[109th Congress Public Law 280]
[From the U.S. Government Printing Office]
[DOCID: f:publ280.109]
[[Page 779]]
PENSION PROTECTION ACT OF 2006
[[Page 120 STAT. 780]]
Public Law 109-280
109th Congress
An Act
To provide economic security for all Americans, and for other
purposes. <<NOTE: Aug. 17, 2006 - [H.R. 4]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress
assembled, <<NOTE: Pension Protection Act of 2006.>>
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This <<NOTE: 29 USC 1001 note.>> Act may be cited
as the ``Pension Protection Act of 2006''.
(b) Table of Contents.--The table of contents for this Act (other
than so much of title XIV as follows section 1401) 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. Special rules for multiple employer plans of certain
cooperatives.
Sec. 105. Temporary relief for certain PBGC settlement plans.
Sec. 106. Special rules for plans of certain government contractors.
Sec. 107. 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.
Sec. 115. Modification of transition rule to pension funding
requirements.
Sec. 116. Restrictions on funding of nonqualified deferred compensation
plans by employers maintaining underfunded or terminated
single-employer plans.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND
RELATED PROVISIONS
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. Prohibition on retaliation against employers exercising their
rights to
petition the Federal Government.
Sec. 206. Special rule for certain benefits funded under an agreement
approved by the Pension Benefit Guaranty Corporation.
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.
[[Page 120 STAT. 781]]
Sec. 213. Measures to forestall insolvency of multiemployer plans.
Sec. 214. Exemption from excise taxes for certain multiemployer pension
plans.
Subtitle C--Sunset of Additional Funding Rules
Sec. 221. Sunset of additional funding rules.
TITLE III--INTEREST RATE ASSUMPTIONS
Sec. 301. Extension of replacement of 30-year Treasury rates.
Sec. 302. Interest rate assumption for determination of lump sum
distributions.
Sec. 303. Interest rate assumption for applying benefit limitations to
lump sum distributions.
TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS
Sec. 401. PBGC premiums.
Sec. 402. Special funding rules for certain plans maintained by
commercial airlines.
Sec. 403. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 404. Rules relating to bankruptcy of employer.
Sec. 405. PBGC premiums for small plans.
Sec. 406. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 407. Rules for substantial owner benefits in terminated plans.
Sec. 408. Acceleration of PBGC computation of benefits attributable to
recoveries from employers.
Sec. 409. Treatment of certain plans where cessation or change in
membership of a controlled group.
Sec. 410. Missing participants.
Sec. 411. Director of the Pension Benefit Guaranty Corporation.
Sec. 412. Inclusion of information in the PBGC annual report.
TITLE V--DISCLOSURE
Sec. 501. Defined benefit plan funding notice.
Sec. 502. Access to multiemployer pension plan information.
Sec. 503. Additional annual reporting requirements.
Sec. 504. Electronic display of annual report information.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information to plan participants.
Sec. 507. Notice of freedom to divest employer securities.
Sec. 508. Periodic pension benefit statements.
Sec. 509. Notice to participants or beneficiaries of blackout periods.
TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY
RULES
Subtitle A--Investment Advice
Sec. 601. Prohibited transaction exemption for provision of investment
advice.
Subtitle B--Prohibited Transactions
Sec. 611. Prohibited transaction rules relating to financial
investments.
Sec. 612. Correction period for certain transactions involving
securities and commodities.
Subtitle C--Fiduciary and Other Rules
Sec. 621. Inapplicability of relief from fiduciary liability during
suspension of ability of participant or beneficiary to direct
investments.
Sec. 622. Increase in maximum bond amount.
Sec. 623. Increase in penalties for coercive interference with exercise
of ERISA rights.
Sec. 624. Treatment of investment of assets by plan where participant
fails to exercise investment election.
Sec. 625. Clarification of fiduciary rules.
TITLE VII--BENEFIT ACCRUAL STANDARDS
Sec. 701. Benefit accrual standards.
Sec. 702. Regulations relating to mergers and acquisitions.
TITLE VIII--PENSION RELATED REVENUE PROVISIONS
Subtitle A--Deduction Limitations
Sec. 801. Increase in deduction limit for single-employer plans.
Sec. 802. Deduction limits for multiemployer plans.
[[Page 120 STAT. 782]]
Sec. 803. Updating deduction rules for combination of plans.
Subtitle B--Certain Pension Provisions Made Permanent
Sec. 811. Pensions and individual retirement arrangement provisions of
Economic Growth and Tax Relief Reconciliation Act of 2001
made permanent.
Sec. 812. Saver's credit.
Subtitle C--Improvements in Portability, Distribution, and Contribution
Rules
Sec. 821. Clarifications regarding purchase of permissive service
credit.
Sec. 822. Allow rollover of after-tax amounts in annuity contracts.
Sec. 823. Clarification of minimum distribution rules for governmental
plans.
Sec. 824. Allow direct rollovers from retirement plans to Roth IRAs.
Sec. 825. Eligibility for participation in retirement plans.
Sec. 826. Modifications of rules governing hardships and unforseen
financial emergencies.
Sec. 827. Penalty-free withdrawals from retirement plans for individuals
called to active duty for at least 179 days.
Sec. 828. Waiver of 10 percent early withdrawal penalty tax on certain
distributions of pension plans for public safety employees.
Sec. 829. Allow rollovers by nonspouse beneficiaries of certain
retirement plan distributions.
Sec. 830. Direct payment of tax refunds to individual retirement plans.
Sec. 831. Allowance of additional IRA payments in certain bankruptcy
cases.
Sec. 832. Determination of average compensation for section 415 limits.
Sec. 833. Inflation indexing of gross income limitations on certain
retirement savings incentives.
Subtitle D--Health and Medical Benefits
Sec. 841. Use of excess pension assets for future retiree health
benefits and collectively bargained retiree health benefits.
Sec. 842. Transfer of excess pension assets to multiemployer health
plan.
Sec. 843. Allowance of reserve for medical benefits of plans sponsored
by bona fide associations.
Sec. 844. Treatment of annuity and life insurance contracts with a long-
term care insurance feature.
Sec. 845. Distributions from governmental retirement plans for health
and long-term care insurance for public safety officers.
Subtitle E--United States Tax Court Modernization
Sec. 851. Cost-of-living adjustments for Tax Court judicial survivor
annuities.
Sec. 852. Cost of life insurance coverage for Tax Court judges age 65 or
over.
Sec. 853. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 854. Annuities to surviving spouses and dependent children of
special trial judges of the Tax Court.
Sec. 855. Jurisdiction of Tax Court over collection due process cases.
Sec. 856. Provisions for recall.
Sec. 857. Authority for special trial judges to hear and decide certain
employment status cases.
Sec. 858. Confirmation of authority of Tax Court to apply doctrine of
equitable recoupment.
Sec. 859. Tax Court filing fee in all cases commenced by filing
petition.
Sec. 860. Expanded use of Tax Court practice fee for pro se taxpayers.
Subtitle F--Other Provisions
Sec. 861. Extension to all governmental plans of current moratorium on
application of certain nondiscrimination rules applicable to
State and local plans.
Sec. 862. Elimination of aggregate limit for usage of excess funds from
black lung disability trusts.
Sec. 863. Treatment of death benefits from corporate-owned life
insurance.
Sec. 864. Treatment of test room supervisors and proctors who assist in
the administration of college entrance and placement exams.
Sec. 865. Grandfather rule for church plans which self-annuitize.
Sec. 866. Exemption for income from leveraged real estate held by church
plans.
Sec. 867. Church plan rule.
Sec. 868. Gratuitous transfer for benefits of employees.
TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND
OTHER PENSION PROVISIONS
Sec. 901. Defined contribution plans required to provide employees with
freedom to invest their plan assets.
[[Page 120 STAT. 783]]
Sec. 902. Increasing participation through automatic contribution
arrangements.
Sec. 903. Treatment of eligible combined defined benefit plans and
qualified cash or deferred arrangements.
Sec. 904. Faster vesting of employer nonelective contributions.
Sec. 905. Distributions during working retirement.
Sec. 906. Treatment of certain pension plans of Indian tribal
governments.
TITLE X--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION
Sec. 1001. Regulations on time and order of issuance of domestic
relations orders.
Sec. 1002. Entitlement of divorced spouses to railroad retirement
annuities independent of actual entitlement of employee.
Sec. 1003. Extension of tier II railroad retirement benefits to
surviving former spouses pursuant to divorce agreements.
Sec. 1004. Requirement for additional survivor annuity option.
TITLE XI--ADMINISTRATIVE PROVISIONS
Sec. 1101. Employee plans compliance resolution system.
Sec. 1102. Notice and consent period regarding distributions.
Sec. 1103. Reporting simplification.
Sec. 1104. Voluntary early retirement incentive and employment retention
plans maintained by local educational agencies and other
entities.
Sec. 1105. No reduction in unemployment compensation as a result of
pension rollovers.
Sec. 1106. Revocation of election relating to treatment as multiemployer
plan.
Sec. 1107. Provisions relating to plan amendments.
TITLE XII--PROVISIONS RELATING TO EXEMPT ORGANIZATIONS
Subtitle A--Charitable Giving Incentives
Sec. 1201. Tax-free distributions from individual retirement plans for
charitable purposes.
Sec. 1202. Extension of modification of charitable deduction for
contributions of food inventory.
Sec. 1203. Basis adjustment to stock of S corporation contributing
property.
Sec. 1204. Extension of modification of charitable deduction for
contributions of book inventory.
Sec. 1205. Modification of tax treatment of certain payments to
controlling exempt organizations.
Sec. 1206. Encouragement of contributions of capital gain real property
made for conservation purposes.
Sec. 1207. Excise taxes exemption for blood collector organizations.
Subtitle B--Reforming Exempt Organizations
Part 1--General Reforms
Sec. 1211. Reporting on certain acquisitions of interests in insurance
contracts in which certain exempt organizations hold an
interest.
Sec. 1212. Increase in penalty excise taxes relating to public
charities, social welfare organizations, and private
foundations.
Sec. 1213. Reform of charitable contributions of certain easements in
registered historic districts and reduced deduction for
portion of qualified conservation contribution attributable
to rehabilitation credit.
Sec. 1214. Charitable contributions of taxidermy property.
Sec. 1215. Recapture of tax benefit for charitable contributions of
exempt use property not used for an exempt use.
Sec. 1216. Limitation of deduction for charitable contributions of
clothing and household items.
Sec. 1217. Modification of recordkeeping requirements for certain
charitable contributions.
Sec. 1218. Contributions of fractional interests in tangible personal
property.
Sec. 1219. Provisions relating to substantial and gross overstatements
of valuations.
Sec. 1220. Additional standards for credit counseling organizations.
Sec. 1221. Expansion of the base of tax on private foundation net
investment income.
Sec. 1222. Definition of convention or association of churches.
Sec. 1223. Notification requirement for entities not currently required
to file.
Sec. 1224. Disclosure to State officials relating to exempt
organizations.
Sec. 1225. Public disclosure of information relating to unrelated
business income tax returns.
Sec. 1226. Study on donor advised funds and supporting organizations.
[[Page 120 STAT. 784]]
Part 2--Improved Accountability of Donor Advised Funds
Sec. 1231. Excise taxes relating to donor advised funds.
Sec. 1232. Excess benefit transactions involving donor advised funds and
sponsoring organizations.
Sec. 1233. Excess business holdings of donor advised funds.
Sec. 1234. Treatment of charitable contribution deductions to donor
advised funds.
Sec. 1235. Returns of, and applications for recognition by, sponsoring
organizations.
Part 3--Improved Accountability of Supporting Organizations
Sec. 1241. Requirements for supporting organizations.
Sec. 1242. Excess benefit transactions involving supporting
organizations.
Sec. 1243. Excess business holdings of supporting organizations.
Sec. 1244. Treatment of amounts paid to supporting organizations by
private foundations.
Sec. 1245. Returns of supporting organizations.
TITLE XIII--OTHER PROVISIONS
Sec. 1301. Technical corrections relating to mine safety.
Sec. 1302. Going-to-the-sun road.
Sec. 1303. Exception to the local furnishing requirement of the tax-
exempt bond rules.
Sec. 1304. Qualified tuition programs.
TITLE XIV--TARIFF PROVISIONS
Sec. 1401. Short title; 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.
(a) Repeal of Existing Funding Rules.--Sections 302 through 308 of
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082
through 1086) are repealed.
(b) New Minimum Funding Standards.--Part 3 of subtitle B of title I
of such Act (as amended by subsection (a)) is amended by inserting after
section 301 the following new section:
``SEC. 302. <<NOTE: 29 USC 1082.>> MINIMUM FUNDING STANDARDS.
``(a) Requirement To Meet Minimum Funding Standard.--
``(1) In general.--A plan to which this part applies shall
satisfy the minimum funding standard applicable to the plan for
any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum funding
standard for a plan year if--
``(A) in the case of a defined benefit plan which is
a single-employer plan, the employer makes contributions
to or under the plan for the plan year which, in the
aggregate, are not less than the minimum required
contribution determined under section 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
[[Page 120 STAT. 785]]
``(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.--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
[[Page 120 STAT. 786]]
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) <<NOTE: Notice.>> notice of
the completed application for any waiver
or modification, and
``(II) <<NOTE: Deadline.>> 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.
[[Page 120 STAT. 787]]
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of
this paragraph shall not apply to any plan with
respect to which the sum of--
``(I) the aggregate unpaid minimum
required contributions for the plan year
and all preceding plan years, and
``(II) the present value of all
waiver amortization installments
determined for the plan year and
succeeding plan years under section
303(e)(2),
is less than $1,000,000.
``(ii) Treatment of waivers for which
applications are pending.--The amount described in
clause (i)(I) shall include any increase in such
amount which would result if all applications for
waivers of the minimum funding standard under this
subsection which are pending with respect to such
plan were denied.
``(iii) Unpaid minimum required
contribution.--For purposes of this subparagraph--
``(I) In general.--The term `unpaid
minimum required contribution' means,
with respect to any plan year, any
minimum required contribution under
section 303 for the plan year which is
not paid on or before the due date (as
determined under section 303(j)(1)) for
the plan year.
``(II) Ordering rule.--For purposes
of subclause (I), any payment to or
under a plan for any plan year shall be
allocated first to unpaid minimum
required contributions for all preceding
plan years on a first-in, first-out
basis and then to the minimum required
contribution under section 303 for the
plan year.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date 2\1/
2\ months after close of year.--
In <<NOTE: Deadline.>> 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.--
[[Page 120 STAT. 788]]
``(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.--Subparagraph (A) shall not apply
to any plan amendment which--
``(i) the Secretary of the Treasury determines
to be reasonable and which provides for only de
minimis increases in the liabilities of the plan,
``(ii) only repeals an amendment described in
subsection (d)(2), or
``(iii) is required as a condition of
qualification under part I of subchapter D of
chapter 1 of the Internal Revenue Code of 1986.
``(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) <<NOTE: Deadlines.>> 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
[[Page 120 STAT. 789]]
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption except
to the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed to
have been made on the first day of such plan year. No amendment
described in this paragraph which reduces the accrued benefits
of any participant shall take effect unless the plan
administrator files a notice with the Secretary of the Treasury
notifying him of such amendment and such Secretary has approved
such amendment, or within 90 days after the date on which such
notice was filed, failed to disapprove such amendment. No
amendment described in this subsection shall be approved by the
Secretary of the Treasury unless such Secretary determines that
such amendment is necessary because of a temporary substantial
business hardship (as determined under subsection (c)(2)) or a
substantial business hardship (as so determined) in the case of
a multiemployer plan and that a waiver under subsection (c) (or,
in the case of a multiemployer plan, any extension of the
amortization period under section 304(d)) is unavailable or
inadequate.
``(3) Controlled group.--For purposes of this section, the
term `controlled group' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section 414
of the Internal Revenue Code of 1986.''.
(c) Clerical Amendment.--The table of contents in section 1 of such
Act is amended by striking the items relating to sections 302 through
308 and inserting the following new item:
``Sec. 302. Minimum funding standards.''.
(d) Effective Date.--The <<NOTE: 29 USC 1082 note.>> amendments made
by this section shall apply to plan years beginning after 2007.
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION
PLANS.
(a) In General.--Part 3 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (as amended by section 101 of
this Act) is amended by inserting after section 302 the following new
section:
``SEC. 303. <<NOTE: 29 USC 1083.>> MINIMUM FUNDING STANDARDS FOR SINGLE-
EMPLOYER DEFINED BENEFIT PENSION PLANS.
``(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); or
``(2) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) equals or exceeds
[[Page 120 STAT. 790]]
the funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced (but not below
zero) by such excess.
``(b) Target Normal Cost.--For purposes of this section, except as
provided in subsection (i)(2) with respect to plans in at-risk status,
the term `target normal cost' means, for any plan year, the present
value of all benefits which are expected to accrue or to be earned under
the plan during the plan year. For purposes of this subsection, if any
benefit attributable to services performed in a preceding plan year is
increased by reason of any increase in compensation during the current
plan year, the increase in such benefit shall be treated as having
accrued during the current plan year.
``(c) Shortfall Amortization Charge.--
``(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan year is
the aggregate total (not less than zero) of the shortfall
amortization installments for such plan year with respect to the
shortfall amortization bases for such plan year and each of the
6 preceding plan years.
``(2) Shortfall amortization installment.--For purposes of
paragraph (1)--
``(A) Determination.--The shortfall amortization
installments are the amounts necessary to amortize the
shortfall amortization base of the plan for any plan
year in level annual installments over the 7-plan-year
period beginning with such plan year.
``(B) Shortfall installment.--The shortfall
amortization installment for any plan year in the 7-
plan-year period under subparagraph (A) with respect to
any shortfall amortization base is the annual
installment determined under subparagraph (A) for that
year for that base.
``(C) Segment rates.--In determining any shortfall
amortization installment under this paragraph, the plan
sponsor shall use the segment rates determined under
subparagraph (C) of subsection (h)(2), applied under
rules similar to the rules of subparagraph (B) of
subsection (h)(2).
``(3) Shortfall amortization base.--For purposes of this
section, the shortfall amortization base of a plan for a plan
year is--
``(A) the funding shortfall of such plan for such
plan year, minus
``(B) the present value (determined using the
segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the
rules of subparagraph (B) of subsection (h)(2)) of the
aggregate total of the shortfall amortization
installments and waiver amortization installments which
have been determined for such plan year and any
succeeding plan year with respect to the shortfall
amortization bases and waiver amortization bases of the
plan for any plan year preceding such plan year.
``(4) Funding shortfall.--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
[[Page 120 STAT. 791]]
``(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.--Except as provided in
clauses (iii) and (iv), in the case of plan years
beginning after 2007 and before 2011, only the
applicable percentage of the funding target shall
be taken into account under paragraph (3)(A) in
determining the funding shortfall for the plan
year for purposes of subparagraph (A).
``(ii) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage shall
be determined in accordance with the following
table:
``In the case ofThe applicable............................
year
beginning in cpercentage is.............................
year:
2008...................................... 92
2009...................................... 94
2010...................................... 96.
``(iii) Limitation.--Clause (i) shall not
apply with respect to any plan year after 2008
unless the shortfall amortization base for each of
the preceding years beginning after 2007 was zero
(determined after application of this
subparagraph).
``(iv) Transition relief not available for new
or deficit reduction plans.--Clause (i) shall not
apply to a plan--
``(I) which was not in effect for a
plan year beginning in 2007, or
``(II) which was in effect for a
plan year beginning in 2007 and which
was subject to section 302(d) (as in
effect for plan years beginning in
2007), determined after the application
of paragraphs (6) and (9) thereof.
``(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
benefits accrued or earned under the plan as of the beginning of
the plan year.
[[Page 120 STAT. 792]]
``(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.--For purposes of
paragraph (1)--
``(A) Determination.--The waiver amortization
installments are the amounts necessary to amortize the
waiver amortization base of the plan for any plan year
in level annual installments over a period of 5 plan
years beginning with the succeeding plan year.
``(B) Waiver installment.--The waiver amortization
installment for any plan year in the 5-year period under
subparagraph (A) with respect to any waiver amortization
base is the annual installment determined under
subparagraph (A) for that year for that base.
``(3) Interest rate.--In determining any waiver amortization
installment under this subsection, the plan sponsor shall use
the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules of
subparagraph (B) of subsection (h)(2).
``(4) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the amount of the waived
funding deficiency (if any) for such plan year under section
302(c).
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the waiver
amortization charge for such plan year and succeeding plan
years, the waiver amortization bases for all preceding plan
years (and all waiver amortization installments determined with
respect to such bases) shall be reduced to zero.
``(f) Reduction of Minimum Required Contribution by Prefunding
Balance and Funding Standard Carryover Balance.--
``(1) Election to maintain balances.--
``(A) Prefunding balance.--The plan sponsor of a
single-employer plan may elect to maintain a prefunding
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 2007.--A plan is described in this
clause if the plan--
[[Page 120 STAT. 793]]
``(I) was in effect for a plan year
beginning in 2007, 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 prefunding 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 prefunding 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 as of the first day of the
plan year 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 prefunding 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. In the case of plan years
beginning in 2008, the ratio under this subparagraph may
be determined using such methods of estimation as the
Secretary of the Treasury may prescribe.
``(4) Effect of balances on amounts treated as value of plan
assets.--In the case of any plan maintaining a prefunding
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:
[[Page 120 STAT. 794]]
``(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 prefunding balance, but only if an
election under paragraph (2) applying any portion of the
prefunding 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 prefunding 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 prefunding 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 prefunding 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 prefunding
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 prefunding 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 prefunding balance.
``(6) Prefunding balance.--
``(A) In general.--A prefunding 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.--
[[Page 120 STAT. 795]]
``(i) In general.--As of the first day of each
plan year beginning after 2008, the prefunding
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.
``(ii) Adjustments for interest.--Any excess
contributions under clause (i) shall be properly
adjusted for interest accruing for the periods
between the first day of the current plan year and
the dates on which the excess contributions were
made, determined by using the effective interest
rate for the preceding plan year and by treating
contributions as being first used to satisfy the
minimum required contribution.
``(iii) Certain contributions necessary to
avoid benefit limitations disregarded.--The excess
described in clause (i) with respect to any
preceding plan year shall be reduced (but not
below zero) by the amount of contributions an
employer would be required to make under paragraph
(1), (2), or (4) of section 206(g) to avoid a
benefit limitation which would otherwise be
imposed under such paragraph for the preceding
plan year. Any contribution which may be taken
into account in satisfying the requirements of
more than 1 of such paragraphs shall be taken into
account only once for purposes of this clause.
``(C) Decrease.--The prefunding balance of a plan
shall be decreased (but not below zero) by--
``(i) as of the first day of each plan year
after 2008, 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) as of the time specified in paragraph
(5)(A), 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.--The funding standard carryover
balance of a plan shall be decreased (but not below
zero) by--
``(i) as of the first day of each plan year
after 2008, 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
[[Page 120 STAT. 796]]
``(ii) as of the time specified in paragraph
(5)(A), any reduction in such balance elected
under paragraph (5).
``(8) Adjustments <<NOTE: Regulations.>> for investment
experience.--In determining the prefunding balance or the
funding standard carryover balance of a plan as of the first day
of the plan year, the plan sponsor shall, in accordance with
regulations prescribed by the Secretary of the Treasury, adjust
such balance to reflect the rate of return on plan assets for
the preceding plan year. Notwithstanding subsection (g)(3), such
rate of return shall be determined on the basis of fair market
value and shall properly take into account, in accordance with
such regulations, all contributions, distributions, and other
plan payments made during such period.
``(9) Elections.--Elections <<NOTE: Regulations.>> 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 100 or fewer
participants, the plan may designate any day during the
plan year as its valuation date for such plan year and
succeeding plan years. For purposes of this
subparagraph, all defined benefit plans 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) Determination of value of plan assets.--For purposes
of this section--
``(A) In general.--Except as provided in
subparagraph (B), the value of plan assets shall be the
fair market value of the assets.
``(B) Averaging allowed.--A plan may determine the
value of plan assets on the basis of the averaging of
fair market values, but only if such method--
``(i) is permitted under regulations
prescribed by the Secretary of the Treasury,
[[Page 120 STAT. 797]]
``(ii) does not provide for averaging of such
values over more than the period beginning on the
last day of the 25th month preceding the month in
which the valuation date occurs and ending on the
valuation date (or a similar period in the case of
a valuation date which is not the 1st day of a
month), and
``(iii) does 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.
Any such averaging shall be adjusted for contributions
and distributions (as provided by the Secretary of the
Treasury).
``(4) Accounting for contribution receipts.--For purposes of
determining the value of assets under paragraph (3)--
``(A) Prior year contributions.--If--
``(i) an employer makes any contribution to
the plan after the valuation date for the plan
year in which the contribution is made, and
``(ii) the contribution is for a preceding
plan year,
the contribution shall be taken into account as an asset
of the plan as of the valuation date, except that in the
case of any plan year beginning after 2008, only the
present value (determined as of the valuation date) of
such contribution may be taken into account. For
purposes of the preceding sentence, present value shall
be determined using the effective interest rate for the
preceding plan year to which the contribution is
properly allocable.
``(B) Special rule for current year contributions
made before valuation date.--If any contributions for
any plan year are made to or under the plan during the
plan year but before the valuation date for the plan
year, the assets of the plan as of the valuation date
shall not include--
``(i) such contributions, and
``(ii) interest on such contributions for the
period between the date of the contributions and
the valuation date, determined by using the
effective interest rate for the plan year.
``(h) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial assumptions
and methods--
``(A) each of which is reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate
of interest which, if used to determine the present
value of the plan's accrued or earned benefits referred
to in subsection (d)(1), would result in an amount equal
to the funding target of the plan for such plan year.
[[Page 120 STAT. 798]]
``(B) Interest rates for determining funding
target.--For purposes of determining the funding target
and normal cost of a plan for any plan year, the
interest rate used in determining the present value of
the benefits of the plan shall be--
``(i) in the case of benefits reasonably
determined to be payable during the 5-year period
beginning on the first day of the plan year, the
first segment rate with respect to the applicable
month,
``(ii) in the case of benefits reasonably
determined to be payable during the 15-year period
beginning at the end of the period described in
clause (i), the second segment rate with respect
to the applicable month, and
``(iii) in the case of benefits reasonably
determined to be payable after the period
described in clause (ii), the third segment rate
with respect to the applicable month.
``(C) Segment rates.--For purposes of this para-
graph--
``(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
the average, for the 24-month period ending with
the month preceding such month, of monthly yields
on investment grade corporate bonds with varying
maturities and that are in the top 3 quality
levels available.
[[Page 120 STAT. 799]]
``(ii) Election to use yield curve.--Solely
for purposes of determining the minimum required
contribution under this section, the plan sponsor
may, in lieu of the segment rates determined under
subparagraph (C), elect to use interest rates
under the corporate bond yield curve. For purposes
of the preceding sentence such curve shall be
determined without regard to the 24-month
averaging described in clause (i). Such election,
once made, may be revoked only with the consent of
the Secretary of the Treasury.
``(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 2008 or 2009, 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 2007),
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 2008 and 66\2/
3\ percent for plan years beginning in 2009.
``(iii) New plans ineligible.--Clause (i)
shall not apply to any plan if the first plan year
of the plan begins after December 31, 2007.
``(iv) Election.--The plan sponsor may elect
not to have this subparagraph apply. Such
election, once made, may be revoked only with the
consent of the Secretary of the Treasury.
[[Page 120 STAT. 800]]
``(3) Mortality tables.--
``(A) In general.--Except <<NOTE: Regulations.>> as
provided in subparagraph (C) or (D), the Secretary of
the Treasury shall by regulation prescribe mortality
tables to be used in determining any present value or
making any computation under this section. Such tables
shall be based on the actual experience of pension plans
and projected trends in such experience. In prescribing
such tables, the Secretary of the Treasury shall take
into account results of available independent studies of
mortality of individuals covered by pension plans.
``(B) Periodic revision.--The Secretary of the
Treasury shall (at least every 10 years) make revisions
in any table in effect under subparagraph (A) to reflect
the actual experience of pension plans and projected
trends in such experience.
``(C) Substitute mortality table.--
``(i) In general.--Upon request by the plan
sponsor and approval by the Secretary of the
Treasury, a mortality table which meets the
requirements of clause (iii) shall be used in
determining any present value or making any
computation under this section during the period
of consecutive plan years (not to exceed 10)
specified in the request.
``(ii) Early termination of period.--
Notwithstanding clause (i), a mortality table
described in clause (i) shall cease to be in
effect as of the earliest of--
``(I) the date on which there is a
significant change in the participants
in the plan by reason of a plan spinoff
or merger or otherwise, or
``(II) the date on which the plan
actuary determines that such table does
not meet the requirements of clause
(iii).
``(iii) Requirements.--A mortality table meets
the requirements of this clause if--
``(I) there is a sufficient number
of plan participants, and the pension
plans have been maintained for a
sufficient period of time, to have
credible information necessary for
purposes of subclause (II), and
``(II) such table reflects the
actual experience of the pension plans
maintained by the sponsor and projected
trends in general mortality experience.
``(iv) All plans in controlled group must use
separate table.--Except as provided by the
Secretary of the Treasury, a plan sponsor may not
use a mortality table under this subparagraph for
any plan maintained by the plan sponsor unless--
``(I) a separate mortality table is
established and used under this
subparagraph for each other plan
maintained by the plan sponsor and if
the plan sponsor is a member of a
controlled group, each member of the
controlled group, and
``(II) the requirements of clause
(iii) are met separately with respect to
the table so established for each such
plan, determined by only taking into
account the participants of such plan,
the
[[Page 120 STAT. 801]]
time such plan has been in existence,
and the actual experience of such plan.
``(v) Deadline for submission and disposition
of application.--
``(I) Submission.--The plan sponsor
shall submit a mortality table to the
Secretary of the Treasury for approval
under this subparagraph at least 7
months before the 1st day of the period
described in clause (i).
``(II) Disposition.--Any mortality
table submitted to the Secretary of the
Treasury for approval under this
subparagraph shall be treated as in
effect as of the 1st day of the period
described in clause (i) unless the
Secretary of the Treasury, during the
180-day period beginning on the date of
such submission, disapproves of such
table and provides the reasons that such
table fails to meet the requirements of
clause (iii). The 180-day period shall
be extended upon mutual agreement of the
Secretary of the Treasury and the plan
sponsor.
``(D) Separate mortality tables for the disabled.--
Notwithstanding subparagraph (A)--
``(i) In general.--The Secretary of the
Treasury shall establish mortality tables which
may be used (in lieu of the tables under
subparagraph (A)) under this subsection for
individuals who are entitled to benefits under the
plan on account of disability. The Secretary of
the Treasury shall establish separate tables for
individuals whose disabilities occur in plan years
beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years
beginning on or after such date.
``(ii) Special rule for disabilities occurring
after 1994.--In the case
of <<NOTE: Applicability.>> disabilities occurring
in plan years beginning after December 31, 1994,
the tables under clause (i) shall apply only with
respect to individuals described in such subclause
who are disabled within the meaning of title II of
the Social Security Act and the regulations
thereunder.
``(iii) Periodic revision.--The Secretary of
the Treasury shall (at least every 10 years) make
revisions in any table in effect under clause (i)
to reflect the actual experience of pension plans
and projected trends in such experience.
``(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
[[Page 120 STAT. 802]]
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 the case of a plan which is in
at-risk status for a plan year, the funding target of
the plan for the plan year shall be equal to the sum
of--
``(i) the present value of all benefits
accrued or earned under the plan as of the
beginning of the plan year, as determined by using
the additional actuarial assumptions described in
subparagraph (B), and
``(ii) in the case of a plan which also has
been in at-risk status for at least 2 of the 4
preceding plan years, a loading factor determined
under subparagraph (C).
``(B) Additional actuarial assumptions.--The
actuarial assumptions described in this subparagraph are
as follows:
``(i) All employees who are not otherwise
assumed to retire as of the valuation date but who
will be eligible to elect benefits during the plan
year and the 10 succeeding plan years shall be
assumed to retire at the earliest retirement date
under the plan but not before the end of the plan
year for which the at-risk funding target and at-
risk target normal cost are being determined.
``(ii) All employees shall be assumed to elect
the retirement benefit available under the plan at
the assumed retirement age (determined after
application of clause (i)) which would result in
the highest present value of benefits.
[[Page 120 STAT. 803]]
``(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 the case of a
plan which is in at-risk status for a plan year, the target
normal cost of the plan for such plan year shall be equal to 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 using the additional actuarial
assumptions described in paragraph (1)(B), plus
``(B) in the case of a plan which also has been in
at-risk status for at least 2 of the 4 preceding plan
years, a loading factor equal to 4 percent of the target
normal cost (determined without regard to this
paragraph) of the plan for the plan year.
``(3) Minimum amount.--In no event shall--
``(A) the at-risk funding target be less than the
funding target, as determined without regard to this
subsection, or
``(B) the at-risk target normal cost be less than
the target normal cost, as determined without regard to
this subsection.
``(4) Determination of at-risk status.--For purposes of this
subsection--
``(A) In general.--A plan is in at-risk status for a
plan year if--
``(i) the funding target attainment percentage
for the preceding plan year (determined under this
section without regard to this subsection) is less
than 80 percent, and
``(ii) the funding target attainment
percentage for the preceding plan year (determined
under this section by using the additional
actuarial assumptions described in paragraph
(1)(B) in computing the funding target) is less
than 70 percent.
``(B) Transition rule.--
In <<NOTE: Applicability.>> the case of plan years
beginning in 2008, 2009, and 2010, subparagraph (A)(i)
shall be applied by substituting the following
percentages for `80 percent':
``(i) 65 percent in the case of 2008.
``(ii) 70 percent in the case of 2009.
``(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008, the funding
target attainment percentage for the preceding plan year
under subparagraph (A)(ii) may be determined using such
methods of estimation as the Secretary of the Treasury
may provide.
``(C) Special rule for employees offered early
retirement in 2006.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the additional actuarial
assumptions described
[[Page 120 STAT. 804]]
in paragraph (1)(B) shall not be taken into
account with respect to any employee if--
``(I) such employee is employed by a
specified automobile manufacturer,
``(II) <<NOTE: Deadline.>> such
employee is offered a substantial amount
of additional cash compensation,
substantially enhanced retirement
benefits under the plan, or materially
reduced employment duties on the
condition that by a specified date (not
later than December 31, 2010) the
employee retires (as defined under the
terms of the plan),
``(III) <<NOTE: Deadline.>> such
offer is made during 2006 and pursuant
to a bona fide retirement incentive
program and requires, by the terms of
the offer, that such offer can be
accepted not later than a specified date
(not later than December 31, 2006), and
``(IV) such employee does not elect
to accept such offer before the
specified date on which the offer
expires.
``(ii) Specified automobile manufacturer.--For
purposes of clause (i), the term `specified
automobile manufacturer' means--
``(I) any manufacturer of
automobiles, and
``(II) any manufacturer of
automobile parts which supplies such
parts directly to a manufacturer of
automobiles and which, after a
transaction or series of transactions
ending in 1999, ceased to be a member of
a controlled group which included such
manufacturer of automobiles.
``(5) 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
subparagraph (A), the transition percentage shall be
determined in accordance with the following table:
``If the consecuti..........................................
of
years (includingThe transition............................
year)
the plan is in at-percentage is--...........................
status is--
1........................................... 20
2........................................... 40
3........................................... 60
4........................................... 80.
[[Page 120 STAT. 805]]
``(C) Years before effective date.--For purposes of
this paragraph, plan years beginning before 2008 shall
not be taken into account.
``(6) Small plan exception.--If, on each day during the
preceding plan year, a plan had 500 or fewer participants, the
plan shall not be treated as in at-risk status for the plan
year. <<NOTE: Applicability.>> For purposes of this paragraph,
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 and the rules of subsection (g)(2)(C)
shall apply.
``(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) Failure to timely make required installment.--
In any case in which the plan has a funding shortfall
for the preceding plan year, the employer maintaining
the plan shall make the required installments under this
paragraph and if the employer fails to pay the full
amount of a required installment for the plan year, then
the amount of interest charged under paragraph (2) on
the underpayment for the period of underpayment shall be
determined by using a rate of interest equal to the rate
otherwise used under paragraph (2) plus 5 percentage
points.
``(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.
[[Page 120 STAT. 806]]
``(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 (determined
without regard to this subsection) to
the plan for the plan year under this
section, or
``(II) 100 percent of the minimum
required contribution (determined
without regard to this subsection or 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
described in subsection (g)(2)(B)) which--
``(i) is required to pay installments under
paragraph (3) for a plan year, and
``(ii) has a liquidity shortfall for any
quarter during such plan year.
[[Page 120 STAT. 807]]
``(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 paragraph--
``(i) Liquidity shortfall.--The term
`liquidity shortfall' means, with respect to any
required installment, an amount equal to the
excess (as of the last day of the quarter for
which such installment is made) of--
``(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
[[Page 120 STAT. 808]]
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 covered under section 4021
for any plan year for which the funding target attainment
percentage (as defined in subsection (d)(2)) of such plan is
less than 100 percent.
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section and
section 302 for which payment has not been made before the due
date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--
A <<NOTE: Deadline.>> 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.
[[Page 120 STAT. 809]]
``(5) Enforcement.--Any lien created under paragraph (1) may
be perfected and enforced only by the Pension Benefit Guaranty
Corporation, or at the direction of the Pension Benefit Guaranty
Corporation, by the contributing sponsor (or any member of the
controlled group of the contributing sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a
contribution payment required to be made to the plan,
including any required installment under paragraphs (3)
and (4) of subsection (j).
``(B) Due date; required installment.--The terms
`due date' and `required installment' have the meanings
given such terms by subsection (j), except that in the
case of a payment other than a required installment, the
due date shall be the date such payment is required to
be made under section 303.
``(C) Controlled group.--The term `controlled group'
means any group treated as a single employer under
subsections (b), (c), (m), and (o) of section 414 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 <<NOTE: 29 USC 1083 note.>> amendments made
by this section shall apply with respect to plan years beginning after
2007.
SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.
(a) Funding-Based Limits on Benefits and Benefit Accruals 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 Limits on Benefits and Benefit Accruals Under
Single-Employer Plans.--
``(1) Funding-based limitation on shutdown benefits and
other unpredictable contingent event benefits under single-
employer plans.--
``(A) In general.--If a participant of a defined
benefit plan which is a single-employer plan is entitled
to an unpredictable contingent event benefit payable
with respect to any event occurring during any plan
year, the plan shall provide that such benefit may not
be provided if the adjusted funding target attainment
percentage for such plan year--
``(i) is less than 60 percent, or
``(ii) would be less than 60 percent taking
into account such occurrence.
``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
date.>> shall cease to apply with respect to any plan
year, effective as of the first day of the plan year,
upon payment by the plan
[[Page 120 STAT. 810]]
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 occurrence referred to in
subparagraph (A), and
``(ii) in the case of subparagraph (A)(ii),
the amount sufficient to result in a funding
target attainment percentage of 60 percent.
``(C) Unpredictable contingent event.--For purposes
of this paragraph, the term `unpredictable contingent
event benefit' means any benefit payable solely by
reason of--
``(i) a plant shutdown (or similar event, as
determined by the Secretary of the Treasury), or
``(ii) an event other than the attainment of
any age, performance of any service, receipt or
derivation of any compensation, or occurrence of
death or disability.
``(2) 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 may take
effect during any plan year if the adjusted funding
target attainment percentage for such plan year is--
``(i) less than 80 percent, or
``(ii) would be less than 80 percent taking
into account such amendment.
``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
date.>> shall cease to apply with respect to any plan
year, effective as of the first day of the plan year (or
if later, the effective date of the amendment), upon
payment by the plan sponsor of a contribution (in
addition to any minimum required contribution under
section 303) equal to--
``(i) in the case of subparagraph (A)(i), the
amount of the increase in the funding target of
the plan (under section 303) for the plan year
attributable to the amendment, and
``(ii) in the case of subparagraph (A)(ii),
the amount sufficient to result in an adjusted
funding target attainment percentage of 80
percent.
``(C) Exception for certain benefit increases.--
Subparagraph (A) shall not apply to any amendment which
provides for an increase in benefits under a formula
which is not based on a participant's compensation, but
only if the rate of such increase is not in excess of
the contemporaneous rate of increase in average wages of
participants covered by the amendment.
``(3) Limitations on accelerated benefit distributions.--
``(A) Funding percentage less than 60 percent.--A
defined benefit plan which is a single-employer plan
shall provide that, in any case in which the plan's
adjusted
[[Page 120 STAT. 811]]
funding target attainment percentage for a plan year is
less than 60 percent, the plan may not pay any
prohibited payment after the valuation date for the plan
year.
``(B) Bankruptcy.--
A <<NOTE: Certification.>> defined benefit plan which is
a single-employer plan shall provide that, during any
period in which the plan sponsor is a debtor in a case
under title 11, United States Code, or similar Federal
or State law, the plan may not pay any prohibited
payment. The preceding sentence shall not apply on or
after the date on which the enrolled actuary of the plan
certifies that the adjusted funding target attainment
percentage of such plan is not less than 100 percent.
``(C) Limited payment if percentage at least 60
percent but less than 80 percent.--
``(i) In general.--A defined benefit plan
which is a single-employer plan shall provide
that, in any case in which the plan's adjusted
funding target attainment percentage for a plan
year is 60 percent or greater but less than 80
percent, the plan may not pay any prohibited
payment after the valuation date for the plan year
to the extent the amount of the payment exceeds
the lesser of--
``(I) 50 percent of the amount of
the payment which could be made without
regard to this subsection, or
``(II) the present value (determined
under guidance prescribed by the Pension
Benefit Guaranty Corporation, using the
interest and mortality assumptions under
section 205(g)) of the maximum guarantee
with respect to the participant under
section 4022.
``(ii) One-time application.--
``(I) In general.--The plan shall
also provide that only 1 prohibited
payment meeting the requirements of
clause (i) may be made with respect to
any participant during any period of
consecutive plan years to which the
limitations under either subparagraph
(A) or (B) or this subparagraph applies.
``(II) Treatment of beneficiaries.--
For purposes of this clause, a
participant and any beneficiary on his
behalf (including an alternate payee, as
defined in section 206(d)(3)(K)) shall
be treated as 1 participant. If the
accrued benefit of a participant is
allocated to such an alternate payee and
1 or more other persons, the amount
under clause (i) shall be allocated
among such persons in the same manner as
the accrued benefit is allocated unless
the qualified domestic relations order
(as defined in section 206(d)(3)(B)(i))
provides otherwise.
``(D) Exception.--This paragraph shall not apply to
any plan for any plan year if the terms of such plan (as
in effect for the period beginning on September 1, 2005,
and ending with such plan year) provide for no benefit
accruals with respect to any participant during such
period.
[[Page 120 STAT. 812]]
``(E) Prohibited payment.--For purpose of this
paragraph, the term `prohibited payment' means--
``(i) any payment, in excess of the monthly
amount paid under a single life annuity (plus any
social security supplements described in the last
sentence of section 204(b)(1)(G)), to a
participant or beneficiary whose annuity starting
date (as defined in section 205(h)(2)) occurs
during any period a limitation under subparagraph
(A) or (B) is in effect,
``(ii) any payment for the purchase of an
irrevocable commitment from an insurer to pay
benefits, and
``(iii) <<NOTE: Regulations.>> any other
payment specified by the Secretary of the Treasury
by regulations.
``(4) Limitation on benefit accruals for plans with severe
funding shortfalls.--
``(A) In general.--A defined benefit plan which is a
single-employer plan shall provide that, in any case in
which the plan's adjusted funding target attainment
percentage for a plan year is less than 60 percent,
benefit accruals under the plan shall cease as of the
valuation date for the plan year.
``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
date.>> shall cease to apply with respect to any plan
year, effective as of the first day 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 the amount sufficient to result in
an adjusted funding target attainment percentage of 60
percent.
``(5) Rules relating to contributions required to avoid
benefit limitations.--
``(A) Security may be provided.--
``(i) In general.--For purposes of this
subsection, the adjusted funding target attainment
percentage shall be determined by treating as an
asset of the plan any security provided by a plan
sponsor in a form meeting the requirements of
clause (ii).
``(ii) Form of security.--The security
required under clause (i) shall consist of--
``(I) a bond issued by a corporate
surety company that is an acceptable
surety for purposes of section 412 of
this Act,
``(II) cash, or United States
obligations which mature in 3 years or
less, held in escrow by a bank or
similar financial institution, or
``(III) such other form of security
as is satisfactory to the Secretary of
the Treasury and the parties involved.
``(iii) Enforcement.--Any security provided
under clause (i) may be perfected and enforced at
any time after the earlier of--
``(I) the date on which the plan
terminates,
``(II) if there is a failure to make
a payment of the minimum required
contribution for any plan year beginning
after the security is provided, the due
date for the payment under section
303(j), or
[[Page 120 STAT. 813]]
``(III) if the adjusted funding
target attainment percentage is less
than 60 percent for a consecutive period
of 7 years, the valuation date for the
last year in the period.
``(iv) Release of security.--The security
shall be released (and any amounts thereunder
shall be refunded together with any interest
accrued thereon) at such time as the Secretary of
the Treasury may prescribe in regulations,
including regulations for partial releases of the
security by reason of increases in the funding
target attainment percentage.
``(B) Prefunding balance or funding standard
carryover balance may not be used.--No prefunding
balance or funding standard carryover balance under
section 303(f) may be used under paragraph (1), (2), or
(4) to satisfy any payment an employer may make under
any such paragraph to avoid or terminate the application
of any limitation under such paragraph.
``(C) Deemed reduction of funding balances.--
``(i) In general.--Subject to clause (iii), in
any case in which a benefit limitation under
paragraph (1), (2), (3), or (4) would (but for
this subparagraph and determined without regard to
paragraph (1)(B), (2)(B), or (4)(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) to
reduce the prefunding balance or funding standard
carryover balance by such amount as is necessary
for such benefit limitation to not apply to the
plan for such plan year.
``(ii) Exception for insufficient funding
balances.--Clause (i) shall not apply with respect
to a benefit limitation for any plan year if the
application of clause (i) would not result in the
benefit limitation not applying for such plan
year.
``(iii) Restrictions of certain rules to
collectively bargained plans.--
With <<NOTE: Applicability.>> respect to any
benefit limitation under paragraph (1), (2), or
(4), clause (i) shall only apply in the case of a
plan maintained pursuant to 1 or more collective
bargaining agreements between employee
representatives and 1 or more employers.
``(6) New plans.--Paragraphs (1), (2), and (4) shall not
apply to a plan for the first 5 plan years of the plan. For
purposes of this paragraph, the reference in this paragraph to a
plan shall include a reference to any predecessor plan.
``(7) Presumed underfunding for purposes of benefit
limitations.--
``(A) Presumption
of <<NOTE: Certification.>> continued underfunding.--In
any case in which a benefit limitation under paragraph
(1), (2), (3), or (4) has been applied to a plan with
respect to the plan year preceding the current plan
year, the adjusted funding target attainment percentage
of the plan for the current plan year shall be presumed
to be equal to the adjusted funding target attainment
percentage of the plan for the preceding plan year until
the enrolled actuary of the plan certifies the actual
adjusted funding
[[Page 120 STAT. 814]]
target attainment percentage of the plan for the current
plan year.
``(B) Presumption of underfunding after 10th
month.--In any case in which no certification of the
adjusted funding target attainment percentage for the
current plan year is made with respect to the plan
before the first day of the 10th month of such year, for
purposes of paragraphs (1), (2), (3), and (4), such
first day shall be deemed, for purposes of such
paragraph, to be the valuation date of the plan for the
current plan year and the plan's adjusted funding target
attainment percentage shall be conclusively presumed to
be less than 60 percent as of such first day.
``(C) Presumption of underfunding after 4th month
for nearly underfunded plans.--In any case in which--
``(i) a benefit limitation under paragraph
(1), (2), (3), or (4) did not apply to a plan with
respect to the plan year preceding the current
plan year, but the adjusted funding target
attainment percentage of the plan for such
preceding plan year was not more than 10
percentage points greater than the percentage
which would have caused such paragraph to apply to
the plan with respect to such preceding plan year,
and
``(ii) as of the first day of the 4th month of
the current plan year, the enrolled actuary of the
plan has not certified the actual adjusted funding
target attainment percentage of the plan for the
current plan year,
until the enrolled actuary so certifies, such first day
shall be deemed, for purposes of such paragraph, to be
the valuation date of the plan for the current plan year
and the adjusted 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 adjusted funding target attainment
percentage of the plan for such preceding plan year.
``(8) Treatment of plan as of close of prohibited or
cessation period.--For purposes of applying this part--
``(A) Operation of <<NOTE: Effective date.>> plan
after period.--Unless the plan provides otherwise,
payments and accruals will resume effective as of the
day following the close of the period for which any
limitation of payment or accrual of benefits under
paragraph (3) or (4) applies.
``(B) Treatment of affected benefits.--Nothing in
this paragraph shall be construed as affecting the
plan's treatment of benefits which would have been paid
or accrued but for this subsection.
``(9) Terms relating to funding target attainment
percentage.--For purposes of this subsection--
``(A) In general.--The term `funding target
attainment percentage' has the same meaning given such
term by section 303(d)(2).
``(B) Adjusted funding target attainment
percentage.--The term `adjusted funding target
attainment
[[Page 120 STAT. 815]]
percentage' means the funding target attainment
percentage which is determined under subparagraph (A) by
increasing each of the amounts under subparagraphs (A)
and (B) of section 303(d)(2) by the aggregate amount of
purchases of annuities for employees other than highly
compensated employees (as defined in section 414(q) of
the Internal Revenue Code of 1986) which were made by
the plan during the preceding 2 plan years.
``(C) 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 in the value of assets
under section 303(f)(4)), the funding target
attainment percentage for purposes of
subparagraphs (A) and (B) shall be determined
without regard to such reduction.
``(ii) Transition rule.--Clause (i) shall be
applied to plan years beginning after 2007 and
before 2011 by substituting for `100 percent' the
applicable percentage determined in accordance
with the following table:
``In the case The applicable............................
year
beginning inpercentage is.............................
year:
2008.................................... 92
2009.................................... 94
2010.................................... 96.
``(iii) Limitation.--Clause (ii) shall not
apply with respect to any plan year after 2008
unless the funding target attainment percentage
(determined without regard to this subparagraph)
of the plan for each preceding plan year after
2007 was not less than the applicable percentage
with respect to such preceding plan year
determined under clause (ii).
``(10) Special rule for 2008.--For purposes of this
subsection, in the case of plan years beginning in 2008, the
funding target attainment percentage for the preceding plan year
may be determined using such methods of estimation as the
Secretary of the Treasury may provide.''.
(b) Notice Requirement.--
(1) In general.--Section 101 of such Act (29 U.S.C. 1021) is
amended--
(A) by redesignating subsection (j) as subsection
(k); and
(B) by inserting after subsection (i) the following
new subsection:
``(j) Notice of Funding-Based Limitation on Certain Forms of
Distribution.--The plan <<NOTE: Deadline.>> administrator of a single-
employer plan shall provide a written notice to plan participants and
beneficiaries within 30 days--
``(1) after the plan has become subject to a restriction
described in paragraph (1) or (3) of section 206(g)),
``(2) in the case of a plan to which section 206(g)(4)
applies, after the valuation date for the plan year described in
section 206(g)(4)(B) for which the plan's adjusted funding
target attainment percentage for the plan year is less than 60
percent
[[Page 120 STAT. 816]]
(or, if earlier, the date such percentage is deemed to be less
than 60 percent under section 206(g)(7)), and
``(3) at such other time as may be determined by the
Secretary of the Treasury.
The notice required to be provided under this subsection shall be in
writing, except that such notice may be in electronic or other form to
the extent that such form is reasonably accessible to the recipient.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by striking ``section 302(b)(7)(F)(iv)''
and inserting ``section 101(j) or 302(b)(7)(F)(iv)''.
(c) Effective <<NOTE: 29 USC 1021 note.>> Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2007.
(2) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before January 1, 2008, the amendments made
by this section shall not apply to plan years beginning before
the earlier of--
(A) the later of--
(i) the date on which the last collective
bargaining agreement relating to the plan
terminates (determined without regard to any
extension thereof agreed to after the date of the
enactment of this Act), or
(ii) the first day of the first plan year to
which the amendments made by this subsection would
(but for this subparagraph) apply, or
(B) January 1, 2010.
For purposes of subparagraph (A)(i), any plan amendment made
pursuant to a collective bargaining agreement relating to the
plan which amends the plan solely to conform to any requirement
added by this section shall not be treated as a termination of
such collective bargaining agreement.
SEC. 104. <<NOTE: 26 USC 401 note.>> SPECIAL RULES FOR MULTIPLE EMPLOYER
PLANS OF CERTAIN COOPERATIVES.
(a) General Rule.--Except as provided in this section, if a plan in
existence on July 26, 2005, was an eligible cooperative plan for its
plan year which includes such date, the amendments made by this subtitle
and subtitle B shall not apply to plan years beginning before the
earlier of--
(1) the first plan year for which the plan ceases to be an
eligible cooperative plan, or
(2) January 1, 2017.
(b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
Internal Revenue Code of 1986 (as in effect before the amendments made
by this subtitle and subtitle B) to an eligible cooperative plan for
plan years beginning after December 31, 2007, and before the first plan
year to which such amendments apply, the third segment rate determined
under section 303(h)(2)(C)(iii) of such Act and section
430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be
used in lieu of the interest rate otherwise used.
(c) Eligible Cooperative Plan Defined.--For purposes of this
section, a plan shall be treated as an eligible cooperative
[[Page 120 STAT. 817]]
plan for a plan year if the plan is maintained by more than 1 employer
and at least 85 percent of the employers are--
(1) rural cooperatives (as defined in section 401(k)(7)(B)
of such Code without regard to clause (iv) thereof), or
(2) organizations which are--
(A) cooperative organizations described in section
1381(a) of such Code which are more than 50-percent
owned by agricultural producers or by cooperatives owned
by agricultural producers, or
(B) more than 50-percent owned, or controlled by,
one or more cooperative organizations described in
subparagraph (A).
A plan shall also be treated as an eligible cooperative plan for any
plan year for which it is described in section 210(a) of the Employee
Retirement Income Security Act of 1974 and is maintained by a rural
telephone cooperative association described in section 3(40)(B)(v) of
such Act.
SEC. 105. <<NOTE: 26 USC 401 note.>> TEMPORARY RELIEF FOR CERTAIN PBGC
SETTLEMENT PLANS.
(a) General Rule.--Except as provided in this section, if a plan in
existence on July 26, 2005, was a PBGC settlement plan as of such date,
the amendments made by this subtitle and subtitle B shall not apply to
plan years beginning before January 1, 2014.
(b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
Internal Revenue Code of 1986 (as in effect before the amendments made
by this subtitle and subtitle B), to a PBGC settlement plan for plan
years beginning after December 31, 2007, and before January 1, 2014, the
third segment rate determined under section 303(h)(2)(C)(iii) of such
Act and section 430(h)(2)(C)(iii) of such Code (as added by such
amendments) shall be used in lieu of the interest rate otherwise used.
(c) PBGC Settlement Plan.--For purposes of this section, the term
``PBGC settlement plan'' means a defined benefit plan (other than a
multiemployer plan) to which section 302 of such Act and section 412 of
such Code apply and--
(1) which was sponsored by an employer which was in
bankruptcy, giving rise to a claim by the Pension Benefit
Guaranty Corporation of not greater than $150,000,000, and the
sponsorship of which was assumed by another employer that was
not a member of the same controlled group as the bankrupt
sponsor and the claim of the Pension Benefit Guaranty
Corporation was settled or withdrawn in connection with the
assumption of the sponsorship, or
(2) which, by agreement with the Pension Benefit Guaranty
Corporation, was spun off from a plan subsequently terminated by
such Corporation under section 4042 of the Employee Retirement
Income Security Act of 1974.
SEC. 106. <<NOTE: 26 USC 401 note.>> SPECIAL RULES FOR PLANS OF CERTAIN
GOVERNMENT CONTRACTORS.
(a) General Rule.--Except as provided in this section, if a plan is
an eligible government contractor plan, this subtitle and subtitle B
shall not apply to plan years beginning before the earliest of--
(1) the first plan year for which the plan ceases to be an
eligible government contractor plan,
[[Page 120 STAT. 818]]
(2) the effective date of the Cost Accounting Standards
Pension Harmonization Rule, or
(3) January 1, 2011.
(b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
Internal Revenue Code of 1986 (as in effect before the amendments made
by this subtitle and subtitle B) to an eligible government contractor
plan for plan years beginning after December 31, 2007, and before the
first plan year to which such amendments apply, the third segment rate
determined under section 303(h)(2)(C)(iii) of such Act and section
430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be
used in lieu of the interest rate otherwise used.
(c) Eligible Government Contractor Plan Defined.--For purposes of
this section, a plan shall be treated as an eligible government
contractor plan if it is maintained by a corporation or a member of the
same affiliated group (as defined by section 1504(a) of the Internal
Revenue Code of 1986), whose primary source of revenue is derived from
business performed under contracts with the United States that are
subject to the Federal Acquisition Regulations (chapter 1 of title 48,
CFR) and that are also subject to the Defense Federal Acquisition
Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue
derived from such business in the previous fiscal year exceeded
$5,000,000,000, and whose pension plan costs that are assignable under
those contracts are subject to sections 412 and 413 of the Cost
Accounting Standards (48 CFR 9904.412 and 9904.413).
(d) Cost Accounting Standards Pension Harmonization Rule.--The Cost
Accounting <<NOTE: Deadline.>> Standards Board shall review and revise
sections 412 and 413 of the Cost Accounting Standards (48 CFR 9904.412
and 9904.413) to harmonize the minimum required contribution under the
Employee Retirement Income Security Act of 1974 of eligible government
contractor plans and government reimbursable pension plan costs not
later than January 1, 2010. Any final rule adopted by the Cost
Accounting Standards Board shall be deemed the Cost Accounting Standards
Pension Harmonization Rule.
SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Miscellaneous Amendments to Title I.--Subtitle B of title I of
such Act (29 U.S.C. 1021 et seq.) is amended--
(1) in section 101(d)(3), by <<NOTE: 29 USC 1021.>> striking
``section 302(e)'' and inserting ``section 303(j)'';
(2) in section 103(d)(8)(B), by <<NOTE: 29 USC
1023.>> striking ``the requirements of section 302(c)(3)'' and
inserting ``the applicable requirements of sections 303(h) and
304(c)(3)'';
(3) in section 103(d), by striking paragraph (11) and
inserting the following:
``(11) If the current value of the assets of the plan is
less than 70 percent of--
``(A) in the case of a single-employer plan, the
funding target (as defined in section 303(d)(1)) of the
plan, or
``(B) in the case of a multiemployer plan, the
current liability (as defined in section 304(c)(6)(D))
under the plan,
the percentage which such value is of the amount described in
subparagraph (A) or (B).'';
[[Page 120 STAT. 819]]
(4) in section 203(a)(3)(C), by <<NOTE: 29 USC
1053.>> striking ``section 302(c)(8)'' and inserting ``section
302(d)(2)'';
(5) in section 204(g)(1), by <<NOTE: 29 USC 1054.>> striking
``section 302(c)(8)'' and inserting ``section 302(d)(2)'';
(6) in section 204(i)(2)(B), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(7) in section 204(i)(3), by striking ``funded current
liability percentage (within the meaning of section 302(d)(8) of
this Act)'' and inserting ``funding target attainment percentage
(as defined in section 303(d)(2))'';
(8) in section 204(i)(4), by striking ``section
302(c)(11)(A), without regard to section 302(c)(11)(B)'' and
inserting ``section 302(b)(1), without regard to section
302(b)(2)'';
(9) in section 206(e)(1), by <<NOTE: 29 USC 1056.>> striking
``section 302(d)'' and inserting ``section 303(j)(4)'', and by
striking ``section 302(e)(5)'' and inserting ``section
303(j)(4)(E)(i)'';
(10) in section 206(e)(3), by striking ``section 302(e) by
reason of paragraph (5)(A) thereof'' and inserting ``section
303(j)(3) by reason of section 303(j)(4)(A)''; and
(11) in sections 101(e)(3), 403(c)(1), <<NOTE: 29 USC 1021,
1103, 1108.>> and 408(b)(13), by striking ``American Jobs
Creation Act of 2004'' and inserting ``Pension Protection Act of
2006''.
(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 4062(c) (29 U.S.C. 1362(c)), by striking
paragraphs (1), (2), and (3) and inserting the following:
``(1) the sum of the shortfall amortization charge (within
the meaning of section 303(c)(1) of this Act and 430(d)(1) of
the Internal Revenue Code of 1986) with respect to the plan (if
any) for the plan year in which the termination date occurs,
plus the aggregate total of shortfall amortization installments
(if any) determined for succeeding plan years under section
303(c)(2) of this Act and section 430(d)(2) of such Code (which,
for purposes of this subparagraph, shall include any increase in
such sum which would result if all applications for waivers of
the minimum funding standard under section 302(c) of this Act
and section 412(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), and
``(2) the sum of the waiver amortization charge (within the
meaning of section 303(e)(1) of this Act and 430(e)(1) of the
Internal Revenue Code of 1986) with respect to the plan
[[Page 120 STAT. 820]]
(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(e)(2) of such Code,'';
(5) in section 4071 (29 U.S.C. 1371), by striking
``302(f)(4)'' and inserting ``303(k)(4)'';
(6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by
striking ``302(a)'' and inserting ``304(a)'', and, in clause
(i), by striking ``302(a)'' and inserting ``304(a)'';
(7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by
striking ``303(a)'' and inserting ``302(c)'';
(8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by
striking ``303(c)'' and inserting ``302(c)(3)''; and
(9) in section 4243(g) (29 U.S.C. 1423(g)), by striking
``302(c)(3)'' and inserting ``304(c)(3)''.
(c) Amendments to <<NOTE: 29 USC 1001 note.>> 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(c)(2) and 431(d)(1), (d)(2), and (e)(2)(A)''.
(d) Repeal of Expired Authority for Temporary Variances.--Section
207 of such Act (29 U.S.C. 1057) is repealed.
(e) Effective Date.--The <<NOTE: 29 USC 1021 note.>> amendments made
by this section shall apply to plan years beginning after 2007.
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 <<NOTE: 26 USC 412.>> 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
[[Page 120 STAT. 821]]
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.--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,
[[Page 120 STAT. 822]]
``(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) <<NOTE: Notice.>> notice of
the completed application for any waiver
or modification, and
``(II) <<NOTE: Deadline.>> 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).
[[Page 120 STAT. 823]]
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions of
this paragraph shall not apply to any plan with
respect to which the sum of--
``(I) the aggregate unpaid minimum
required contributions (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 <<NOTE: Deadline.>> 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
[[Page 120 STAT. 824]]
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.--Subparagraph (A) shall not apply
to any plan amendment which--
``(i) the Secretary determines to be
reasonable and which provides for only de minimis
increases in the liabilities of the plan,
``(ii) only repeals an amendment described in
subsection (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 <<NOTE: Deadline.>> 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 <<NOTE: Notices. Deadline.>> first day of
such plan year. No amendment described in this paragraph which
reduces the accrued benefits of any participant shall take
effect unless the plan administrator files a notice with the
Secretary notifying him of such amendment and the Secretary has
approved such amendment, or within 90 days after the date on
which such notice was filed, failed to disapprove such
amendment. No amendment described in this subsection shall be
approved by the Secretary unless the Secretary determines that
such amendment is necessary because of a temporary substantial
business hardship (as determined under subsection (c)(2)) or a
substantial business hardship (as so determined) in the case of
a multiemployer plan and that a waiver under subsection
[[Page 120 STAT. 825]]
(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 paragraphs (2) and
(4), this section applies to a plan if, for any plan year
beginning on or after the effective date of this section for
such plan under the Employee Retirement Income Security Act of
1974--
``(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,
[[Page 120 STAT. 826]]
``(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.
``(4) Certain <<NOTE: Applicability.>> terminated
multiemployer plans.--This section applies with respect to a
terminated multiemployer plan to which section 4021 of the
Employee Retirement Income Security Act of 1974 applies until
the last day of the plan year in which the plan terminates
(within the meaning of section 4041A(a)(2) of such Act).''.
(b) Effective Date.--The <<NOTE: 26 USC 412 note.>> amendments made
by this section shall apply to plan years beginning after December 31,
2007.
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. <<NOTE: 26 USC 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)) equals or exceeds
the funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced (but not below
zero) by such excess.
``(b) Target Normal Cost.--For purposes of this section, except as
provided in subsection (i)(2) with respect to plans in at-risk status,
the term `target normal cost' means, for any plan year, the present
value of all benefits which are expected to accrue
[[Page 120 STAT. 827]]
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 (not less than zero) of the shortfall
amortization installments for such plan year with respect to the
shortfall amortization bases for such plan year and each of the
6 preceding plan years.
``(2) Shortfall amortization installment.--For purposes of
paragraph (1)--
``(A) Determination.--The shortfall amortization
installments are the amounts necessary to amortize the
shortfall amortization base of the plan for any plan
year in level annual installments over the 7-plan-year
period beginning with such plan year.
``(B) Shortfall installment.--The shortfall
amortization installment for any plan year in the 7-
plan-year period under subparagraph (A) with respect to
any shortfall amortization base is the annual
installment determined under subparagraph (A) for that
year for that base.
``(C) Segment rates.--In determining any shortfall
amortization installment under this paragraph, the plan
sponsor shall use the segment rates determined under
subparagraph (C) of subsection (h)(2), applied under
rules similar to the rules of subparagraph (B) of
subsection (h)(2).
``(3) Shortfall amortization base.--For purposes of this
section, the shortfall amortization base of a plan for a plan
year is--
``(A) the funding shortfall of such plan for such
plan year, minus
``(B) the present value (determined using the
segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the
rules of subparagraph (B) of subsection (h)(2)) of the
aggregate total of the shortfall amortization
installments and waiver amortization installments which
have been determined for such plan year and any
succeeding plan year with respect to the shortfall
amortization bases and waiver amortization bases of the
plan for any plan year preceding such plan year.
``(4) Funding shortfall.--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
[[Page 120 STAT. 828]]
(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.--Except as provided in
clauses (iii) and (iv), in the case of plan years
beginning after 2007 and before 2011, only the
applicable percentage of the funding target shall
be taken into account under paragraph (3)(A) in
determining the funding shortfall for the plan
year for purposes of subparagraph (A).
``(ii) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage shall
be determined in accordance with the following
table:
``In the case The applicable............................
year
beginning inpercentage is.............................
year:
2008.................................... 92
2009.................................... 94
2010.................................... 96.
``(iii) Limitation.--Clause (i) shall not
apply with respect to any plan year after 2008
unless the shortfall amortization base for each of
the preceding years beginning after 2007 was zero
(determined after application of this
subparagraph).
``(iv) Transition relief not available for new
or deficit reduction plans.--Clause (i) shall not
apply to a plan--
``(I) which was not in effect for a
plan year beginning in 2007, or
``(II) which was in effect for a
plan year beginning in 2007 and which
was subject to section 412(l) (as in
effect for plan years beginning in
2007), determined after the application
of paragraphs (6) and (9) thereof.
``(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
benefits accrued or earned under the plan as of the beginning of
the plan year.
``(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is the
ratio (expressed as a percentage) which--
``(A) the value of plan assets for the plan year (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.--
[[Page 120 STAT. 829]]
``(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any plan year
is the aggregate total of the waiver amortization installments
for such plan year with respect to the waiver amortization bases
for each of the 5 preceding plan years.
``(2) Waiver amortization installment.--For purposes of
paragraph (1)--
``(A) Determination.--The waiver amortization
installments are the amounts necessary to amortize the
waiver amortization base of the plan for any plan year
in level annual installments over a period of 5 plan
years beginning with the succeeding plan year.
``(B) Waiver installment.--The waiver amortization
installment for any plan year in the 5-year period under
subparagraph (A) with respect to any waiver amortization
base is the annual installment determined under
subparagraph (A) for that year for that base.
``(3) Interest rate.--In determining any waiver amortization
installment under this subsection, the plan sponsor shall use
the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules of
subparagraph (B) of subsection (h)(2).
``(4) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the amount of the waived
funding deficiency (if any) for such plan year under section
412(c).
``(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the waiver
amortization charge for such plan year and succeeding plan
years, the waiver amortization bases for all preceding plan
years (and all waiver amortization installments determined with
respect to such bases) shall be reduced to zero.
``(f) Reduction of Minimum Required Contribution by Prefunding
Balance and Funding Standard Carryover Balance.--
``(1) Election to maintain balances.--
``(A) Prefunding balance.--The plan sponsor of a
defined benefit plan which is not a multiemployer plan
may elect to maintain a prefunding 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 2007.--A plan is described in this
clause if the plan--
``(I) was in effect for a plan year
beginning in 2007, 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.
[[Page 120 STAT. 830]]
``(2) Application of balances.--A prefunding 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 prefunding 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 as of the first day of the
plan year by the amount so credited by the plan sponsor
as of the first day of the plan year. 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 prefunding 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. In the case of plan years
beginning in 2008, the ratio under this subparagraph may
be determined using such methods of estimation as the
Secretary may prescribe.
``(4) Effect of balances on amounts treated as value of plan
assets.--In the case of any plan maintaining a prefunding
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 prefunding balance, but only if an
election under
[[Page 120 STAT. 831]]
paragraph (2) applying any portion of the prefunding
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 prefunding 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 prefunding 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 prefunding 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 prefunding
balance and the funding standard carryover balance for
any plan year (but not below zero). <<NOTE: Effective
date.>> 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 prefunding 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 prefunding balance.
``(6) Prefunding balance.--
``(A) In general.--A prefunding 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.--
``(i) In general.--As of the <<NOTE: Effective
date.>> first day of each plan year beginning
after 2008, the prefunding balance of a plan shall
be increased by the amount elected by
[[Page 120 STAT. 832]]
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.
``(ii) Adjustments for interest.--Any excess
contributions under clause (i) shall be properly
adjusted for interest accruing for the periods
between the first day of the current plan year and
the dates on which the excess contributions were
made, determined by using the effective interest
rate for the preceding plan year and by treating
contributions as being first used to satisfy the
minimum required contribution.
``(iii) Certain contributions necessary to
avoid benefit limitations disregarded.--The excess
described in clause (i) with respect to any
preceding plan year shall be reduced (but not
below zero) by the amount of contributions an
employer would be required to make under paragraph
(1), (2), or (4) of section 206(g) to avoid a
benefit limitation which would otherwise be
imposed under such paragraph for the preceding
plan year. Any contribution which may be taken
into account in satisfying the requirements of
more than 1 of such paragraphs shall be taken into
account only once for purposes of this clause.
``(C) Decreases.--The prefunding balance of a plan
shall be decreased (but not below zero) by the sum of--
``(i) as of the first day of each plan year
after 2008, 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) as of the time specified in paragraph
(5)(A), 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.--The funding standard carryover
balance of a plan shall be decreased (but not below
zero) by--
``(i) as of the first day of each plan year
after 2008, 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) as of the time specified in paragraph
(5)(A), any reduction in such balance elected
under paragraph (5).
[[Page 120 STAT. 833]]
``(8) Adjustments for investment experience.--In determining
the prefunding balance or the funding standard carryover balance
of a plan as of the first day of the plan year, the plan sponsor
shall, in accordance with regulations prescribed by the
Secretary of the Treasury, adjust such balance to reflect the
rate of return on plan assets for the preceding plan year.
Notwithstanding subsection (g)(3), such rate of return shall be
determined on the basis of fair market value and shall properly
take into account, in accordance with such regulations, all
contributions, distributions, and other plan payments made
during such period.
``(9) Elections.--Elections <<NOTE: Regulations.>> 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 <<NOTE: Deadline.>> otherwise provided under this subsection,
all determinations under this section for a plan year shall be
made as of the valuation date of the plan for such plan year.
``(2) Valuation date.--For purposes of this section--
``(A) In general.--Except as provided in
subparagraph (B), the valuation date of a plan for any
plan year shall be the first day of the plan year.
``(B) Exception for small plans.--If, on each day
during the preceding plan year, a plan had 100 or fewer
participants, the plan may designate any day during the
plan year as its valuation date for such plan year and
succeeding plan years. For purposes of this
subparagraph, all defined benefit plans (other than
multiemployer plans) maintained by the same employer (or
any member of such employer's controlled group) shall be
treated as 1 plan, but only 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) Determination of value of plan assets.--For purposes
of this section--
``(A) In general.--Except as provided in
subparagraph (B), the value of plan assets shall be the
fair market value of the assets.
``(B) Averaging allowed.--A plan may determine the
value of plan assets on the basis of the averaging of
fair market values, but only if such method--
``(i) is permitted under regulations
prescribed by the Secretary,
``(ii) does not provide for averaging of such
values over more than the period beginning on the
last day of the 25th month preceding the month in
which the
[[Page 120 STAT. 834]]
valuation date occurs and ending on the valuation
date (or a similar period in the case of a
valuation date which is not the 1st day of a
month), and
``(iii) does 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.
Any such averaging shall be adjusted for contributions
and distributions (as provided by the Secretary).
``(4) Accounting for contribution receipts.--For purposes of
determining the value of assets under paragraph (3)--
``(A) Prior year contributions.--If--
``(i) an employer makes any contribution to
the plan after the valuation date for the plan
year in which the contribution is made, and
``(ii) the contribution is for a preceding
plan year,
the contribution shall be taken into account as an asset
of the plan as of the valuation date, except that in the
case of any plan year beginning after 2008, only the
present value (determined as of the valuation date) of
such contribution may be taken into account. For
purposes of the preceding sentence, present value shall
be determined using the effective interest rate for the
preceding plan year to which the contribution is
properly allocable.
``(B) Special rule for current year contributions
made before valuation date.--If any contributions for
any plan year are made to or under the plan during the
plan year but before the valuation date for the plan
year, the assets of the plan as of the valuation date
shall not include--
``(i) such contributions, and
``(ii) interest on such contributions for the
period between the date of the contributions and
the valuation date, determined by using the
effective interest rate for the plan year.
``(h) Actuarial Assumptions and Methods.--
``(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial assumptions
and methods--
``(A) each of which is reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
``(2) Interest rates.--
``(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate
of interest which, if used to determine the present
value of the plan's accrued or earned benefits referred
to in subsection (d)(1), would result in an amount equal
to the funding target of the plan for such plan year.
``(B) Interest rates for determining funding
target.--For purposes of determining the funding target
of
[[Page 120 STAT. 835]]
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 benefits reasonably
determined to be payable during the 5-year period
beginning on the first day of the plan year, the
first segment rate with respect to the applicable
month,
``(ii) in the case of benefits reasonably
determined to be payable during the 15-year period
beginning at the end of the period described in
clause (i), the second segment rate with respect
to the applicable month, and
``(iii) in the case of benefits reasonably
determined to be payable after the period
described in clause (ii), the third segment rate
with respect to the applicable month.
``(C) Segment rates.--For purposes of this para-
graph--
``(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 the average, for
the 24-month period ending with the month
preceding such month, of monthly yields on
investment grade corporate bonds with varying
maturities and that are in the top 3 quality
levels available.
``(ii) Election to use yield curve.--Solely
for purposes of determining the minimum required
contribution under this section, the plan sponsor
may,
[[Page 120 STAT. 836]]
in lieu of the segment rates determined under
subparagraph (C), elect to use interest rates
under the corporate bond yield curve. For purposes
of the preceding sentence such curve shall be
determined without regard to the 24-month
averaging described in clause (i). Such election,
once made, may be revoked only with the consent of
the Secretary.
``(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 2008 or 2009, 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 2007),
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 2008 and 66\2/
3\ percent for plan years beginning in 2009.
``(iii) New plans ineligible.--Clause (i)
shall not apply to any plan if the first plan year
of the plan begins after December 31, 2007.
``(iv) Election.--The plan sponsor may elect
not to have this subparagraph apply. Such
election, once made, may be revoked only with the
consent of the Secretary.
``(3) Mortality tables.--
``(A) In general.--Except
as <<NOTE: Regulations.>> provided in subparagraph (C)
or (D), the Secretary shall by regulation prescribe
mortality tables to be used in determining any present
value or making any computation under this section. Such
tables
[[Page 120 STAT. 837]]
shall be based on 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.
``(B) Periodic revision.--The Secretary shall (at
least every 10 years) make revisions in any table in
effect under subparagraph (A) to reflect the actual
experience of pension plans and projected trends in such
experience.
``(C) Substitute mortality table.--
``(i) In general.--Upon request by the plan
sponsor and approval by the Secretary, a mortality
table which meets the requirements of clause (iii)
shall be used in determining any present value or
making any computation under this section during
the period of consecutive plan years (not to
exceed 10) specified in the request.
``(ii) Early termination of period.--
Notwithstanding clause (i), a mortality table
described in clause (i) shall cease to be in
effect as of the earliest of--
``(I) the date on which there is a
significant change in the participants
in the plan by reason of a plan spinoff
or merger or otherwise, or
``(II) the date on which the plan
actuary determines that such table does
not meet the requirements of clause
(iii).
``(iii) Requirements.--A mortality table meets
the requirements of this clause if--
``(I) there is a sufficient number
of plan participants, and the pension
plans have been maintained for a
sufficient period of time, to have
credible information necessary for
purposes of subclause (II), and
``(II) such table reflects the
actual experience of the pension plans
maintained by the sponsor and projected
trends in general mortality experience.
``(iv) All plans in controlled group must use
separate table.--Except as provided by the
Secretary, a plan sponsor may not use a mortality
table under this subparagraph for any plan
maintained by the plan sponsor unless--
``(I) a separate mortality table is
established and used under this
subparagraph for each other plan
maintained by the plan sponsor and if
the plan sponsor is a member of a
controlled group, each member of the
controlled group, and
``(II) the requirements of clause
(iii) are met separately with respect to
the table so established for each such
plan, determined by only taking into
account the participants of such plan,
the time such plan has been in
existence, and the actual experience of
such plan.
``(v) Deadline for submission and disposition
of application.--
``(I) Submission.--The plan sponsor
shall submit a mortality table to the
Secretary for
[[Page 120 STAT. 838]]
approval under this subparagraph at
least 7 months before the 1st day of the
period described in clause (i).
``(II) Disposition.--Any mortality
table submitted to the Secretary for
approval under this subparagraph shall
be treated as in effect as of the 1st
day of the period described in clause
(i) unless the Secretary, during the
180-day period beginning on the date of
such submission, disapproves of such
table and provides the reasons that such
table fails to meet the requirements of
clause (iii). <<NOTE: Extension.>> The
180-day period shall be extended upon
mutual agreement of the Secretary and
the plan sponsor.
``(D) Separate mortality tables for the disabled.--
Notwithstanding subparagraph (A)--
``(i) In general.--The Secretary shall
establish mortality tables which may be used (in
lieu of the tables under subparagraph (A)) under
this subsection for individuals who are entitled
to benefits under the plan on account of
disability. The Secretary shall establish separate
tables for individuals whose disabilities occur in
plan years beginning before January 1, 1995, and
for individuals whose disabilities occur in plan
years beginning on or after such date.
``(ii) Special rule for disabilities occurring
after 1994.--In the case
of <<NOTE: Applicability.>> disabilities occurring
in plan years beginning after December 31, 1994,
the tables under clause (i) shall apply only with
respect to individuals described in such subclause
who are disabled within the meaning of title II of
the Social Security Act and the regulations
thereunder.
``(iii) Periodic revision.--The Secretary
shall (at least every 10 years) make revisions in
any table in effect under clause (i) to reflect
the actual experience of pension plans and
projected trends in such experience.
``(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.
[[Page 120 STAT. 839]]
``(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 the case of a plan which is in
at-risk status for a plan year, the funding target of
the plan for the plan year shall be equal to the sum
of--
``(i) the present value of all benefits
accrued or earned under the plan as of the
beginning of the plan year, as determined by using
the additional actuarial assumptions described in
subparagraph (B), and
``(ii) in the case of a plan which also has
been in at-risk status for at least 2 of the 4
preceding plan years, a loading factor determined
under subparagraph (C).
``(B) Additional actuarial assumptions.--The
actuarial assumptions described in this subparagraph are
as follows:
``(i) All employees who are not otherwise
assumed to retire as of the valuation date but who
will be eligible to elect benefits during the plan
year and the 10 succeeding plan years shall be
assumed to retire at the earliest retirement date
under the plan but not before the end of the plan
year for which the at-risk funding target and at-
risk target normal cost are being determined.
``(ii) All employees shall be assumed to elect
the retirement benefit available under the plan at
the assumed retirement age (determined after
application of clause (i)) which would result in
the highest present value of benefits.
``(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
[[Page 120 STAT. 840]]
``(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 the case of a
plan which is in at-risk status for a plan year, the target
normal cost of the plan for such plan year shall be equal to 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 using the additional actuarial
assumptions described in paragraph (1)(B), plus
``(B) in the case of a plan which also has been in
at-risk status for at least 2 of the 4 preceding plan
years, a loading factor equal to 4 percent of the target
normal cost (determined without regard to this
paragraph) of the plan for the plan year.
``(3) Minimum amount.--In no event shall--
``(A) the at-risk funding target be less than the
funding target, as determined without regard to this
subsection, or
``(B) the at-risk target normal cost be less than
the target normal cost, as determined without regard to
this subsection.
``(4) Determination of at-risk status.--For purposes of this
subsection--
``(A) In general.--A plan is in at-risk status for a
plan year if--
``(i) the funding target attainment percentage
for the preceding plan year (determined under this
section without regard to this subsection) is less
than 80 percent, and
``(ii) the funding target attainment
percentage for the preceding plan year (determined
under this section by using the additional
actuarial assumptions described in paragraph
(1)(B) in computing the funding target) is less
than 70 percent.
``(B) Transition rule.--In
the <<NOTE: Applicability.>> case of plan years
beginning in 2008, 2009, and 2010, subparagraph (A)(i)
shall be applied by substituting the following
percentages for `80 percent':
``(i) 65 percent in the case of 2008.
``(ii) 70 percent in the case of 2009.
``(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008, the funding
target attainment percentage for the preceding plan year
under subparagraph (A)(ii) may be determined using such
methods of estimation as the Secretary may provide.
``(C) Special rule for employees offered early
retirement in 2006.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the additional actuarial
assumptions described in paragraph (1)(B) shall
not be taken into account with respect to any
employee if--
``(I) such employee is employed by a
specified automobile manufacturer,
[[Page 120 STAT. 841]]
``(II) <<NOTE: Deadline.>> such
employee is offered a substantial amount
of additional cash compensation,
substantially enhanced retirement
benefits under the plan, or materially
reduced employment duties on the
condition that by a specified date (not
later than December 31, 2010) the
employee retires (as defined under the
terms of the plan),
``(III) <<NOTE: Deadline.>> such
offer is made during 2006 and pursuant
to a bona fide retirement incentive
program and requires, by the terms of
the offer, that such offer can be
accepted not later than a specified date
(not later than December 31, 2006), and
``(IV) such employee does not elect
to accept such offer before the
specified date on which the offer
expires.
``(ii) Specified automobile manufacturer.--For
purposes of clause (i), the term `specified
automobile manufacturer' means--
``(I) any manufacturer of
automobiles, and
``(II) any manufacturer of
automobile parts which supplies such
parts directly to a manufacturer of
automobiles and which, after a
transaction or series of transactions
ending in 1999, ceased to be a member of
a controlled group which included such
manufacturer of automobiles.
``(5) 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
subparagraph (A), the transition percentage shall be
determined in accordance with the following table:
``If the consecuti .........................................
of
years (includingThe transition............................
year)
the plan is in apercentage is--...........................
status is--
1........................................... 20
2........................................... 40
3........................................... 60
4........................................... 80.
``(C) Years before effective date.--For purposes of
this paragraph, plan years beginning before 2008 shall
not be taken into account.
``(6) Small plan exception.--If, on each day during the
preceding plan year, a plan had 500 or fewer participants, the
plan shall not be treated as in at-risk status for the plan
[[Page 120 STAT. 842]]
year. For <<NOTE: Applicability.>> purposes of this paragraph,
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 and the rules of subsection (g)(2)(C)
shall apply.
``(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) Failure to timely make required installment.--
In any case in which the plan has a funding shortfall
for the preceding plan year, the employer maintaining
the plan shall make the required installments under this
paragraph and if the employer fails to pay the full
amount of a required installment for the plan year, then
the amount of interest charged under paragraph (2) on
the underpayment for the period of underpayment shall be
determined by using a rate of interest equal to the rate
otherwise used under paragraph (2) plus 5 percentage
points.
``(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:
[[Page 120 STAT. 843]]
``In the case of the following The due date is:
required installment:
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 (determined
without regard to this subsection) to
the plan for the plan year under this
section, or
``(II) 100 percent of the minimum
required contribution (determined
without regard to this subsection or 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.
``(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
described in subsection (g)(2)(B)) 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
[[Page 120 STAT. 844]]
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 paragraph--
``(i) Liquidity shortfall.--The term
`liquidity shortfall' means, with respect to any
required installment, an amount equal to the
excess (as of the last day of the quarter for
which such installment is made) of--
``(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) <<NOTE: Regulations.>> 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 <<NOTE: Regulations.>> 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
[[Page 120 STAT. 845]]
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) covered under section 4021 of the Employee
Retirement Income Security Act of 1974 for any plan year for
which the funding target attainment percentage (as defined in
subsection (d)(2)) of such plan is less than 100 percent.
``(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section and
section 412 for which payment has not been made before the due
date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--
A <<NOTE: Deadline.>> 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
[[Page 120 STAT. 846]]
Guaranty Corporation, by the contributing sponsor (or any member
of the controlled group of the contributing sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a
contribution payment required to be made to the plan,
including any required installment under paragraphs (3)
and (4) of subsection (j).
``(B) Due date; required installment.--The terms
`due date' and `required installment' have the meanings
given such terms by subsection (j), except that in the
case of a payment other than a required installment, the
due date shall be the date such payment is required to
be made under section 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 <<NOTE: 26 USC 430 note.>> amendments made
by this section shall apply with respect to plan years beginning after
December 31, 2007.
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 <<NOTE: 26 USC prec.
430.>> (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:
[[Page 120 STAT. 847]]
``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. <<NOTE: 26 USC 436.>> FUNDING-BASED LIMITS ON BENEFITS AND
BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER PLANS.
``(a) General Rule.--For purposes of section 401(a)(29), a defined
benefit plan which is a single-employer plan shall be treated as meeting
the requirements of this section if the plan meets the requirements of
subsections (b), (c), (d), and (e).
``(b) Funding-Based Limitation on Shutdown Benefits and Other
Unpredictable Contingent Event Benefits Under Single-Employer Plans.--
``(1) In general.--If a participant of a defined benefit
plan which is a single-employer plan is entitled to an
unpredictable contingent event benefit payable with respect to
any event occurring during any plan year, the plan shall provide
that such benefit may not be provided if the adjusted funding
target attainment percentage for such plan year--
``(A) is less than 60 percent, or
``(B) would be less than 60 percent taking into
account such occurrence.
``(2) Exemption.--Paragraph (1) <<NOTE: Effective
date.>> shall cease to apply with respect to any plan year,
effective as of the first day 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 430) 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 60 percent.
``(3) Unpredictable contingent event.--For purposes of this
subsection, the term `unpredictable contingent event benefit'
means any benefit payable solely by reason of--
``(A) a plant shutdown (or similar event, as
determined by the Secretary), or
``(B) any event other than the attainment of any
age, performance of any service, receipt or derivation
of any compensation, or occurrence of death or
disability.
``(c) Limitations on Plan Amendments Increasing Liability for
Benefits.--
``(1) 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 may take effect during any plan year if the
adjusted funding target attainment percentage for such plan year
is--
``(A) less than 80 percent, or
``(B) would be less than 80 percent taking into
account such amendment.
[[Page 120 STAT. 848]]
``(2) Exemption.--Paragraph <<NOTE: Effective date.>> (1)
shall cease to apply with respect to any plan year, effective as
of the first day of the plan year (or if later, the effective
date of the amendment), upon payment by the plan sponsor of a
contribution (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 an adjusted funding target
attainment percentage of 80 percent.
``(3) Exception for certain benefit increases.--Paragraph
(1) shall not apply to any amendment which provides for an
increase in benefits under a formula which is not based on a
participant's compensation, but only if the rate of such
increase is not in excess of the contemporaneous rate of
increase in average wages of participants covered by the
amendment.
``(d) Limitations on Accelerated Benefit Distributions.--
``(1) Funding percentage less than 60 percent.--A defined
benefit plan which is a single-employer plan shall provide that,
in any case in which the plan's adjusted funding target
attainment percentage for a plan year is less than 60 percent,
the plan may not pay any prohibited payment after the valuation
date for the plan year.
``(2) Bankruptcy.--A defined benefit plan which is a single-
employer plan shall provide that, during any period in which the
plan sponsor is a debtor in a case under title 11, United States
Code, or similar Federal or State law, the plan may not pay any
prohibited payment. <<NOTE: Effective date.>> The preceding
sentence shall not apply on or after the date on which the
enrolled actuary of the plan certifies that the adjusted funding
target attainment percentage of such plan is not less than 100
percent.
``(3) Limited payment if percentage at least 60 percent but
less than 80 percent.--
``(A) In general.--A defined benefit plan which is a
single-employer plan shall provide that, in any case in
which the plan's adjusted funding target attainment
percentage for a plan year is 60 percent or greater but
less than 80 percent, the plan may not pay any
prohibited payment after the valuation date for the plan
year to the extent the amount of the payment exceeds the
lesser of--
``(i) 50 percent of the amount of the payment
which could be made without regard to this
section, or
``(ii) the present value (determined under
guidance prescribed by the Pension Benefit
Guaranty Corporation, using the interest and
mortality assumptions under section 417(e)) of the
maximum guarantee with respect to the participant
under section 4022 of the Employee Retirement
Income Security Act of 1974.
``(B) One-time application.--
``(i) In general.--The plan shall also provide
that only 1 prohibited payment meeting the
requirements of subparagraph (A) may be made with
respect to any participant during any period of
consecutive plan
[[Page 120 STAT. 849]]
years to which the limitations under either
paragraph (1) or (2) or this paragraph applies.
``(ii) Treatment of beneficiaries.--For
purposes of this subparagraph, a participant and
any beneficiary on his behalf (including an
alternate payee, as defined in section 414(p)(8))
shall be treated as 1 participant. If the accrued
benefit of a participant is allocated to such an
alternate payee and 1 or more other persons, the
amount under subparagraph (A) shall be allocated
among such persons in the same manner as the
accrued benefit is allocated unless the qualified
domestic relations order (as defined in section
414(p)(1)(A)) provides otherwise.
``(4) Exception.--This subsection shall not apply to any
plan for any plan year if the terms of such plan (as in effect
for the period beginning on September 1, 2005, and ending with
such plan year) provide for no benefit accruals with respect to
any participant during such period.
``(5) Prohibited payment.--For purpose of this subsection,
the term `prohibited payment' means--
``(A) any payment, in excess of the monthly amount
paid under a single life annuity (plus any social
security supplements described in the last sentence of
section 411(a)(9)), to a participant or beneficiary
whose annuity starting date (as defined in section
417(f)(2)) occurs during any period a limitation under
paragraph (1) or (2) is in effect,
``(B) any payment for the purchase of an irrevocable
commitment from an insurer to pay benefits, and
``(C) any other payment specified by the Secretary
by regulations.
``(e) Limitation on <<NOTE: Effective dates.>> Benefit Accruals for
Plans With Severe Funding Shortfalls.--
``(1) In general.--A defined benefit plan which is a single-
employer plan shall provide that, in any case in which the
plan's adjusted funding target attainment percentage for a plan
year is less than 60 percent, benefit accruals under the plan
shall cease as of the valuation date for the plan year.
``(2) Exemption.--Paragraph (1) shall cease to apply with
respect to any plan year, effective as of the first day 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 the amount sufficient to result in an adjusted
funding target attainment percentage of 60 percent.
``(f) Rules Relating to Contributions Required to Avoid Benefit
Limitations.--
``(1) Security may be provided.--
``(A) In general.--For purposes of this section, the
adjusted funding target attainment percentage shall be
determined by treating as an asset of the plan any
security provided by a plan sponsor in a form meeting
the requirements of subparagraph (B).
``(B) Form of security.--The security required under
subparagraph (A) shall consist of--
``(i) a bond issued by a corporate surety
company that is an acceptable surety for purposes
of section
[[Page 120 STAT. 850]]
412 of the Employee Retirement Income Security Act
of 1974,
``(ii) cash, or United States obligations
which mature in 3 years or less, held in escrow by
a bank or similar financial institution, or
``(iii) such other form of security as is
satisfactory to the Secretary and the parties
involved.
``(C) Enforcement.--Any security provided under
subparagraph (A) may be perfected and enforced at any
time after the earlier of--
``(i) the date on which the plan terminates,
``(ii) if there is a failure to make a payment
of the minimum required contribution for any plan
year beginning after the security is provided, the
due date for the payment under section 430(j), or
``(iii) if the adjusted funding target
attainment percentage is less than 60 percent for
a consecutive period of 7 years, the valuation
date for the last year in the period.
``(D) Release of security.--
The <<NOTE: Regulations.>> security shall be released
(and any amounts thereunder shall be refunded together
with any interest accrued thereon) at such time as the
Secretary may prescribe in regulations, including
regulations for partial releases of the security by
reason of increases in the funding target attainment
percentage.
``(2) Prefunding balance or funding standard carryover
balance may not be used.--No prefunding balance under section
430(f) or funding standard carryover balance may be used under
subsection (b), (c), or (e) to satisfy any payment an employer
may make under any such subsection to avoid or terminate the
application of any limitation under such subsection.
``(3) Deemed reduction of funding balances.--
``(A) In general.--Subject to subparagraph (C), in
any case in which a benefit limitation under subsection
(b), (c), (d), or (e) would (but for this subparagraph
and determined without regard to subsection (b)(2),
(c)(2), or (e)(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) to reduce the prefunding balance or
funding standard carryover balance 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.
``(C) Restrictions of certain rules to collectively
bargained plans.--With respect to any benefit limitation
under subsection (b), (c), or (e), subparagraph (A)
shall only apply in the case of a plan maintained
pursuant to 1 or more collective bargaining agreements
between employee representatives and 1 or more
employers.
``(g) New Plans.--Subsections (b), (c), and (e) shall not apply to a
plan for the first 5 plan years of the plan. For purposes
[[Page 120 STAT. 851]]
of this subsection, the reference in this subsection to a plan shall
include a reference to any predecessor plan.
``(h) Presumed <<NOTE: Certification.>> Underfunding for Purposes of
Benefit Limitations.--
``(1) Presumption of continued underfunding.--In any case in
which a benefit limitation under subsection (b), (c), (d), or
(e) has been applied to a plan with respect to the plan year
preceding the current plan year, the adjusted funding target
attainment percentage of the plan for the current plan year
shall be presumed to be equal to the adjusted funding target
attainment percentage of the plan for the preceding plan year
until the enrolled actuary of the plan certifies the actual
adjusted funding target attainment percentage of the plan for
the current plan year.
``(2) Presumption of underfunding after 10th month.--In any
case in which no certification of the adjusted funding target
attainment percentage for the current plan year is made with
respect to the plan before the first day of the 10th month of
such year, for purposes of subsections (b), (c), (d), and (e),
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 plan's adjusted funding target attainment percentage
shall be conclusively presumed to be less than 60 percent as of
such first day.
``(3) Presumption of underfunding after 4th month for nearly
underfunded plans.--In any case in which--
``(A) a benefit limitation under subsection (b),
(c), (d), or (e) did not apply to a plan with respect to
the plan year preceding the current plan year, but the
adjusted 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 adjusted funding target
attainment percentage 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 adjusted
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 adjusted funding
target attainment percentage of the plan for such preceding plan
year.
``(i) Treatment of Plan as of Close of Prohibited or Cessation
Period.--For purposes of applying this title--
``(1) Operation of <<NOTE: Effective date.>> plan after
period.--Unless the plan provides otherwise, payments and
accruals will resume effective as of the day following the close
of the period for which any limitation of payment or accrual of
benefits under subsection (d) or (e) applies.
``(2) Treatment of affected benefits.--Nothing in this
subsection shall be construed as affecting the plan's treatment
of benefits which would have been paid or accrued but for this
section.
[[Page 120 STAT. 852]]
``(j) Terms Relating to Funding Target Attainment Percentage.--For
purposes of this section--
``(1) In general.--The term `funding target attainment
percentage' has the same meaning given such term by section
430(d)(2).
``(2) Adjusted funding target attainment percentage.--The
term `adjusted funding target attainment percentage' means the
funding target attainment percentage which is determined under
paragraph (1) by increasing each of the amounts under
subparagraphs (A) and (B) of section 430(d)(2) by the aggregate
amount of purchases of annuities for employees other than highly
compensated employees (as defined in section 414(q)) which were
made by the plan during the preceding 2 plan years.
``(3) 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 paragraph and without regard to the reduction in
the value of assets under section 430(f)(4)(A)), the
funding target attainment percentage for purposes of
paragraph (1) shall be determined without regard to such
reduction.
``(B) Transition <<NOTE: Applicability.>> rule.--
Subparagraph (A) shall be applied to plan years
beginning after 2007 and before 2011 by substituting for
`100 percent' the applicable percentage determined in
accordance with the following table:
``In the case of a pThe applicable............................
beginning in calenpercentage is.............................
2008.......................................... 92
2009.......................................... 94
2010.......................................... 96.
``(C) Limitation.--Subparagraph (B) shall not apply
with respect to any plan year after 2008 unless the
funding target attainment percentage (determined without
regard to this paragraph) of the plan for each preceding
plan year after 2007 was not less than the applicable
percentage with respect to such preceding plan year
determined under subparagraph (B).
``(k) Special Rule for 2008.--For purposes of this section, in the
case of plan years beginning in 2008, the funding target attainment
percentage for the preceding plan year may be determined using such
methods of estimation as the Secretary may provide.''.
(2) Clerical amendment.--The table of parts for subchapter D
of chapter 1 of the Internal Revenue Code of 1986 is
amended <<NOTE: 26 USC prec. 401.>> by adding at the end the
following new item:
``Part III--Rules Relating to Minimum Funding Standards and Benefit
Limitations''.
(b) Effective <<NOTE: 26 USC 436 note.>> Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2007.
(2) Collective bargaining exception.--In the case of a plan
maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified before January 1, 2008, the amendments
[[Page 120 STAT. 853]]
made by this section shall not apply to plan years beginning
before the earlier of--
(A) the later of--
(i) the date on which the last collective
bargaining agreement relating to the plan
terminates (determined without regard to any
extension thereof agreed to after the date of the
enactment of this Act), or
(ii) the first day of the first plan year to
which the amendments made by this subsection would
(but for this subparagraph) apply, or
(B) January 1, 2010.
For purposes of subparagraph (A)(i), any plan amendment made
pursuant to a collective bargaining agreement relating to the
plan which amends the plan solely to conform to any requirement
added by this section shall not be treated as a termination of
such collective bargaining agreement.
SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Amendments Related to Qualification Requirements.--
(1) Section 401(a)(29) of the Internal Revenue Code of 1986
is <<NOTE: 26 USC 401.>> amended to read as follows:
``(29) Benefit limitations on plans in at-risk status.--In
the case of a defined benefit plan (other than a multiemployer
plan) to which the requirements of section 412 apply, the trust
of which the plan is a part shall not constitute a qualified
trust under this subsection unless the plan meets the
requirements of section 436.''.
(2) Section 401(a)(32) of such Code is amended--
(A) in subparagraph (A), by striking ``412(m)(5)''
each place it appears and inserting ``section
430(j)(4)'', and
(B) in subparagraph (C), by striking ``section
412(m)'' and inserting ``section 430(j)''.
(3) Section 401(a)(33) of such Code is amended--
(A) in subparagraph (B)(i), by striking ``funded
current liability percentage (within the meaning of
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(c)(2)'', and
(C) in subparagraph (D), by striking ``section
412(c)(11) (without regard to subparagraph (B)
thereof)'' and inserting ``section 412(b)(2) (without
regard to subparagraph (B) 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(c)(2)'',
(2) in subsection (b)(1)(F)--
(A) by striking ``paragraphs (2) and (3) of section
412(i)'' in clause (ii) and inserting ``subparagraphs
(B) and (C) of section 412(e)(3)'', and
(B) by striking ``paragraphs (4), (5), and (6) of
section 412(i)'' and inserting ``subparagraphs (D), (E),
and (F) of section 412(e)(3)'', and
(3) by striking ``section 412(c)(8)'' in subsection
(d)(6)(A) and inserting ``section 412(e)(2)''.
(c) Mergers and Consolidations of Plans.--Subclause (I) of section
414(l)(2)(B)(i) of such Code is amended to read as follows:
[[Page 120 STAT. 854]]
``(I) the amount determined under
section 431(c)(6)(A)(i) in the case of a
multiemployer plan (and the sum of the
funding shortfall and target normal cost
determined under section 430 in the case
of any other plan), over''.
(d) Transfer of Excess Pension Assets to Retiree Health Accounts.--
(1) Section 420(e)(2) of such <<NOTE: 26 USC 420.>> Code is
amended to read as follows:
``(2) Excess pension assets.--The term `excess pension
assets' means the excess (if any) of--
``(A) the lesser of--
``(i) the fair market value of the plan's
assets (reduced by the prefunding balance and
funding standard carryover balance determined
under section 430(f)), or
``(ii) the value of plan assets as determined
under section 430(g)(3) after reduction under
section 430(f), over
``(B) 125 percent of the sum of the funding
shortfall and the target normal cost determined under
section 430 for such plan year.''.
(2) Section 420(e)(4) of such Code is amended to read as
follows:
``(4) Coordination with section 430.--In the case of a
qualified transfer, any assets so transferred shall not, for
purposes of this section and section 430, be treated as assets
in the plan.''.
(e) Excise Taxes.--
(1) In general.--Subsections (a) and (b) of section 4971 of
such Code are amended to read as follows:
``(a) Initial Tax.--If at any time during any taxable year an
employer maintains a plan to which section 412 applies, there is hereby
imposed for the taxable year a tax equal to--
``(1) in the case of a single-employer plan, 10 percent of
the aggregate unpaid minimum required contributions for all plan
years remaining unpaid as of the end of any plan year ending
with or within the taxable year, and
``(2) in the case of a multiemployer plan, 5 percent of the
accumulated funding deficiency determined under section 431 as
of the end of any plan year ending with or within the taxable
year.
``(b) Additional Tax.--If--
``(1) a tax is imposed under subsection (a)(1) on any unpaid
required minimum contribution and such amount remains unpaid as
of the close of the taxable period, or
``(2) a tax is imposed under subsection (a)(2) on any
accumulated funding deficiency and the accumulated funding
deficiency is not corrected within the taxable period,
there is hereby imposed a tax equal to 100 percent of the unpaid minimum
required contribution or accumulated funding deficiency, whichever is
applicable, to the extent not so paid or corrected.''.
(2) Section 4971(c) of such Code is amended--
(A) by striking ``the last two sentences of section
412(a)'' in paragraph (1) and inserting ``section 431'',
and
(B) by adding at the end the following new
paragraph:
``(4) Unpaid minimum required contribution.--
[[Page 120 STAT. 855]]
``(A) In general.--The term `unpaid minimum required
contribution' means, with respect to any plan year, any
minimum required contribution under section 430 for the
plan year which is not paid on or before the due date
(as determined under section 430(j)(1)) for the plan
year.
``(B) Ordering rule.--Any payment to or under a plan
for any plan year shall be allocated first to unpaid
minimum required contributions for all preceding plan
years on a first-in, first-out basis and then to the
minimum required contribution under section 430 for the
plan year.''.
(3) Section 4971(e)(1) of such <<NOTE: 26 USC 4971.>> Code
is amended by striking ``section 412(b)(3)(A)'' and inserting
``section 412(a)(1)(A)''.
(4) Section 4971(f)(1) of such Code is amended--
(A) by striking ``section 412(m)(5)'' and inserting
``section 430(j)(4)'', and
(B) by striking ``section 412(m)'' and inserting
``section 430(j)''.
(5) Section 4972(c)(7) of such Code is amended by striking
``except to the extent that such contributions exceed the full-
funding limitation (as defined in section 412(c)(7), determined
without regard to subparagraph (A)(i)(I) thereof)'' and
inserting ``except, in the case of a multiemployer plan, to the
extent that such contributions exceed the full-funding
limitation (as defined in section 431(c)(6))''.
(f) Reporting Requirements.--Section 6059(b) of such Code is
amended--
(1) by striking ``the accumulated funding deficiency (as
defined in section 412(a))'' in paragraph (2) and inserting
``the minimum required contribution determined under section
430, or the accumulated funding deficiency determined under
section 431,'', and
(2) by striking paragraph (3)(B) and inserting:
``(B) the requirements for reasonable actuarial
assumptions under section 430(h)(1) or 431(c)(3),
whichever are applicable, have been complied with.''.
SEC. 115. <<NOTE: 26 USC 430 note.>> MODIFICATION OF TRANSITION RULE TO
PENSION FUNDING REQUIREMENTS.
(a) In General.--In the <<NOTE: Applicability. Effective
date.>> 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, 2007.
(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--
[[Page 120 STAT. 856]]
(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
``In the case of a plan year beginning in applicable
calendar year: percentage
is:
2008.......................................... 90 percent
2009.......................................... 92 percent
2010.......................................... 94 percent
2011.......................................... 96 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 and 2007.--
(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 <<NOTE: 26 USC 412
note.>> by striking ``and 2005'' and inserting ``, 2005, 2006,
and 2007''.
(2) Effective date.--The <<NOTE: 26 USC 412
note.>> 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 <<NOTE: Effective date. 26 USC 412 note.>> amendment
made by paragraph (1) shall take effect on December 31, 2007,
and shall apply to plan years beginning after such date.
SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED COMPENSATION
PLANS BY EMPLOYERS MAINTAINING UNDERFUNDED OR TERMINATED
SINGLE-EMPLOYER PLANS.
(a) Amendments of Internal Revenue Code.--Subsection (b) of section
409A of the Internal Revenue Code <<NOTE: 26 USC 409A.>> 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) Treatment of employer's defined benefit plan during
restricted period.--
``(A) In general.--If--
``(i) during any restricted period with
respect to a single-employer defined benefit plan,
assets are set
[[Page 120 STAT. 857]]
aside or reserved (directly or indirectly) in a
trust (or other arrangement as determined by the
Secretary) or transferred to such a trust or other
arrangement for purposes of paying deferred
compensation of an applicable covered employee
under a nonqualified deferred compensation plan of
the plan sponsor or member of a controlled group
which includes the plan sponsor, or
``(ii) a nonqualified deferred compensation
plan of the plan sponsor or member of a controlled
group which includes the plan sponsor provides
that assets will become restricted to the
provision of benefits under the plan in connection
with such restricted period (or other similar
financial measure determined by the Secretary)
with respect to 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. Clause
(i) shall not apply with respect to any assets which are
so set aside before the restricted period with respect
to the defined benefit plan.
``(B) Restricted period.--For purposes of this
section, the term `restricted period' means, with
respect to any plan described in subparagraph (A)--
``(i) any period during which the plan is in
at-risk status (as defined in section 430(i));
``(ii) any period the plan sponsor is a debtor
in a case under title 11, United States Code, or
similar Federal or State law, and
``(iii) the 12-month period beginning on the
date which is 6 months before the termination date
of the plan if, as of the termination date, the
plan is not sufficient for benefit liabilities
(within the meaning of section 4041 of the
Employee Retirement Income Security Act of 1974).
``(C) Special rule for payment of taxes on deferred
compensation included in income.--If an employer
provides directly or indirectly for the payment of any
Federal, State, or local income taxes with respect to
any compensation required to be included in gross income
by reason of this paragraph--
``(i) interest shall be imposed under
subsection (a)(1)(B)(i)(I) on the amount of such
payment in the same manner as if such payment was
part of the deferred compensation to which it
relates,
``(ii) such payment shall be taken into
account in determining the amount of the
additional tax under subsection (a)(1)(B)(i)(II)
in the same manner as if such payment was part of
the deferred compensation to which it relates, and
``(iii) no deduction shall be allowed under
this title with respect to such payment.
``(D) Other definitions.--For purposes of this sec-
tion--
[[Page 120 STAT. 858]]
``(i) Applicable covered employee.--The term
`applicable covered employee' means any--
``(I) covered employee of a plan
sponsor,
``(II) covered employee of a member
of a controlled group which includes the
plan sponsor, and
``(III) former employee who was a
covered employee at the time of
termination of employment with the plan
sponsor or a member of a controlled
group which includes the plan sponsor.
``(ii) Covered employee.--The term `covered
employee' means an individual described in section
162(m)(3) or an individual subject to the
requirements of section 16(a) of the Securities
Exchange Act of 1934.''.
(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 <<NOTE: 26 USC 409A note.>> amendments made
by this section shall apply to transfers or other reservation of assets
after the date of the enactment of this Act.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND
RELATED PROVISIONS
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 this Act) is
amended by inserting after section 303 the following new section:
``MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS
``Sec. 304. (a) In General.--For <<NOTE: 29 USC 1084.>> 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
[[Page 120 STAT. 859]]
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 which comes into
existence on or after January 1, 2008, the
unfunded past service liability under the plan on
the first day of the first plan year to which this
section applies, over a period of 15 plan years,
``(ii) 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,
``(iii) separately, with respect to each plan
year, the net experience loss (if any) under the
plan, over a period of 15 plan years, and
``(iv) 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 2006), 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 2006).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the
employer to or under the plan for the plan year,
``(B) the amount necessary to amortize in equal
annual installments (until fully amortized)--
``(i) separately, with respect to each plan
year, the net decrease (if any) in unfunded past
service liability under the plan arising from plan
amendments adopted in such year, over a period of
15 plan years,
``(ii) separately, with respect to each plan
year, the net experience gain (if any) under the
plan, over a period of 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,
[[Page 120 STAT. 860]]
``(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 2006), the
excess (if any) of any debit balance in the funding
standard account (determined without regard to this
subparagraph) over any debit balance in the alternative
minimum funding standard account.
``(4) Special rule for amounts first amortized in plan years
before 2008.--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 2006) over any period beginning
with a plan year beginning before 2008, in lieu of the
amortization described in paragraphs (2)(B) and (3)(B), such
amount shall continue to be amortized under such section as so
in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations <<NOTE: Regulations.>> prescribed by the
Secretary of the Treasury, amounts required to be amortized
under paragraph (2) or paragraph (3), as the case may be--
``(A) may be combined into one amount under such
paragraph to be amortized over a period determined on
the basis of the remaining amortization period for all
items entering into such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the
resulting amount to be amortized over a period
determined on the basis of the remaining amortization
periods for all items entering into whichever of the two
amounts being offset is the greater.
``(6) Interest.--The <<NOTE: Regulations.>> funding standard
account (and items therein) shall be charged or credited (as
determined under regulations prescribed by the Secretary of the
Treasury) with interest at the appropriate rate consistent with
the rate or rates of interest used under the plan to determine
costs.
``(7) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by
a multiemployer plan in payment of all or part of an
employer's withdrawal liability under part 1 of subtitle
E of title IV shall be considered an amount contributed
by the employer to or under the plan. The Secretary of
the Treasury may prescribe by regulation additional
charges and credits to a multiemployer plan's funding
standard account to the extent necessary to prevent
withdrawal liability payments from being unduly
reflected as advance funding for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in
reorganization in the immediately preceding plan year,
any balance in
[[Page 120 STAT. 861]]
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 <<NOTE: Regulations.>> 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
2006) 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)(iii) 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 not payable as a life annuity but are
payable under the terms of the plan for a period that
does not exceed 14 years from the effective date of the
amendment, paragraph (2)(B)(ii) shall be applied
separately with respect to such increase in unfunded
past service liability by substituting the number of
years of the period during which such benefits are
payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan.
[[Page 120 STAT. 862]]
``(2) Valuation of assets.--
``(A) In general.--
For <<NOTE: Regulations.>> purposes of this part, the
value of the plan's assets shall be determined on the
basis of any reasonable actuarial method of valuation
which takes into account fair market value and which is
permitted under regulations prescribed by the Secretary
of the Treasury.
``(B) Election with respect to bonds.--The value of
a bond or other evidence of indebtedness which is not in
default as to principal or interest may, at the election
of the plan administrator, be determined on an amortized
basis running from initial cost at purchase to par value
at maturity or earliest call
date. <<NOTE: Applicability. Regulations.>> 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
[[Page 120 STAT. 863]]
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 para-
graph--
``(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)
[[Page 120 STAT. 864]]
used to determine reserves for group
annuity contracts issued on January 1,
1993.
``(II) Secretarial authority.--The
Secretary of the Treasury may by
regulation prescribe for plan years
beginning after December 31, 1999,
mortality tables to be used in
determining current liability under this
subsection. Such tables shall be based
upon the actual experience of pension
plans and projected trends in such
experience. In prescribing such tables,
such Secretary shall take into account
results of available independent studies
of mortality of individuals covered by
pension plans.
``(v) Separate mortality tables for the
disabled.--Notwithstanding clause (iv)--
``(I) In general.--The Secretary of
the Treasury shall establish mortality
tables which may be used (in lieu of the
tables under clause (iv)) to determine
current liability under this subsection
for individuals who are entitled to
benefits under the plan on account of
disability. Such Secretary shall
establish separate tables for
individuals whose disabilities occur in
plan years beginning before January 1,
1995, and for individuals whose
disabilities occur in plan years
beginning on or after such date.
``(II)
Special <<NOTE: Applicability.>> 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 <<NOTE: Regulations.>> 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
[[Page 120 STAT. 865]]
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 <<NOTE: Regulations.>> 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 <<NOTE: Deadline.>> 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
[[Page 120 STAT. 866]]
period may be <<NOTE: Regulations.>> extended for not more than
six months under regulations prescribed by the Secretary of the
Treasury.
``(d) Extension of Amortization Periods for Multiemployer Plans.--
``(1) Automatic extension upon application by certain
plans.--
``(A) In general.--If the plan sponsor of a
multiemployer plan--
``(i) submits to the Secretary of the Treasury
an application for an extension of the period of
years required to amortize any unfunded liability
described in any clause of subsection (b)(2)(B) or
described in subsection (b)(4), and
``(ii) includes with the application a
certification by the plan's actuary described in
subparagraph (B),
the Secretary of the Treasury shall extend the
amortization period for the period of time (not in
excess of 5 years) specified in the application. Such
extension shall be in addition to any extension under
paragraph (2).
``(B) Criteria.--A certification with respect to a
multiemployer plan is described in this subparagraph if
the plan's actuary certifies that, based on reasonable
assump- tions--
``(i) absent the extension under subparagraph
(A), the plan would have an accumulated funding
deficiency in the current plan year or any of the
9 succeeding plan years,
``(ii) the plan sponsor has adopted a plan to
improve the plan's funding status,
``(iii) the plan is projected to have
sufficient assets to timely pay expected benefits
and anticipated expenditures over the amortization
period as extended, and
``(iv) the
notice <<NOTE: Notification.>> required under
paragraph (3)(A) has been provided.
``(C) Termination.--The preceding provisions of this
paragraph shall not apply with respect to any
application submitted after December 31, 2014.
``(2) Alternative extension.--
``(A) In general.--If the plan sponsor of a
multiemployer plan submits to the Secretary of the
Treasury an application for an extension of the period
of years required to amortize any unfunded liability
described in any clause of subsection (b)(2)(B) or
described in subsection (b)(4), the Secretary of the
Treasury may extend the amortization period for a period
of time (not in excess of 10 years reduced by the number
of years of any extension under paragraph (1) with
respect to such unfunded liability) if the Secretary of
the Treasury makes the determination described in
subparagraph (B). Such extension shall be in addition to
any extension under paragraph (1).
``(B) Determination.--The Secretary of the Treasury
may grant an extension under subparagraph (A) if such
Secretary determines that--
``(i) such extension would carry out the
purposes of this Act and would provide adequate
protection for
[[Page 120 STAT. 867]]
participants under the plan and their
beneficiaries, and
``(ii) the failure to permit such extension
would--
``(I) result in a substantial risk
to the voluntary continuation of the
plan, or a substantial curtailment of
pension benefit levels or employee
compensation, and
``(II) be adverse to the interests
of plan participants in the aggregate.
``(C) Action
by <<NOTE: Deadline. Notification.>> secretary of the
treasury.--The Secretary of the Treasury shall act upon
any application for an extension under this paragraph
within 180 days of the submission of such application.
If such Secretary rejects the application for an
extension under this paragraph, such Secretary shall
provide notice to the plan detailing the specific
reasons for the rejection, including references to the
criteria set forth above.
``(3) Advance notice.--
``(A) In general.--The Secretary of the Treasury
shall, before granting an extension under this
subsection, require each applicant to provide evidence
satisfactory to such Secretary that the applicant has
provided notice of the filing of the application for
such extension to each affected party (as defined in
section 4001(a)(21)) with respect to the affected plan.
Such notice shall include a description of the extent to
which the plan is funded for benefits which are
guaranteed under title IV and for benefit liabilities.
``(B) Consideration of relevant information.--The
Secretary of the Treasury shall consider any relevant
information provided by a person to whom notice was
given under paragraph (1).''.
(b) Shortfall <<NOTE: 29 USC 1084 note.>> Funding Method.--
(1) In general.--A multiemployer plan meeting the criteria
of paragraph (2) may adopt, use, or cease using, the shortfall
funding method and such adoption, use, or cessation of use of
such method, shall be deemed approved by the Secretary of the
Treasury under section 302(d)(1) of the Employee Retirement
Income Security Act of 1974 and section 412(d)(1) of the
Internal Revenue Code of 1986.
(2) Criteria.--A multiemployer pension plan meets the
criteria of this clause if--
(A) the plan has not used the shortfall funding
method during the 5-year period ending on the day before
the date the plan is to use the method under paragraph
(1); and
(B) the plan is not operating under an amortization
period extension under section 304(d) of such Act and
did not operate under such an extension during such 5-
year period.
(3) Shortfall funding method defined.--For purposes of this
subsection, the term ``shortfall funding method'' means the
shortfall funding method described in Treasury Regulations
section 1.412(c)(1)-2 (26 CFR 1.412(c)(1)-2).
(4) Benefit restrictions to apply.--The benefit restrictions
under section 302(c)(7) of such Act and section 412(c)(7) of
such Code shall apply during any period a multiemployer
[[Page 120 STAT. 868]]
plan is on the shortfall funding method pursuant to this
subsection.
(5) Use of shortfall method not to preclude other options.--
Nothing in this subsection shall be construed to affect a
multiemployer plan's ability to adopt the shortfall funding
method with the Secretary's permission under otherwise
applicable regulations or to affect a multiemployer plan's right
to change funding methods, with or without the Secretary's
consent, as provided in applicable rules and regulations.
(c) Conforming Amendments.--
(1) Section 301 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1081) is amended by striking subsection
(d).
(2) The table of contents in section 1 of such Act (as
amended by this Act) is amended by inserting after the item
relating to section 303 the following new item:
``Sec. 304. Minimum funding standards for multiemployer plans.''.
(d) Effective <<NOTE: 29 USC 1081 note.>> Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2007.
(2) Special rule for certain amortization extensions.--If
the Secretary of the <<NOTE: Applicability.>> Treasury grants an
extension under section 304 of the Employee Retirement Income
Security Act of 1974 and section 412(e) of the Internal Revenue
Code of 1986 with respect to any application filed with the
Secretary of the Treasury on or before June 30, 2005, the
extension (and any modification thereof) shall be applied and
administered under the rules of such sections as in effect
before the enactment of this Act, including the use of the rate
of interest determined under section 6621(b) of such Code.
SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED
OR CRITICAL STATUS.
(a) In General.--Part 3 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (as amended by the preceding
provisions of this Act) is amended by inserting after section 304 the
following new section:
``ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED STATUS
OR CRITICAL STATUS
``Sec. 305. (a) General Rule.--For <<NOTE: 29 USC 1085.>> purposes
of this part, in the case of a multiemployer plan in effect on July 16,
2006--
``(1) if the plan is in endangered status--
``(A) the plan sponsor shall adopt and implement a
funding improvement plan in accordance with the
requirements of subsection (c), and
``(B) the <<NOTE: Applicability.>> requirements of
subsection (d) shall apply during the funding plan
adoption period and the funding improvement period, and
``(2) if the plan is in critical status--
``(A) the plan sponsor shall adopt and implement a
rehabilitation plan in accordance with the requirements
of subsection (e), and
``(B) the <<NOTE: Applicability.>> requirements of
subsection (f) shall apply during the rehabilitation
plan adoption period and the rehabilitation period.
[[Page 120 STAT. 869]]
``(b) Determination of Endangered and Critical Status.--For purposes
of this section--
``(1) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the plan
actuary under paragraph (3), the plan is not in critical status
for the plan year and, as of the beginning of the plan year,
either--
``(A) the plan's funded percentage for such plan
year is less than 80 percent, or
``(B) the plan has an accumulated funding deficiency
for such plan year, or is projected to have such an
accumulated funding deficiency for any of the 6
succeeding plan years, taking into account any extension
of amortization periods under section 304(d).
For purposes of this section, a plan shall be treated as in
seriously endangered status for a plan year if the plan is
described in both subparagraphs (A) and (B).
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if, as determined by the plan actuary
under paragraph (3), the plan is described in 1 or more of the
following subparagraphs as of the beginning of the plan year:
``(A) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is
less than 65 percent, and
``(ii) the sum of--
``(I) the fair market value of plan
assets, plus
``(II) the present value of the
reasonably anticipated employer
contributions for the current plan year
and each of the 6 succeeding plan years,
assuming that the terms of all
collective bargaining agreements
pursuant to which the plan is maintained
for the current plan year continue in
effect for succeeding plan years,
is less than the present value of all
nonforfeitable benefits 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--
``(i) the plan has an accumulated funding
deficiency for the current plan year, not taking
into account any extension of amortization periods
under section 304(d), or
``(ii) the plan is projected to have an
accumulated funding deficiency for any of the 3
succeeding plan years (4 succeeding plan years if
the funded percentage of the plan is 65 percent or
less), not taking into account any extension of
amortization periods under section 304(d).
``(C) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the
current plan year, plus interest (determined at
the rate used for determining costs under the
plan) for the current plan year on the amount of
unfunded benefit liabilities under the plan as of
the last date of the preceding plan year, exceeds
[[Page 120 STAT. 870]]
``(II) the present value 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 of nonforfeitable benefits of
active participants, and
``(iii) the plan has an accumulated funding
deficiency for the current plan year, or is
projected to have such a deficiency for any of the
4 succeeding plan years, not taking into account
any extension of amortization periods under
section 304(d).
``(D) A plan is described in this subparagraph if
the sum of--
``(i) the fair market value of plan assets,
plus
``(ii) the present value of the reasonably
anticipated employer contributions for the current
plan year and each of the 4 succeeding plan years,
assuming that the terms of all collective
bargaining agreements pursuant to which the plan
is maintained for the current plan year continue
in effect for succeeding plan years,
is less than the present value of all benefits projected
to be payable under the plan during the current plan
year and each of the 4 succeeding plan years (plus
administrative expenses for such plan years).
``(3) Annual certification by plan actuary.--
``(A) In general.--Not <<NOTE: Deadline.>> later
than the 90th day of each plan year of a multiemployer
plan, the plan actuary shall certify to the Secretary of
the Treasury and to the plan sponsor--
``(i) whether or not the plan is in endangered
status for such plan year and whether or not the
plan is or will be in critical status for such
plan year, and
``(ii) in the case of a plan which is in a
funding improvement or rehabilitation period,
whether or not the plan is making the scheduled
progress in meeting the requirements of its
funding improvement or rehabilitation plan.
``(B) Actuarial projections of assets and
liabilities.--
``(i) In general.--In making the
determinations and projections under this
subsection, the plan actuary shall make
projections required for the current and
succeeding plan years of the current value of the
assets of the plan and the present value of all
liabilities to participants and beneficiaries
under the plan for the current plan year as of the
beginning of such year. The actuary's projections
shall be based on reasonable actuarial estimates,
assumptions, and methods that, except as provided
in clause (iii), offer the actuary's best estimate
of anticipated experience under the plan. The
projected present value of liabilities as of the
beginning of such year shall be determined based
on the most recent of either--
[[Page 120 STAT. 871]]
``(I) the actuarial statement
required under section 103(d) with
respect to the most recently filed
annual report, or
``(II) the actuarial valuation for
the preceding plan year.
``(ii) Determinations of future
contributions.--Any actuarial projection of plan
assets shall assume--
``(I) reasonably anticipated
employer contributions for the current
and succeeding plan years, assuming that
the terms of the one or more collective
bargaining agreements pursuant to which
the plan is maintained for the current
plan year continue in effect for
succeeding plan years, or
``(II) that employer contributions
for the most recent plan year will
continue indefinitely, but only if the
plan actuary determines there have been
no significant demographic changes that
would make such assumption unreasonable.
``(iii) Projected industry activity.--Any
projection of activity in the industry or
industries covered by the plan, including future
covered employment and contribution levels, shall
be based on information provided by the plan
sponsor, which shall act reasonably and in good
faith.
``(C) Penalty for failure to secure timely actuarial
certification.--Any <<NOTE: Reports.>> failure of the
plan's actuary to certify the plan's status under this
subsection by the date specified in subparagraph (A)
shall be treated for purposes of section 502(c)(2) as a
failure or refusal by the plan administrator to file the
annual report required to be filed with the Secretary
under section 101(b)(4).
``(D) Notice.--
``(i) In general.--In <<NOTE: Deadline.>> any
case in which it is certified under subparagraph
(A) that a multiemployer plan is or will be in
endangered or critical status for a plan year, the
plan sponsor shall, not later than 30 days after
the date of the certification, provide
notification of the endangered or critical status
to the participants and beneficiaries, the
bargaining parties, the Pension Benefit Guaranty
Corporation, and the Secretary.
``(ii) Plans in critical status.--If it is
certified under subparagraph (A) that a
multiemployer plan is or will be in critical
status, the plan sponsor shall include in the
notice under clause (i) an explanation of the
possibility that--
``(I) adjustable benefits (as
defined in subsection (e)(8)) may be
reduced, and
``(II) such reductions may apply to
participants and beneficiaries whose
benefit commencement date is on or after
the date such notice is provided for the
first plan year in which the plan is in
critical status.
``(iii) Model notice.--The Secretary shall
prescribe a model notice that a multiemployer plan
may use to satisfy the requirements under clause
(ii).
[[Page 120 STAT. 872]]
``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
Plans in Endangered Status.--
``(1) In general.--In any <<NOTE: Deadlines.>> case in which
a multiemployer plan is in endangered status for a plan year,
the plan sponsor, in accordance with this subsection--
``(A) shall adopt a funding improvement plan not
later than 240 days following the required date for the
actuarial certification of endangered status under
subsection (b)(3)(A), and
``(B) within 30 days after the adoption of the
funding improvement plan--
``(i) shall provide to the bargaining parties
1 or more schedules showing revised benefit
structures, revised contribution structures, or
both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to meet
the applicable benchmarks in accordance with the
funding improvement plan, including--
``(I) one proposal for reductions in
the amount of future benefit accruals
necessary to achieve the applicable
benchmarks, assuming no amendments
increasing contributions under the plan
(other than amendments increasing
contributions necessary to achieve the
applicable benchmarks after amendments
have reduced future benefit accruals to
the maximum extent permitted by law),
and
``(II) one proposal for increases in
contributions under the plan necessary
to achieve the applicable benchmarks,
assuming no amendments reducing future
benefit accruals under the plan, and
``(ii) may, if the plan sponsor deems
appropriate, prepare and provide the bargaining
parties with additional information relating to
contribution rates or benefit reductions,
alternative schedules, or other information
relevant to achieving the applicable benchmarks in
accordance with the funding improvement plan.
For purposes of this section, the term `applicable
benchmarks' means the requirements applicable to the
multiemployer plan under paragraph (3) (as modified by
paragraph (5)).
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a funding
plan adoption period or funding improvement period by reason of
the plan being in endangered status for a preceding plan year.
For purposes of this section, such preceding plan year shall be
the initial determination year with respect to the funding
improvement plan to which it relates.
``(3) Funding improvement plan.--For purposes of this
section--
``(A) In general.--A funding improvement plan is a
plan which consists of the actions, including options or
a range of options to be proposed to the bargaining
parties, formulated to provide, based on reasonably
anticipated experience and reasonable actuarial
assumptions, for the attainment by the plan during the
funding improvement period of the following
requirements:
[[Page 120 STAT. 873]]
``(i) Increase in plan's funding percentage.--
The plan's funded percentage as of the close of
the funding improvement period equals or exceeds a
percentage equal to the sum of--
``(I) such percentage as of the
beginning of such period, plus
``(II) 33 percent of the difference
between 100 percent and the percentage
under subclause (I).
``(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) Seriously <<NOTE: Applicability.>> endangered
plans.--In the case of a plan in seriously endangered
status, except as provided in paragraph (5),
subparagraph (A)(i)(II) shall be applied by substituting
`20 percent' for `33 percent'.
``(4) Funding improvement period.--For purposes of this
section--
``(A) In general.--The funding improvement period
for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
first day of the first plan year of the multiemployer
plan beginning after the earlier of--
``(i) the second anniversary of the date of
the adoption of the funding improvement plan, or
``(ii) the expiration of the collective
bargaining agreements in effect on the due date
for the actuarial certification of endangered
status for the initial determination year under
subsection (b)(3)(A) and covering, as of such due
date, at least 75 percent of the active
participants in such multiemployer plan.
``(B) Seriously <<NOTE: Applicability.>> endangered
plans.--In the case of a plan in seriously endangered
status, except as provided in paragraph (5),
subparagraph (A) shall be applied by substituting `15-
year period' for `10-year period'.
``(C) Coordination with changes in status.--
``(i) Plans no longer in endangered status.--
If the plan's actuary certifies under subsection
(b)(3)(A) for a plan year in any funding plan
adoption period or funding improvement period that
the plan is no longer in endangered status and is
not in critical status, the funding plan adoption
period or funding improvement period, whichever is
applicable, shall end as of the close of the
preceding plan year.
``(ii) Plans in critical status.--If the
plan's actuary certifies under subsection
(b)(3)(A) for a plan year in any funding plan
adoption period or funding improvement period that
the plan is in critical status, the funding plan
adoption period or funding improvement period,
whichever is applicable, shall end as of the close
of the plan year preceding the first plan year in
the rehabilitation period with respect to such
status.
``(D) Plans in endangered status at end of period.--
If the plan's actuary certifies under subsection
(b)(3)(A) for the first plan year following the close of
the
[[Page 120 STAT. 874]]
period described in subparagraph (A) that the plan is in
endangered status, the provisions of this subsection and
subsection (d) shall be applied as if such first plan
year were an initial determination year, except that the
plan may not be amended in a manner inconsistent with
the funding improvement plan in effect for the preceding
plan year until a new funding improvement plan is
adopted.
``(5) Special rules for seriously endangered plans more than
70 percent funded.--
``(A) In general.--If the funded percentage of a
plan in seriously endangered status was more than 70
percent as of the beginning of the initial determination
year--
``(i) <<NOTE: Applicability. Deadline.>> paragraphs
(3)(B) and (4)(B) shall apply only if the plan's
actuary certifies, within 30 days after the
certification under subsection (b)(3)(A) for the
initial determination year, that, based on the
terms of the plan and the collective bargaining
agreements in effect at the time of such
certification, the plan is not projected to meet
the requirements of paragraph (3)(A) (without
regard to paragraphs (3)(B) and (4)(B)), and
``(ii) if there is a certification under
clause (i), the plan may, in formulating its
funding improvement plan, only take into account
the rules of paragraph (3)(B) and (4)(B) for plan
years in the funding improvement period beginning
on or before the date on which the last of the
collective bargaining agreements described in
paragraph (4)(A)(ii) expires.
``(B) Special rule after expiration of agreements.--
Notwithstanding subparagraph (A)(ii), if, for any plan
year ending after the date described in subparagraph
(A)(ii), the plan actuary certifies (at the time of the
annual certification under subsection (b)(3)(A) for such
plan year) that, based on the terms of the plan and
collective bargaining agreements in effect at the time
of that annual certification, the plan is not projected
to be able to meet the requirements of paragraph (3)(A)
(without regard to paragraphs (3)(B) and (4)(B)),
paragraphs (3)(B) and (4)(B) shall continue to apply for
such year.
``(6) Updates to funding improvement plan and schedules.--
``(A) Funding improvement plan.--The plan sponsor
shall annually update the funding improvement plan and
shall file the update with the plan's annual report
under section 104.
``(B) Schedules.--The plan sponsor shall annually
update any schedule of contribution rates provided under
this subsection to reflect the experience of the plan.
``(C) Duration of schedule.--A schedule of
contribution rates provided by the plan sponsor and
relied upon by bargaining parties in negotiating a
collective bargaining agreement shall remain in effect
for the duration of that collective bargaining
agreement.
``(7) Imposition of default schedule where failure to adopt
funding improvement plan.--
``(A) In general.--If--
[[Page 120 STAT. 875]]
``(i) a collective bargaining agreement
providing for contributions under a multiemployer
plan that was in effect at the time the plan
entered endangered status expires, and
``(ii) after receiving one or more schedules
from the plan sponsor under paragraph (1)(B), the
bargaining parties with respect to such agreement
fail to agree on changes to contribution or
benefit schedules necessary to meet the applicable
benchmarks in accordance with the funding
improvement plan,
the plan sponsor shall implement the schedule described
in paragraph (1)(B)(i)(I) beginning on the date
specified in subparagraph (B).
``(B) Date of implementation.--The date specified in
this subparagraph is the earlier of the date--
``(i) on which the Secretary certifies that
the parties are at an impasse, or
``(ii) which is 180 days after the date on
which the collective bargaining agreement
described in subparagraph (A) expires.
``(8) Funding plan adoption period.--For purposes of this
section, the term `funding plan adoption period' means the
period beginning on the date of the certification under
subsection (b)(3)(A) for the initial determination year and
ending on the day before the first day of the funding
improvement period.
``(d) Rules for Operation of Plan During Adoption and Improvement
Periods.--
``(1) Special rules for plan adoption period.--During the
funding plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with
respect to the multiemployer plan that provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation,
``(B) no amendment of the plan which increases the
liabilities of the plan by reason of any increase in
benefits, any change in the accrual of benefits, or any
change in the rate at which benefits become
nonforfeitable under the plan may be adopted unless the
amendment is required as a condition of qualification
under part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 or to comply with other
applicable law, and
``(C) in the case of a plan in seriously endangered
status, the plan sponsor shall take all reasonable
actions which are consistent with the terms of the plan
and applicable law and which are expected, based on
reasonable assumptions, to achieve--
``(i) an increase in the plan's funded
percentage, and
``(ii) postponement of an accumulated funding
deficiency for at least 1 additional plan year.
[[Page 120 STAT. 876]]
Actions under subparagraph (C) include applications for
extensions of amortization periods under section 304(d), use of
the shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(2) Compliance with funding improvement plan.--
``(A) In general.--A plan may not be amended after
the date of the adoption of a funding improvement plan
so as to be inconsistent with the funding improvement
plan.
``(B) No reduction in contributions.--A plan sponsor
may not during any funding improvement period accept a
collective bargaining agreement or participation
agreement with respect to the multiemployer plan that
provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation.
``(C) Special rules for benefit increases.--A plan
may not be amended after the date of the adoption of a
funding improvement plan so as to increase benefits,
including future benefit accruals, unless the plan
actuary certifies that the benefit increase is
consistent with the funding improvement plan and is paid
for out of contributions not required by the funding
improvement plan to meet the applicable benchmark in
accordance with the schedule contemplated in the funding
improvement plan.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in
Critical Status.--
``(1) In general.--In <<NOTE: Deadlines.>> any case in which
a multiemployer plan is in critical status for a plan year, the
plan sponsor, in accordance with this subsection--
``(A) shall adopt a rehabilitation plan not later
than 240 days following the required date for the
actuarial certification of critical status under
subsection (b)(3)(A), and
``(B) within 30 days after the adoption of the
rehabilitation plan--
``(i) shall provide to the bargaining parties
1 or more schedules showing revised benefit
structures, revised contribution structures, or
both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to
emerge from critical status in accordance with the
rehabilitation plan, and
``(ii) may, if the plan sponsor deems
appropriate, prepare and provide the bargaining
parties with additional information relating to
contribution rates or benefit reductions,
alternative schedules, or other information
relevant to emerging from critical status in
accordance with the rehabilitation plan.
The schedule or schedules described in subparagraph (B)(i) shall
reflect reductions in future benefit accruals and adjustable
[[Page 120 STAT. 877]]
benefits, and increases in contributions, that the plan sponsor
determines are reasonably necessary to emerge from critical
status. One schedule shall be designated as the default schedule
and such schedule shall assume that there are no increases in
contributions under the plan other than the increases necessary
to emerge from critical status after future benefit accruals and
other benefits (other than benefits the reduction or elimination
of which are not permitted under section 204(g)) have been
reduced to the maximum extent permitted by law.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a
rehabilitation plan adoption period or rehabilitation period by
reason of the plan being in critical status for a preceding plan
year. For purposes of this section, such preceding plan year
shall be the initial critical year with respect to the
rehabilitation plan to which it relates.
``(3) Rehabilitation plan.--For purposes of this section--
``(A) In general.--A rehabilitation plan is a plan
which consists of--
``(i) actions, including options or a range of
options to be proposed to the bargaining parties,
formulated, based on reasonably anticipated
experience and reasonable actuarial assumptions,
to enable the plan to cease to be in critical
status by the end of the rehabilitation period and
may include reductions in plan expenditures
(including plan mergers and consolidations),
reductions in future benefit accruals or increases
in contributions, if agreed to by the bargaining
parties, or any combination of such actions, or
``(ii) if the plan sponsor determines that,
based on reasonable actuarial assumptions and upon
exhaustion of all reasonable measures, the plan
can not reasonably be expected to emerge from
critical status by the end of the rehabilitation
period, reasonable measures to emerge from
critical status at a later time or to forestall
possible insolvency (within the meaning of section
4245).
A <<NOTE: Standards.>> rehabilitation plan must provide
annual standards for meeting the requirements of such
rehabilitation plan. Such plan shall also include the
schedules required to be provided under paragraph
(1)(B)(i) and if clause (ii) applies, shall set forth
the alternatives considered, explain why the plan is not
reasonably expected to emerge from critical status by
the end of the rehabilitation period, and specify when,
if ever, the plan is expected to emerge from critical
status in accordance with the rehabilitation plan.
``(B) Updates to rehabilitation plan and
schedules.--
``(i) Rehabilitation plan.--The plan sponsor
shall annually update the rehabilitation plan and
shall file the update with the plan's annual
report under section 104.
``(ii) Schedules.--The plan sponsor shall
annually update any schedule of contribution rates
provided under this subsection to reflect the
experience of the plan.
[[Page 120 STAT. 878]]
``(iii) Duration of schedule.--A schedule of
contribution rates provided by the plan sponsor
and relied upon by bargaining parties in
negotiating a collective bargaining agreement
shall remain in effect for the duration of that
collective bargaining agreement.
``(C) Imposition of default schedule where failure
to adopt rehabilitation plan.--
``(i) In general.--If--
``(I) a collective bargaining
agreement providing for contributions
under a multiemployer plan that was in
effect at the time the plan entered
critical status expires, and
``(II) after receiving one or more
schedules from the plan sponsor under
paragraph (1)(B), the bargaining parties
with respect to such agreement fail to
adopt a contribution or benefit
schedules with terms consistent with the
rehabilitation plan and the schedule
from the plan sponsor under paragraph
(1)(B)(i),
the plan sponsor shall implement the default
schedule described in the last sentence of
paragraph (1) beginning on the date specified in
clause (ii).
``(ii) Date of implementation.--The date
specified in this clause is the earlier of the
date--
``(I) on which the Secretary
certifies that the parties are at an
impasse, or
``(II) which is 180 days after the
date on which the collective bargaining
agreement described in clause (i)
expires.
``(4) Rehabilitation period.--For purposes of this sec-
tion--
``(A) In general.--The rehabilitation period for a
plan in critical status is the 10-year period beginning
on the first day of the first plan year of the
multiemployer plan following the earlier of--
``(i) the second anniversary of the date of
the adoption of the rehabilitation plan, or
``(ii) the expiration of the collective
bargaining agreements in effect on the date of the
due date for the actuarial certification of
critical status for the initial critical year
under subsection (a)(1) and covering, as of such
date at least 75 percent of the active
participants in such multiemployer plan.
If a plan emerges from critical status as provided under
subparagraph (B) before the end of such 10-year period,
the rehabilitation period shall end with the plan year
preceding the plan year for which the determination
under subparagraph (B) is made.
``(B) Emergence.--A plan in critical status shall
remain in such status until a plan year for which the
plan actuary certifies, in accordance with subsection
(b)(3)(A), that the plan is not projected to have an
accumulated funding deficiency for the plan year or any
of the 9 succeeding plan years, without regard to the
use of the shortfall method and taking into account any
extension of amortization periods under section 304(d).
[[Page 120 STAT. 879]]
``(5) Rehabilitation plan adoption period.--For purposes of
this section, the term `rehabilitation plan adoption period'
means the period beginning on the date of the certification
under subsection (b)(3)(A) for the initial critical year and
ending on the day before the first day of the rehabilitation
period.
``(6) Limitation on reduction in rates of future accruals.--
Any reduction in the rate of future accruals under the default
schedule described in paragraph (1)(B)(i) shall not reduce the
rate of future accruals below--
``(A) a monthly benefit (payable as a single life
annuity commencing at the participant's normal
retirement age) equal to 1 percent of the contributions
required to be made with respect to a participant, or
the equivalent standard accrual rate for a participant
or group of participants under the collective bargaining
agreements in effect as of the first day of the initial
critical year, or
``(B) if lower, the accrual rate under the plan on
such first day.
The equivalent standard accrual rate shall be determined by the
plan sponsor based on the standard or average contribution base
units which the plan sponsor determines to be representative for
active participants and such other factors as the plan sponsor
determines to be relevant. Nothing in this paragraph shall be
construed as limiting the ability of the plan sponsor to prepare
and provide the bargaining parties with alternative schedules to
the default schedule that established lower or higher accrual
and contribution rates than the rates otherwise described in
this paragraph.
``(7) Automatic employer surcharge.--
``(A) Imposition of surcharge.--Each employer
otherwise obligated to make contributions for the
initial critical year shall be obligated to pay to the
plan for such year a surcharge equal to 5 percent of the
contributions otherwise required under the applicable
collective bargaining agreement (or other agreement
pursuant to which the employer contributes). For each
succeeding plan year in which the plan is in critical
status for a consecutive period of years beginning with
the initial critical year, the surcharge shall be 10
percent of the contributions otherwise so required.
``(B) Enforcement of surcharge.--The surcharges
under subparagraph (A) shall be due and payable on the
same schedule as the contributions on which the
surcharges 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.
``(C) Surcharge to terminate upon collective
bargaining agreement renegotiation.--The surcharge under
this paragraph shall cease to be effective with respect
to employees covered by a collective bargaining
agreement (or other agreement pursuant to which the
employer contributes), beginning on the effective date
of a collective bargaining agreement (or other such
agreement) that includes terms consistent with a
schedule presented by the plan sponsor under paragraph
(1)(B)(i), as modified under subparagraph (B) of
paragraph (3).
[[Page 120 STAT. 880]]
``(D) Surcharge not to apply until employer receives
notice.--The surcharge under this paragraph shall not
apply to an employer until 30 days after the employer
has been notified by the plan sponsor that the plan is
in critical status and that the surcharge is in effect.
``(E) Surcharge not to generate increased benefit
accruals.--Notwithstanding any provision of a plan to
the contrary, the amount of any surcharge under this
paragraph shall not be the basis for any benefit accrual
under the plan.
``(8) Benefit adjustments.--
``(A) Adjustable benefits.--
``(i) In general.--Notwithstanding section
204(g), the plan sponsor shall, subject to the
notice requirements in subparagraph (C), make any
reductions to adjustable benefits which the plan
sponsor deems appropriate, based upon the outcome
of collective bargaining over the schedule or
schedules provided under paragraph (1)(B)(i).
``(ii) Exception for retirees.--Except in the
case of adjustable benefits described in clause
(iv)(III), the plan sponsor of a plan in critical
status shall not reduce adjustable benefits of any
participant or beneficiary whose benefit
commencement date is before the date on which the
plan provides notice to the participant or
beneficiary under subsection (b)(3)(D) for the
initial critical year.
``(iii) Plan sponsor flexibility.--The plan
sponsor 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 by the plan sponsor based on the
plan's then current overall funding status.
``(iv) Adjustable benefit defined.--For
purposes of this paragraph, the term `adjustable
benefit' means--
``(I) benefits, rights, and features
under the plan, including post-
retirement death benefits, 60-month
guarantees, disability benefits not yet
in pay status, and similar benefits,
``(II) any early retirement benefit
or retirement-type subsidy (within the
meaning of section 204(g)(2)(A)) and any
benefit payment option (other than the
qualified joint and survivor annuity),
and
``(III) benefit increases that would
not be eligible for a guarantee under
section 4022A on the first day of
initial critical year because the
increases were adopted (or, if later,
took effect) less than 60 months before
such first day.
``(B) Normal retirement benefits protected.--Except
as provided in subparagraph (A)(iv)(III), nothing in
this paragraph shall be construed to permit a plan
[[Page 120 STAT. 881]]
to reduce the level of a participant's accrued benefit
payable at normal retirement age.
``(C) Notice requirements.--
``(i) In general.--
No <<NOTE: Deadline.>> reduction may be made to
adjustable benefits under subparagraph (A) unless
notice of such reduction has been given at least
30 days before the general effective date of such
reduction for all participants and beneficiaries
to--
``(I) plan participants and
beneficiaries,
``(II) each employer who has an
obligation to contribute (within the
meaning of section 4212(a)) under the
plan, and
``(III) each employee organization
which, for purposes of collective
bargaining, represents plan participants
employed by such an employer.
``(ii) Content of notice.--The notice under
clause (i) shall contain--
``(I) sufficient information to
enable participants and beneficiaries to
understand the effect of any reduction
on their benefits, including an estimate
(on an annual or monthly basis) of any
affected adjustable benefit that a
participant or beneficiary would
otherwise have been eligible for as of
the general effective date described in
clause (i), and
``(II) information as to the rights
and remedies of plan participants and
beneficiaries as well as how to contact
the Department of Labor for further
information and assistance where
appropriate.
``(iii) Form and manner.--Any notice under
clause (i)--
``(I) <<NOTE: Regulations.>> shall
be provided in a form and manner
prescribed in regulations of the
Secretary,
``(II) shall be written in a manner
so as to be understood by the average
plan participant, and
``(III) may be provided in written,
electronic, or other appropriate form to
the extent such form is reasonably
accessible to persons to whom the notice
is required to be provided.
The <<NOTE: Regulations.>> Secretary shall in the
regulations prescribed under subclause (I)
establish a model notice that a plan sponsor may
use to meet the requirements of this subparagraph.
``(9) Adjustments disregarded in withdrawal liability
determination.--
``(A) Benefit reductions.--Any benefit reductions
under this subsection shall be disregarded in
determining a plan's unfunded vested benefits for
purposes of determining an employer's withdrawal
liability under section 4201.
``(B) Surcharges.--Any surcharges under paragraph
(7) 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 under section 4211(c)(4) or
a comparable method approved under section 4211(c)(5).
[[Page 120 STAT. 882]]
``(C) Simplified calculations.--The Pension Benefit
Guaranty Corporation shall prescribe simplified methods
for the application of this paragraph in determining
withdrawal liability.
``(f) Rules for Operation of Plan During Adoption and Rehabilitation
Period.--
``(1) Compliance with rehabilitation plan.--
``(A) In general.--A plan may not be amended after
the date of the adoption of a rehabilitation plan under
subsection (e) so as to be inconsistent with the
rehabilitation plan.
``(B) Special rules for benefit increases.--A plan
may not be amended after the date of the adoption of a
rehabilitation plan under subsection (e) so as to
increase benefits, including future benefit accruals,
unless the plan actuary certifies that such increase is
paid for out of additional contributions not
contemplated by the rehabilitation plan, and, after
taking into account the benefit increase, the
multiemployer plan still is reasonably expected to
emerge from critical status by the end of the
rehabilitation period on the schedule contemplated in
the rehabilitation plan.
``(2) Restriction on lump sums and similar benefits.--
``(A) In general.--Effective <<NOTE: Effective
date.>> on the date the notice of certification of the
plan's critical status for the initial critical year
under subsection (b)(3)(D) is sent, and notwithstanding
section 204(g), the plan shall not pay--
``(i) any payment, in excess of the monthly
amount paid under a single life annuity (plus any
social security supplements described in the last
sentence of section 204(b)(1)(G)),
``(ii) any payment for the purchase of an
irrevocable commitment from an insurer to pay
benefits, and
``(iii) any other payment specified by the
Secretary of the Treasury by regulations.
``(B) Exception.--Subparagraph (A) shall not apply
to a benefit which under section 203(e) may be
immediately distributed without the consent of the
participant or to any makeup payment in the case of a
retroactive annuity starting date or any similar payment
of benefits owed with respect to a prior period.
``(3) Adjustments disregarded in withdrawal liability
determination.--Any benefit reductions under this subsection
shall be disregarded in determining a plan's unfunded vested
benefits for purposes of determining an employer's withdrawal
liability under section 4201.
``(4) Special rules for plan adoption period.--During the
rehabilitation plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with
respect to the multiemployer plan that provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
[[Page 120 STAT. 883]]
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation, and
``(B) no amendment of the plan which increases the
liabilities of the plan by reason of any increase in
benefits, any change in the accrual of benefits, or any
change in the rate at which benefits become
nonforfeitable under the plan may be adopted unless the
amendment is required as a condition of qualification
under part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 or to comply with other
applicable law.
``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within 60
days of the due date for adoption of a funding improvement plan or a
rehabilitation plan under subsection (e), the plan sponsor of a plan in
endangered status or a plan in critical status has not agreed on a
funding improvement plan or rehabilitation plan, then any member of the
board or group that constitutes the plan sponsor may require that the
plan sponsor enter into an expedited dispute resolution procedure for
the development and adoption of a funding improvement plan or
rehabilitation plan.
``(h) Nonbargained Participation.--
``(1) Both bargained and nonbargained employee-
participants.--In the case of an employer that contributes to a
multiemployer plan with respect to both employees who are
covered by one or more collective bargaining agreements and
employees who are not so covered, if the plan is in endangered
status or in critical status, benefits of and contributions for
the nonbargained employees, including surcharges on those
contributions, shall be determined as if those nonbargained
employees were covered under the first to expire of the
employer's collective bargaining agreements in effect when the
plan entered endangered or critical status.
``(2) Nonbargained employees only.--In the case of an
employer that contributes to a multiemployer plan only with
respect to employees who are not covered by a collective
bargaining agreement, this section shall be applied as if the
employer were the bargaining party, and its participation
agreement with the plan were a collective bargaining agreement
with a term ending on the first day of the plan year beginning
after the employer is provided the schedule or schedules
described in subsections (c) and (e).
``(i) Definitions; Actuarial Method.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means--
``(A)(i) except as provided in clause (ii), an
employer who has an obligation to contribute under the
plan; or
``(ii) in the case of a plan described under section
404(c) of the Internal Revenue Code of 1986, or a
continuation of such a plan, the association of
employers that is the employer settlor of the plan; and
``(B) an employee organization which, for purposes
of collective bargaining, represents plan participants
employed by an employer who has an obligation to
contribute under the plan.
``(2) Funded percentage.--The term `funded percentage' means
the percentage equal to a fraction--
[[Page 120 STAT. 884]]
``(A) the numerator of which is the value of the
plan's assets, as determined under section 304(c)(2),
and
``(B) the denominator of which is the accrued
liability of the plan, determined using actuarial
assumptions described in section 304(c)(3).
``(3) Accumulated funding deficiency.--The term `accumulated
funding deficiency' has the meaning given such term in section
304(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive participant'
means, in connection with a multiemployer plan, a participant,
or the beneficiary or alternate payee of a participant, who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in pay status under a
multiemployer plan if--
``(A) at any time during the current plan year, such
person is a participant or beneficiary under the plan
and is paid an early, late, normal, or disability
retirement benefit under the plan (or a death benefit
under the plan related to a retirement benefit), or
``(B) to the extent provided in regulations of the
Secretary of the Treasury, such person is entitled to
such a benefit under the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning given such term under section
4212(a).
``(8) Actuarial method.--Notwithstanding any other provision
of this section, the actuary's determinations with respect to a
plan's normal cost, actuarial accrued liability, and
improvements in a plan's funded percentage under this section
shall be based upon the unit credit funding method (whether or
not that method is used for the plan's actuarial valuation).
``(9) Plan sponsor.--In the case of a plan described under
section 404(c) of the Internal Revenue Code of 1986, or a
continuation of such a plan, the term `plan sponsor' means the
bargaining parties described under paragraph (1).
``(10) Benefit commencement date.--The term `benefit
commencement date' means the annuity starting date (or in the
case of a retroactive annuity starting date, the date on which
benefit payments begin).''.
(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 against any plan sponsor of a
multiemployer plan a civil penalty of not more than $1,100 per
day--
``(A) for each violation by such sponsor of the
requirement under section 305 to adopt by the deadline
established
[[Page 120 STAT. 885]]
in that section a funding improvement plan or
rehabilitation plan with respect to a multiemployer
which is in endangered or critical status, or
``(B) in the case of a plan in endangered status
which is not in seriously endangered status, for failure
by the plan to meet the applicable benchmarks under
section 305 by the end of the funding improvement period
with respect to the plan.''.
(c) Cause of Action To Compel Adoption or Implementation of Funding
Improvement or Rehabilitation Plan.--Section 502(a) of the Employee
Retirement Income Security Act of <<NOTE: 29 USC 1132.>> 1974 is amended
by striking ``or'' at the end of paragraph (8), by striking the period
at the end of paragraph (9) and inserting ``; or'' and by adding at the
end the following:
``(10) in the case of a multiemployer plan that has been
certified by the actuary to be in endangered or critical status
under section 305, if the plan sponsor--
``(A) has not adopted a funding improvement or
rehabilitation plan under that section by the deadline
established in such section, or
``(B) fails to update or comply with the terms of
the funding improvement or rehabilitation plan in
accordance with the requirements of such section,
by an employer that has an obligation to contribute with respect
to the multiemployer plan or an employee organization that
represents active participants in the multiemployer plan, for an
order compelling the plan sponsor to adopt a funding improvement
or rehabilitation plan or to update or comply with the terms of
the funding improvement or rehabilitation plan in accordance
with the requirements of such section and the funding
improvement or rehabilitation plan.''.
(d) No Additional Contributions Required.--Section 302(b) of the
Employee Retirement Income Security Act of 1974, as amended by this
Act, <<NOTE: 29 USC 1082.>> is amended by adding at the end the
following new paragraph:
``(3) Multiemployer plans in critical status.--Paragraph (1)
shall not apply in the case of a multiemployer plan for any plan
year in which the plan is in critical status pursuant to section
305. This paragraph shall only apply if the plan adopts a
rehabilitation plan in accordance with section 305(e) and
complies with the terms of such rehabilitation plan (and any
updates or modifications of the plan).''.
(e) Conforming Amendment.--The table of contents in section 1 of
such Act (as amended by the preceding provisions of this Act) is amended
by inserting after the item relating to section 304 the following new
item:
``Sec. 305. Additional funding rules for multiemployer plans in
endangered status or critical status.''.
(f) <<NOTE: 29 USC 1082 note.>> Effective Dates.--
(1) In general.--The amendments made by this section shall
apply with respect to plan years beginning after 2007.
(2) Special rule for certain notices.--In any case in which
a plan's actuary certifies that it is reasonably expected that a
multiemployer plan will be in critical status under section
305(b)(3) of the Employee Retirement Income Security Act of
1974, as added by this section, with respect to the first plan
year beginning after 2007, the notice required under
[[Page 120 STAT. 886]]
subparagraph (D) of such section may be provided at any time
after the date of enactment, so long as it is provided on or
before the last date for providing the notice under such
subparagraph.
(3) Special rule for certain restored benefits.--In the case
of a multiemployer plan--
(A) with respect to which benefits were reduced
pursuant to a plan amendment adopted on or after January
1, 2002, and before June 30, 2005, and
(B) which, pursuant to the plan document, the trust
agreement, or a formal written communication from the
plan sponsor to participants provided before June 30,
2005, provided for the restoration of such benefits,
the amendments made by this section shall not apply to such
benefit restorations to the extent that any restriction on the
providing or accrual of such benefits would otherwise apply by
reason of such amendments.
SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.
(a) Advance Determination of Impending Insolvency Over 5 Years.--
Section 4245(d)(1) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1426(d)(1)) is amended--
(1) by striking ``3 plan years'' the second place it appears
and inserting ``5 plan years''; and
(2) by adding at the end the following new sentence: ``If
the plan sponsor makes such a determination that the plan will
be insolvent in any of the next 5 plan years, the plan sponsor
shall make the comparison under this paragraph at least annually
until the plan sponsor makes a determination that the plan will
not be insolvent in any of the next 5 plan years.''.
(b) <<NOTE: 29 USC 1426 note.>> Effective Date.--The amendments made
by this section shall apply with respect to determinations made in plan
years beginning after 2007.
SEC. 204. WITHDRAWAL LIABILITY REFORMS.
(a) Update of Rules Relating to Limitations on Withdrawal
Liability.--
(1) Increase in limits.--Section 4225(a)(2) of such Act (29
U.S.C. 1405(a)(2)) is amended by striking the table contained
therein and inserting the following new table:
------------------------------------------------------------------------
``If the liquidation or distribution
value of the employer after the sale The portion is--
or exchange is--
------------------------------------------------------------------------
Not more than $5,000,000............. 30 percent of the amount.
More than $5,000,000, but not more $1,500,000, plus 35 percent of
than $10,000,000. the amount in excess of
$5,000,000.
More than $10,000,000, but not more $3,250,000, plus 40 percent of
than $15,000,000. the amount in excess of
$10,000,000.
More than $15,000,000, but not more $5,250,000, plus 45 percent of
than $17,500,000. the amount in excess of
$15,000,000.
More than $17,500,000, but not more $6,375,000, plus 50 percent of
than $20,000,000. the amount in excess of
$17,500,000.
[[Page 120 STAT. 887]]
More than $20,000,000, but not more $7,625,000, plus 60 percent of
than $22,500,000. the amount in excess of
$20,000,000.
More than $22,500,000, but not more $9,125,000, plus 70 percent of
than $25,000,000. the amount in excess of
$22,500,000.
More than $25,000,000................ $10,875,000, plus 80 percent of
the amount in excess of
$25,000,000.''.
------------------------------------------------------------------------
(2) Plans using attributable method.--Section 4225(a)(1)(B)
of such Act (29 U.S.C. 1405(a)(1)(B)) is amended to read as
follows:
``(B) in the case of a plan using the attributable
method of allocating withdrawal liability, the unfunded
vested benefits attributable to employees of the
employer.''.
(3) <<NOTE: 29 USC 1405 note.>> Effective date.--The
amendments made by this subsection shall apply to sales
occurring on or after January 1, 2007.
(b) Withdrawal Liability Continues if Work Contracted Out.--
(1) In general.--Clause (i) of section 4205(b)(2)(A) of such
Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ``or to an
entity or entities owned or controlled by the employer'' after
``to another location''.
(2) <<NOTE: 29 USC 1385 note.>> Effective date.--The
amendment made by this subsection shall apply with respect to
work transferred on or after the date of the enactment of this
Act.
(c) Application of Rules to Plans Primarily Covering Employees in
the Building and Construction Industry.--
(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) Fresh start option.--Section 4211(c)(5) of such Act (29
U.S.C. 1391(c)(5)) is amended by adding at the end the following
new subparagraph:
``(E) Fresh start option.--Notwithstanding paragraph
(1), a plan may be amended to provide that the
withdrawal liability method described in subsection (b)
shall be applied by substituting the plan year which is
specified in the amendment and for which the plan has no
unfunded vested benefits for the plan year ending before
September 26, 1980.''.
(3) <<NOTE: 29 USC 1390 note.>> Effective date.--The
amendments made by this subsection shall apply with respect to
plan withdrawals occurring on or after January 1, 2007.
(d) Procedures Applicable to Disputes Involving Pension Plan
Withdrawal Liability.--
(1) In general.--Section 4221 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1401) is amended by
adding at the end the following:
``(g) Procedures Applicable to Certain Disputes.--
``(1) In general.--If--
``(A) a plan sponsor of a plan determines that--
[[Page 120 STAT. 888]]
``(i) a complete or partial withdrawal of an
employer has occurred, or
``(ii) an employer is liable for withdrawal
liability payments with respect to such complete
or partial withdrawal, and
``(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 after December 31, 1998, and 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,
then the person against which the withdrawal liability is
assessed based solely on the application of section 4212(c) may
elect to use the special rule under paragraph (2) in applying
subsection (d) of this section and section 4219(c) to such
person.
``(2) Special rule.--Notwithstanding subsection (d) and
section 4219(c), if an electing person contests the plan
sponsor's determination with respect to withdrawal liability
payments under paragraph (1) through an arbitration proceeding
pursuant to subsection (a), through an action brought in a court
of competent jurisdiction for review of such an arbitration
decision, or as otherwise permitted by law, the electing person
shall not be obligated to make the withdrawal liability payments
until a final decision in the arbitration proceeding, or in
court, upholds the plan sponsor's determination, but only if the
electing person--
``(A) provides notice to the plan sponsor of its
election to apply the special rule in this paragraph
within 90 days after the plan sponsor notifies the
electing person of its liability by reason of the
application of section 4212(c); and
``(B) if a final decision in the arbitration
proceeding, or in court, of the withdrawal liability
dispute has not been rendered within 12 months from the
date of such notice, the electing person provides to the
plan, effective as of the first day following the 12-
month period, a bond issued by a corporate surety
company that is an acceptable surety for purposes of
section 412 of this Act, or an amount held in escrow by
a bank or similar financial institution satisfactory to
the plan, in an amount equal to the sum of the
withdrawal liability payments that would otherwise be
due under subsection (d) and section 4219(c) for the 12-
month period beginning with the first anniversary of
such notice. Such bond or escrow shall remain in effect
until there is a final decision in the arbitration
proceeding, or in court, of the withdrawal liability
dispute, at which time such bond or escrow shall be paid
to the plan if such final decision upholds the plan
sponsor's determination.
``(3) Definition of small employer.--For purposes of this
subsection--
``(A) In general.--The term `small employer' means
any employer which, for the calendar year in which the
transaction referred to in paragraph (1)(B) occurred and
for each of the 3 preceding years, on average--
``(i) employs not more than 500 employees, and
[[Page 120 STAT. 889]]
``(ii) is required to make contributions to
the plan for not more than 250 employees.
``(B) Controlled group.--Any group treated as a
single employer under subsection (b)(1) of section 4001,
without regard to any transaction that was a basis for
the plan's finding under section 4212, shall be treated
as a single employer for purposes of this subparagraph.
``(4) Additional security pending resolution of dispute.--If
a withdrawal liability dispute to which this subsection applies
is not concluded by 12 months after the electing person posts
the bond or escrow described in paragraph (2), the electing
person shall, at the start of each succeeding 12-month period,
provide an additional bond or amount held in escrow equal to the
sum of the withdrawal liability payments that would otherwise be
payable to the plan during that period.
``(5) The liability of the party furnishing a bond or escrow
under this subsection shall be reduced, upon the payment of the
bond or escrow to the plan, by the amount thereof.''.
(2) <<NOTE: 29 USC 1401 note.>> Effective date.--The
amendments made by this subsection shall apply to any person
that receives a notification under section 4219(b)(1) of the
Employee Retirement Income Security Act of 1974 on or after the
date of enactment of this Act with respect to a transaction that
occurred after December 31, 1998.
SEC. 205. PROHIBITION ON RETALIATION AGAINST EMPLOYERS EXERCISING THEIR
RIGHTS TO PETITION THE FEDERAL GOVERNMENT.
Section 510 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1140) is amended by inserting before the last sentence
thereof the following new sentence: ``In the case of a multiemployer
plan, it shall be unlawful for the plan sponsor or any other person to
discriminate against any contributing employer for exercising rights
under this Act or for giving information or testifying in any inquiry or
proceeding relating to this Act before Congress.''.
SEC. 206. <<NOTE: 26 USC 412 note.>> SPECIAL RULE FOR CERTAIN BENEFITS
FUNDED UNDER AN AGREEMENT APPROVED BY THE PENSION BENEFIT
GUARANTY CORPORATION.
In the case of a multiemployer plan that is a party to an agreement
that was approved by the Pension Benefit Guaranty Corporation prior to
June 30, 2005, and that--
(1) increases benefits, and
(2) provides for special withdrawal liability rules under
section 4203(f) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1383),
the amendments made by sections 201, 202, 211, and 212 of this Act shall
not apply to the benefit increases under any plan amendment adopted
prior to June 30, 2005, that are funded pursuant to such agreement if
the plan is funded in compliance with such agreement (and any amendments
thereto).
[[Page 120 STAT. 890]]
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 (as added by this Act) is amended
by inserting after section 430 the following new section:
``SEC. 431. <<NOTE: 26 USC 431.>> MINIMUM FUNDING STANDARDS FOR
MULTIEMPLOYER PLANS.
``(a) In General.--For purposes of section 412, the accumulated
funding deficiency of a multiemployer plan for any plan year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the excess
(if any) of the total charges to the funding standard account of
the plan for all plan years (beginning with the first plan year
for which this part applies to the plan) over the total credits
to such account for such years, and
``(2) if the multiemployer plan is in reorganization for any
plan year, the accumulated funding deficiency of the plan
determined under section 4243 of the Employee Retirement Income
Security Act of 1974.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan year,
``(B) the amounts necessary to amortize in equal
annual installments (until fully amortized)--
``(i) in the case of a plan which comes into
existence on or after January 1, 2008, the
unfunded past service liability under the plan on
the first day of the first plan year to which this
section applies, over a period of 15 plan years,
``(ii) 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,
``(iii) separately, with respect to each plan
year, the net experience loss (if any) under the
plan, over a period of 15 plan years, and
``(iv) 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
[[Page 120 STAT. 891]]
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 2006), 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 2006).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the
employer to or under the plan for the plan year,
``(B) the amount necessary to amortize in equal
annual installments (until fully amortized)--
``(i) separately, with respect to each plan
year, the net decrease (if any) in unfunded past
service liability under the plan arising from plan
amendments adopted in such year, over a period of
15 plan years,
``(ii) separately, with respect to each plan
year, the net experience gain (if any) under the
plan, over a period of 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 2006), the
excess (if any) of any debit balance in the funding
standard account (determined without regard to this
subparagraph) over any debit balance in the alternative
minimum funding standard account.
``(4) Special rule for amounts first amortized in plan years
before 2008.--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 2006) over any period beginning
with a plan year beginning before 2008 in lieu of the
amortization described in paragraphs (2)(B) and (3)(B), such
amount shall continue to be amortized under such section as so
in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under <<NOTE: Regulations.>> 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
[[Page 120 STAT. 892]]
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the
resulting amount to be amortized over a period
determined on the basis of the remaining amortization
periods for all items entering into whichever of the two
amounts being offset is the greater.
``(6) Interest.--The funding standard account (and items
therein) shall be charged or credited (as determined under
regulations prescribed by the Secretary of the Treasury) with
interest at the appropriate rate consistent with the rate or
rates of interest used under the plan to determine costs.
``(7) Special rules relating to charges and credits to
funding standard account.--For purposes of this part--
``(A) Withdrawal liability.--Any amount received by
a multiemployer plan in payment of all or part of an
employer's withdrawal liability under part 1 of subtitle
E of title IV of the Employee Retirement Income Security
Act of 1974 shall be considered an amount contributed by
the employer to or under the plan. The Secretary may
prescribe by regulation additional charges and credits
to a multiemployer plan's funding standard account to
the extent necessary to prevent withdrawal liability
payments from being unduly reflected as advance funding
for plan liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in
reorganization in the immediately preceding plan year,
any balance in the funding standard account at the close
of such immediately preceding plan year--
``(i) shall be eliminated by an offsetting
credit or charge (as the case may be), but
``(ii) shall be taken into account in
subsequent plan years by being amortized in equal
annual installments (until fully amortized) over
30 plan years.
The preceding sentence shall not apply to the extent of
any accumulated funding deficiency under section 4243(a)
of such Act as of the end of the last plan year that the
plan was in reorganization.
``(C) Plan payments to supplemental program or
withdrawal liability payment fund.--Any amount paid by a
plan during a plan year to the Pension Benefit Guaranty
Corporation pursuant to section 4222 of such Act or to a
fund exempt under section 501(c)(22) pursuant to section
4223 of such Act shall reduce the amount of
contributions considered received by the plan for the
plan year.
``(D) <<NOTE: Regulations.>> 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
[[Page 120 STAT. 893]]
date of the enactment of the Pension Protection Act of
2006) 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)(iii) 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 <<NOTE: Applicability.>> the extent that any plan
amendment increases the unfunded past service liability
under the plan by reason of an increase in benefits
which are not payable as a life annuity but are payable
under the terms of the plan for a period that does not
exceed 14 years from the effective date of the
amendment, paragraph (2)(B)(ii) shall be applied
separately with respect to such increase in unfunded
past service liability by substituting the number of
years of the period during which such benefits are
payable for `15'.
``(c) Additional Rules.--
``(1) Determinations to be made under funding method.--For
purposes of this part, normal costs, accrued liability, past
service liabilities, and experience gains and losses shall be
determined under the funding method used to determine costs
under the plan. I22 ``(2) Valuation of assets.--
``(A) In general.--
For <<NOTE: Regulations.>> purposes of this part, the
value of the plan's assets shall be determined on the
basis of any reasonable actuarial method of valuation
which takes into account fair market value and which is
permitted under regulations prescribed by the Secretary.
``(B) Election with respect to bonds.--
The <<NOTE: Regulations. Applicability.>> 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
[[Page 120 STAT. 894]]
``(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 para-
graph--
``(i) In general.--The term `current
liability' means all liabilities to employees and
their beneficiaries under the plan.
[[Page 120 STAT. 895]]
``(ii) Treatment of unpredictable contingent
event benefits.--For purposes of clause (i), any
benefit contingent on an event other than--
``(I) age, service, compensation,
death, or disability, or
``(II) an event which is reasonably
and reliably predictable (as determined
by the Secretary),
shall not be taken into account until the event on
which the benefit is contingent occurs.
``(iii) Interest rate used.--The rate of
interest used to determine current liability under
this paragraph shall be the rate of interest
determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard
table.--In the case of plan years
beginning before the first plan year to
which the first tables prescribed under
subclause (II) apply, the mortality
table used in determining current
liability under this paragraph shall be
the table prescribed by the Secretary
which is based on the prevailing
commissioners' standard table (described
in section 807(d)(5)(A)) used to
determine reserves for group annuity
contracts issued on January 1, 1993.
``(II) Secretarial authority.--The
Secretary may by regulation prescribe
for plan years beginning after December
31, 1999, mortality tables to be used in
determining current liability under this
subsection. Such tables shall be based
upon the actual experience of pension
plans and projected trends in such
experience. In prescribing such tables,
the Secretary shall take into account
results of available independent studies
of mortality of individuals covered by
pension plans.
``(v) Separate mortality tables for the
disabled.--Notwithstanding clause (iv)--
``(I) In general.--The Secretary
shall establish mortality tables which
may be used (in lieu of the tables under
clause (iv)) to determine current
liability under this subsection for
individuals who are entitled to benefits
under the plan on account of disability.
The Secretary shall establish separate
tables for individuals whose
disabilities occur in plan years
beginning before January 1, 1995, and
for individuals whose disabilities occur
in plan years beginning on or after such
date.
``(II) Special rule for disabilities
occurring after 1994.--
In <<NOTE: Applicability.>> 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 <<NOTE: Regulations.>> Secretary shall
periodically (at least every 5 years) review any
tables in effect under this subparagraph and
shall, to the
[[Page 120 STAT. 896]]
extent such Secretary determines necessary, by
regulation update the tables to reflect the actual
experience of pension plans and projected trends
in such experience.
``(E) Required change of interest rate.--For
purposes of determining a plan's current liability for
purposes of this paragraph--
``(i) In general.--If any rate of interest
used under the plan under subsection (b)(6) to
determine cost is not within the permissible
range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of
this subparagraph--
``(I) In general.--Except as
provided in subclause (II), the term
`permissible range' means a rate of
interest which is not more than 5
percent above, and not more than 10
percent below, the weighted average of
the rates of interest on 30-year
Treasury securities during the 4-year
period ending on the last day before the
beginning of the plan year.
``(II) Secretarial authority.--If
the Secretary finds that the lowest rate
of interest permissible under subclause
(I) is unreasonably high, the Secretary
may prescribe a lower rate of interest,
except that such rate may not be less
than 80 percent of the average rate
determined under such subclause.
``(iii) Assumptions.--Notwithstanding
paragraph (3)(A), the interest rate used under the
plan shall be--
``(I) determined without taking into
account the experience of the plan and
reasonable expectations, but
``(II) consistent with the
assumptions which reflect the purchase
rates which would be used by insurance
companies to satisfy the liabilities
under the plan.
``(7) Annual valuation.--
``(A) In general.--
For <<NOTE: Regulations.>> 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
[[Page 120 STAT. 897]]
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 <<NOTE: Deadline.>> purposes of this section, any
contributions for a plan year made by an employer after the last
day of such plan year, but not later than two and one-half
months after such day, shall be deemed to have been made on such
last day. For purposes of this subparagraph, such two and one-
half month period may be extended for not more than six months
under regulations prescribed by the Secretary.
``(d) Extension of Amortization Periods for Multiemployer Plans.--
``(1) Automatic extension upon application by certain
plans.--
``(A) In general.--If the plan sponsor of a
multiemployer plan--
``(i) submits to the Secretary an application
for an extension of the period of years required
to amortize any unfunded liability described in
any clause of subsection (b)(2)(B) or described in
subsection (b)(4), and
``(ii) includes with the application a
certification by the plan's actuary described in
subparagraph (B),
the Secretary shall extend the amortization period for
the period of time (not in excess of 5 years) specified
in the application. Such extension shall be in addition
to any extension under paragraph (2).
``(B) Criteria.--
A <<NOTE: Certification.>> certification with respect to
a multiemployer plan is described in this subparagraph
if the plan's actuary certifies that, based on
reasonable assump- tions--
``(i) absent the extension under subparagraph
(A), the plan would have an accumulated funding
deficiency in the current plan year or any of the
9 succeeding plan years,
``(ii) the plan sponsor has adopted a plan to
improve the plan's funding status,
``(iii) the plan is projected to have
sufficient assets to timely pay expected benefits
and anticipated expenditures over the amortization
period as extended, and
``(iv) the notice required under paragraph
(3)(A) has been provided.
``(C) Termination.--The preceding provisions of this
paragraph shall not apply with respect to any
application submitted after December 31, 2014.
``(2) Alternative extension.--
[[Page 120 STAT. 898]]
``(A) In general.--If the plan sponsor of a
multiemployer plan submits to the Secretary an
application for an extension of the period of years
required to amortize any unfunded liability described in
any clause of subsection (b)(2)(B) or described in
subsection (b)(4), the Secretary may extend the
amortization period for a period of time (not in excess
of 10 years reduced by the number of years of any
extension under paragraph (1) with respect to such
unfunded liability) if the Secretary makes the
determination described in subparagraph (B). Such
extension shall be in addition to any extension under
paragraph (1).
``(B) Determination.--The Secretary may grant an
extension under subparagraph (A) if the Secretary
determines that--
``(i) such extension would carry out the
purposes of this Act and would provide adequate
protection for participants under the plan and
their beneficiaries, and
``(ii) the failure to permit such extension
would--
``(I) result in a substantial risk
to the voluntary continuation of the
plan, or a substantial curtailment of
pension benefit levels or employee
compensation, and
``(II) be adverse to the interests
of plan participants in the aggregate.
``(C) Action by secretary.--
The <<NOTE: Deadline.>> Secretary shall act upon any
application for an extension under this paragraph within
180 days of the submission of such application. If the
Secretary rejects the application for an extension under
this paragraph, the Secretary shall provide notice to
the plan detailing the specific reasons for the
rejection, including references to the criteria set
forth above.
``(3) Advance notice.--
``(A) In general.--The Secretary shall, before
granting an extension under this subsection, require
each applicant to provide evidence satisfactory to such
Secretary that the applicant has provided notice of the
filing of the application for such extension to each
affected party (as defined in section 4001(a)(21) of the
Employee Retirement Income Security Act of 1974) with
respect to the affected plan. Such notice shall include
a description of the extent to which the plan is funded
for benefits which are guaranteed under title IV of such
Act and for benefit liabilities.
``(B) Consideration of relevant information.--The
Secretary shall consider any relevant information
provided by a person to whom notice was given under
paragraph (1).''.
(b) <<NOTE: 26 USC 431 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2007.
(2) Special rule for certain amortization extensions.--
If <<NOTE: Deadline. Applicability.>> the Secretary of the
Treasury grants an extension under section 304 of the Employee
Retirement Income Security Act of 1974 and section 412(e) of the
Internal Revenue Code of 1986 with respect to any application
filed with the Secretary of the Treasury on or before June 30,
2005, the extension
[[Page 120 STAT. 899]]
(and any modification thereof) shall be applied and administered
under the rules of such sections as in effect before the
enactment of this Act, including the use of the rate of interest
determined under section 6621(b) of such Code.
SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED
OR CRITICAL STATUS.
(a) In General.--Subpart A of part III of subchapter D of chapter 1
of the Internal Revenue Code of 1986 (as amended by this Act) is amended
by inserting after section 431 the following new section:
``SEC. 432. <<NOTE: 26 USC 432.>> ADDITIONAL FUNDING RULES FOR
MULTIEMPLOYER PLANS IN ENDANGERED STATUS OR CRITICAL STATUS.
``(a) General Rule.--For purposes of this part, in the case of a
multiemployer plan in effect on July 16, 2006--
``(1) if the plan is in endangered status--
``(A) the plan sponsor shall adopt and implement a
funding improvement plan in accordance with the
requirements of subsection (c), and
``(B) <<NOTE: Applicability.>> the requirements of
subsection (d) shall apply during the funding plan
adoption period and the funding improvement period, and
``(2) if the plan is in critical status--
``(A) the plan sponsor shall adopt and implement a
rehabilitation plan in accordance with the requirements
of subsection (e), and
``(B) <<NOTE: Applicability.>> the requirements of
subsection (f) shall apply during the rehabilitation
plan adoption period and the rehabilitation period.
``(b) Determination of Endangered and Critical Status.--For purposes
of this section--
``(1) Endangered status.--A multiemployer plan is in
endangered status for a plan year if, as determined by the plan
actuary under paragraph (3), the plan is not in critical status
for the plan year and, as of the beginning of the plan year,
either--
``(A) the plan's funded percentage for such plan
year is less than 80 percent, or
``(B) the plan has an accumulated funding deficiency
for such plan year, or is projected to have such an
accumulated funding deficiency for any of the 6
succeeding plan years, taking into account any extension
of amortization periods under section 431(d).
For purposes of this section, a plan shall be treated as in
seriously endangered status for a plan year if the plan is
described in both subparagraphs (A) and (B).
``(2) Critical status.--A multiemployer plan is in critical
status for a plan year if, as determined by the plan actuary
under paragraph (3), the plan is described in 1 or more of the
following subparagraphs as of the beginning of the plan year:
``(A) A plan is described in this subparagraph if--
``(i) the funded percentage of the plan is
less than 65 percent, and
``(ii) the sum of--
``(I) the fair market value of plan
assets, plus
[[Page 120 STAT. 900]]
``(II) the present value of the
reasonably anticipated employer
contributions for the current plan year
and each of the 6 succeeding plan years,
assuming that the terms of all
collective bargaining agreements
pursuant to which the plan is maintained
for the current plan year continue in
effect for succeeding plan years,
is less than the present value of all
nonforfeitable benefits 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--
``(i) the plan has an accumulated funding
deficiency for the current plan year, not taking
into account any extension of amortization periods
under section 431(d), or
``(ii) the plan is projected to have an
accumulated funding deficiency for any of the 3
succeeding plan years (4 succeeding plan years if
the funded percentage of the plan is 65 percent or
less), not taking into account any extension of
amortization periods under section 431(d).
``(C) A plan is described in this subparagraph if--
``(i)(I) the plan's normal cost for the
current plan year, plus interest (determined at
the rate used for determining costs under the
plan) for the current plan year on the amount of
unfunded benefit liabilities under the plan as of
the last date of the preceding plan year, exceeds
``(II) the present value of the reasonably
anticipated employer 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 of nonforfeitable benefits of
active participants, and
``(iii) the plan has an accumulated funding
deficiency for the current plan year, or is
projected to have such a deficiency for any of the
4 succeeding plan years, not taking into account
any extension of amortization periods under
section 431(d).
``(D) A plan is described in this subparagraph if
the sum of--
``(i) the fair market value of plan assets,
plus
``(ii) the present value of the reasonably
anticipated employer contributions for the current
plan year and each of the 4 succeeding plan years,
assuming that the terms of all collective
bargaining agreements pursuant to which the plan
is maintained for the current plan year continue
in effect for succeeding plan years,
is less than the present value of all benefits projected
to be payable under the plan during the current plan
year and each of the 4 succeeding plan years (plus
administrative expenses for such plan years).
``(3) Annual certification by plan actuary.--
[[Page 120 STAT. 901]]
``(A) In general.--Not <<NOTE: Deadline.>> later
than the 90th day of each plan year of a multiemployer
plan, the plan actuary shall certify to the Secretary
and to the plan sponsor--
``(i) whether or not the plan is in endangered
status for such plan year and whether or not the
plan is or will be in critical status for such
plan year, and
``(ii) in the case of a plan which is in a
funding improvement or rehabilitation period,
whether or not the plan is making the scheduled
progress in meeting the requirements of its
funding improvement or rehabilitation plan.
``(B) Actuarial projections of assets and
liabilities.--
``(i) In general.--In making the
determinations and projections under this
subsection, the plan actuary shall make
projections required for the current and
succeeding plan years of the current value of the
assets of the plan and the present value of all
liabilities to participants and beneficiaries
under the plan for the current plan year as of the
beginning of such year. The actuary's projections
shall be based on reasonable actuarial estimates,
assumptions, and methods that, except as provided
in clause (iii), offer the actuary's best estimate
of anticipated experience under the plan. The
projected present value of liabilities as of the
beginning of such year shall be determined based
on the most recent of either--
``(I) the actuarial statement
required under section 103(d) of the
Employee Retirement Income Security Act
of 1974 with respect to the most
recently filed annual report, or
``(II) the actuarial valuation for
the preceding plan year.
``(ii) Determinations of future
contributions.--Any actuarial projection of plan
assets shall assume--
``(I) reasonably anticipated
employer contributions for the current
and succeeding plan years, assuming that
the terms of the one or more collective
bargaining agreements pursuant to which
the plan is maintained for the current
plan year continue in effect for
succeeding plan years, or
``(II) that employer contributions
for the most recent plan year will
continue indefinitely, but only if the
plan actuary determines there have been
no significant demographic changes that
would make such assumption unreasonable.
``(iii) Projected industry activity.--Any
projection of activity in the industry or
industries covered by the plan, including future
covered employment and contribution levels, shall
be based on information provided by the plan
sponsor, which shall act reasonably and in good
faith.
``(C) Penalty for failure to secure timely actuarial
certification.--Any failure of the plan's actuary to
certify the plan's status under this subsection by the
date specified in subparagraph (A) shall be treated for
[[Page 120 STAT. 902]]
purposes of section 502(c)(2) of the Employee Retirement
Income Security Act of 1974 as a failure or refusal by
the plan administrator to file the annual report
required to be filed with the Secretary under section
101(b)(4) of such Act.
``(D) Notice.--
``(i) In general.--In <<NOTE: Deadline.>> any
case in which it is certified under subparagraph
(A) that a multiemployer plan is or will be in
endangered or critical status for a plan year, the
plan sponsor shall, not later than 30 days after
the date of the certification, provide
notification of the endangered or critical status
to the participants and beneficiaries, the
bargaining parties, the Pension Benefit Guaranty
Corporation, and the Secretary of Labor.
``(ii) Plans in critical status.--If it is
certified under subparagraph (A) that a
multiemployer plan is or will be in critical
status, the plan sponsor shall include in the
notice under clause (i) an explanation of the
possibility that--
``(I) adjustable benefits (as
defined in subsection (e)(8)) may be
reduced, and
``(II) such reductions may apply to
participants and beneficiaries whose
benefit commencement date is on or after
the date such notice is provided for the
first plan year in which the plan is in
critical status.
``(iii) Model notice.--The Secretary of Labor
shall prescribe a model notice that a
multiemployer plan may use to satisfy the
requirements under clause (ii).
``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
Plans in Endangered Status.--
``(1) <<NOTE: Deadlines.>> In general.--In any case in which
a multiemployer plan is in endangered status for a plan year,
the plan sponsor, in accordance with this subsection--
``(A) shall adopt a funding improvement plan not
later than 240 days following the required date for the
actuarial certification of endangered status under
subsection (b)(3)(A), and
``(B) within 30 days after the adoption of the
funding improvement plan--
``(i) shall provide to the bargaining parties
1 or more schedules showing revised benefit
structures, revised contribution structures, or
both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to meet
the applicable benchmarks in accordance with the
funding improvement plan, including--
``(I) one proposal for reductions in
the amount of future benefit accruals
necessary to achieve the applicable
benchmarks, assuming no amendments
increasing contributions under the plan
(other than amendments increasing
contributions necessary to achieve the
applicable benchmarks after amendments
have reduced future benefit accruals to
the maximum extent permitted by law),
and
[[Page 120 STAT. 903]]
``(II) one proposal for increases in
contributions under the plan necessary
to achieve the applicable benchmarks,
assuming no amendments reducing future
benefit accruals under the plan, and
``(ii) may, if the plan sponsor deems
appropriate, prepare and provide the bargaining
parties with additional information relating to
contribution rates or benefit reductions,
alternative schedules, or other information
relevant to achieving the applicable benchmarks in
accordance with the funding improvement plan.
For purposes of this section, the term `applicable
benchmarks' means the requirements applicable to the
multiemployer plan under paragraph (3) (as modified by
paragraph (5)).
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a funding
plan adoption period or funding improvement period by reason of
the plan being in endangered status for a preceding plan year.
For purposes of this section, such preceding plan year shall be
the initial determination year with respect to the funding
improvement plan to which it relates.
``(3) Funding improvement plan.--For purposes of this
section--
``(A) In general.--A funding improvement plan is a
plan which consists of the actions, including options or
a range of options to be proposed to the bargaining
parties, formulated to provide, based on reasonably
anticipated experience and reasonable actuarial
assumptions, for the attainment by the plan during the
funding improvement period of the following
requirements:
``(i) Increase in plan's funding percentage.--
The plan's funded percentage as of the close of
the funding improvement period equals or exceeds a
percentage equal to the sum of--
``(I) such percentage as of the
beginning of such period, plus
``(II) 33 percent of the difference
between 100 percent and the percentage
under subclause (I).
``(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) Seriously endangered plans.--In the case of a
plan in seriously endangered status, except as provided
in paragraph (5), subparagraph (A)(i)(II) shall be
applied by substituting `20 percent' for `33 percent'.
``(4) Funding improvement period.--For purposes of this
section--
``(A) In general.--The funding improvement period
for any funding improvement plan adopted pursuant to
this subsection is the 10-year period beginning on the
first day of the first plan year of the multiemployer
plan beginning after the earlier of--
``(i) the second anniversary of the date of
the adoption of the funding improvement plan, or
[[Page 120 STAT. 904]]
``(ii) <<NOTE: Expiration date.>> the
expiration of the collective bargaining agreements
in effect on the due date for the actuarial
certification of endangered status for the initial
determination year under subsection (b)(3)(A) and
covering, as of such due date, at least 75 percent
of the active participants in such multiemployer
plan.
``(B) <<NOTE: Applicability.>> Seriously endangered
plans.--In the case of a plan in seriously endangered
status, except as provided in paragraph (5),
subparagraph (A) shall be applied by substituting `15-
year period' for `10-year period'.
``(C) <<NOTE: Termination dates.>> Coordination with
changes in status.--
``(i) Plans no longer in endangered status.--
If the plan's actuary certifies under subsection
(b)(3)(A) for a plan year in any funding plan
adoption period or funding improvement period that
the plan is no longer in endangered status and is
not in critical status, the funding plan adoption
period or funding improvement period, whichever is
applicable, shall end as of the close of the
preceding plan year.
``(ii) Plans in critical status.--If the
plan's actuary certifies under subsection
(b)(3)(A) for a plan year in any funding plan
adoption period or funding improvement period that
the plan is in critical status, the funding plan
adoption period or funding improvement period,
whichever is applicable, shall end as of the close
of the plan year preceding the first plan year in
the rehabilitation period with respect to such
status.
``(D) Plans in endangered status at end of period.--
If the plan's actuary certifies under subsection
(b)(3)(A) for the first plan year following the close of
the period described in subparagraph (A) that the plan
is in endangered status, the provisions of this
subsection and subsection (d) shall be applied as if
such first plan year were an initial determination year,
except that the plan may not be amended in a manner
inconsistent with the funding improvement plan in effect
for the preceding plan year until a new funding
improvement plan is adopted.
``(5) Special rules for seriously endangered plans more than
70 percent funded.--
``(A) In general.--If the funded percentage of a
plan in seriously endangered status was more than 70
percent as of the beginning of the initial determination
year--
``(i) paragraphs (3)(B) and (4)(B) shall apply
only if the plan's actuary certifies, within 30
days after the certification under subsection
(b)(3)(A) for the initial determination year,
that, based on the terms of the plan and the
collective bargaining agreements in effect at the
time of such certification, the plan is not
projected to meet the requirements of paragraph
(3)(A) (without regard to paragraphs (3)(B) and
(4)(B)), and
``(ii) if there is a certification under
clause (i), the plan may, in formulating its
funding improvement plan, only take into account
the rules of paragraph (3)(B) and (4)(B) for plan
years in the funding improvement period beginning
on or before the date on which
[[Page 120 STAT. 905]]
the last of the collective bargaining agreements
described in paragraph (4)(A)(ii) expires.
``(B) Special rule after expiration of agreements.--
Notwithstanding subparagraph (A)(ii), if, for any plan
year ending after the date described in subparagraph
(A)(ii), the plan actuary certifies (at the time of the
annual certification under subsection (b)(3)(A) for such
plan year) that, based on the terms of the plan and
collective bargaining agreements in effect at the time
of that annual certification, the plan is not projected
to be able to meet the requirements of paragraph (3)(A)
(without regard to paragraphs (3)(B) and (4)(B)),
paragraphs (3)(B) and (4)(B) shall continue to apply for
such year.
``(6) Updates to funding improvement plans and schedules.--
``(A) Funding improvement plan.--The plan sponsor
shall annually update the funding improvement plan and
shall file the update with the plan's annual report
under section 104 of the Employee Retirement Income
Security Act of 1974.
``(B) Schedules.--The plan sponsor shall annually
update any schedule of contribution rates provided under
this subsection to reflect the experience of the plan.
``(C) Duration of schedule.--A schedule of
contribution rates provided by the plan sponsor and
relied upon by bargaining parties in negotiating a
collective bargaining agreement shall remain in effect
for the duration of that collective bargaining
agreement.
``(7) Imposition of default schedule where failure to adopt
funding improvement plan.--
``(A) In general.--If--
``(i) a collective bargaining agreement
providing for contributions under a multiemployer
plan that was in effect at the time the plan
entered endangered status expires, and
``(ii) after receiving one or more schedules
from the plan sponsor under paragraph (1)(B), the
bargaining parties with respect to such agreement
fail to agree on changes to contribution or
benefit schedules necessary to meet the applicable
benchmarks in accordance with the funding
improvement plan,
the plan sponsor shall implement the schedule described
in paragraph (1)(B)(i)(I) beginning on the date
specified in subparagraph (B).
``(B) Date of implementation.--The date specified in
this subparagraph is the earlier of the date--
``(i) on which the Secretary of Labor
certifies that the parties are at an impasse, or
``(ii) which is 180 days after the date on
which the collective bargaining agreement
described in subparagraph (A) expires.
``(8) Funding plan adoption period.--For purposes of this
section, the term `funding plan adoption period' means the
period beginning on the date of the certification under
subsection (b)(3)(A) for the initial determination year and
ending on the day before the first day of the funding
improvement period.
[[Page 120 STAT. 906]]
``(d) Rules for Operation of Plan During Adoption and Improvement
Periods.--
``(1) Special rules for plan adoption period.--During the
funding plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with
respect to the multiemployer plan that provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation,
``(B) no amendment of the plan which increases the
liabilities of the plan by reason of any increase in
benefits, any change in the accrual of benefits, or any
change in the rate at which benefits become
nonforfeitable under the plan may be adopted unless the
amendment is required as a condition of qualification
under part I of subchapter D of chapter 1 or to comply
with other applicable law, and
``(C) in the case of a plan in seriously endangered
status, the plan sponsor shall take all reasonable
actions which are consistent with the terms of the plan
and applicable law and which are expected, based on
reasonable assumptions, to achieve--
``(i) an increase in the plan's funded
percentage, and
``(ii) postponement of an accumulated funding
deficiency for at least 1 additional plan year.
Actions under subparagraph (C) include applications for
extensions of amortization periods under section 431(d), use of
the shortfall funding method in making funding standard account
computations, amendments to the plan's benefit structure,
reductions in future benefit accruals, and other reasonable
actions consistent with the terms of the plan and applicable
law.
``(2) Compliance with funding improvement plan.--
``(A) In general.--A plan may not be amended after
the date of the adoption of a funding improvement plan
so as to be inconsistent with the funding improvement
plan.
``(B) No reduction in contributions.--A plan sponsor
may not during any funding improvement period accept a
collective bargaining agreement or participation
agreement with respect to the multiemployer plan that
provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation.
``(C) Special rules for benefit increases.--A plan
may not be amended after the date of the adoption of
[[Page 120 STAT. 907]]
a funding improvement plan so as to increase benefits,
including future benefit accruals, unless the plan
actuary certifies that the benefit increase is
consistent with the funding improvement plan and is paid
for out of contributions not required by the funding
improvement plan to meet the applicable benchmark in
accordance with the schedule contemplated in the funding
improvement plan.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in
Critical Status.--
``(1) <<NOTE: Deadlines.>> In general.--In any case in which
a multiemployer plan is in critical status for a plan year, the
plan sponsor, in accordance with this subsection--
``(A) shall adopt a rehabilitation plan not later
than 240 days following the required date for the
actuarial certification of critical status under
subsection (b)(3)(A), and
``(B) within 30 days after the adoption of the
rehabilitation plan--
``(i) shall provide to the bargaining parties
1 or more schedules showing revised benefit
structures, revised contribution structures, or
both, which, if adopted, may reasonably be
expected to enable the multiemployer plan to
emerge from critical status in accordance with the
rehabilitation plan, and
``(ii) may, if the plan sponsor deems
appropriate, prepare and provide the bargaining
parties with additional information relating to
contribution rates or benefit reductions,
alternative schedules, or other information
relevant to emerging from critical status in
accordance with the rehabilitation plan.
The schedule or schedules described in subparagraph (B)(i) shall
reflect reductions in future benefit accruals and adjustable
benefits, and increases in contributions, that the plan sponsor
determines are reasonably necessary to emerge from critical
status. One schedule shall be designated as the default schedule
and such schedule shall assume that there are no increases in
contributions under the plan other than the increases necessary
to emerge from critical status after future benefit accruals and
other benefits (other than benefits the reduction or elimination
of which are not permitted under section 411(d)(6)) have been
reduced to the maximum extent permitted by law.
``(2) Exception for years after process begins.--Paragraph
(1) shall not apply to a plan year if such year is in a
rehabilitation plan adoption period or rehabilitation period by
reason of the plan being in critical status for a preceding plan
year. For purposes of this section, such preceding plan year
shall be the initial critical year with respect to the
rehabilitation plan to which it relates.
``(3) Rehabilitation plan.--For purposes of this section--
``(A) In general.--A rehabilitation plan is a plan
which consists of--
``(i) actions, including options or a range of
options to be proposed to the bargaining parties,
formulated, based on reasonably anticipated
experience and reasonable actuarial assumptions,
to enable the plan to cease to be in critical
status by the end of the rehabilitation period and
may include reductions in plan expenditures
[[Page 120 STAT. 908]]
(including plan mergers and consolidations),
reductions in future benefit accruals or increases
in contributions, if agreed to by the bargaining
parties, or any combination of such actions, or
``(ii) if the plan sponsor determines that,
based on reasonable actuarial assumptions and upon
exhaustion of all reasonable measures, the plan
can not reasonably be expected to emerge from
critical status by the end of the rehabilitation
period, reasonable measures to emerge from
critical status at a later time or to forestall
possible insolvency (within the meaning of section
4245 of the Employee Retirement Income Security
Act of 1974).
A rehabilitation plan must provide annual standards for
meeting the requirements of such rehabilitation plan.
Such plan shall also include the schedules required to
be provided under paragraph (1)(B)(i) and if clause (ii)
applies, shall set forth the alternatives considered,
explain why the plan is not reasonably expected to
emerge from critical status by the end of the
rehabilitation period, and specify when, if ever, the
plan is expected to emerge from critical status in
accordance with the rehabilitation plan.
``(B) Updates to rehabilitation plan and
schedules.--
``(i) Rehabilitation plan.--The plan sponsor
shall annually update the rehabilitation plan and
shall file the update with the plan's annual
report under section 104 of the Employee
Retirement Income Security Act of 1974.
``(ii) Schedules.--The plan sponsor shall
annually update any schedule of contribution rates
provided under this subsection to reflect the
experience of the plan.
``(iii) Duration of schedule.--A schedule of
contribution rates provided by the plan sponsor
and relied upon by bargaining parties in
negotiating a collective bargaining agreement
shall remain in effect for the duration of that
collective bargaining agreement.
``(C) Imposition of default schedule where failure
to adopt rehabilitation plan.--
``(i) In general.--If--
``(I) a collective bargaining
agreement providing for contributions
under a multiemployer plan that was in
effect at the time the plan entered
critical status expires, and
``(II) after receiving one or more
schedules from the plan sponsor under
paragraph (1)(B), the bargaining parties
with respect to such agreement fail to
adopt a contribution or benefit
schedules with terms consistent with the
rehabilitation plan and the schedule
from the plan sponsor under paragraph
(1)(B)(i),
the plan sponsor shall implement the default
schedule described in the last sentence of
paragraph (1) beginning on the date specified in
clause (ii).
``(ii) Date of implementation.--The date
specified in this clause is the earlier of the
date--
[[Page 120 STAT. 909]]
``(I) on which the Secretary of
Labor certifies that the parties are at
an impasse, or
``(II) which is 180 days after the
date on which the collective bargaining
agreement described in clause (i)
expires.
``(4) Rehabilitation period.--For purposes of this sec-
tion--
``(A) In general.--The rehabilitation period for a
plan in critical status is the 10-year period beginning
on the first day of the first plan year of the
multiemployer plan following the earlier of--
``(i) the second anniversary of the date of
the adoption of the rehabilitation plan, or
``(ii) the expiration of the collective
bargaining agreements in effect on the date of the
due date for the actuarial certification of
critical status for the initial critical year
under subsection (a)(1) and covering, as of such
date at least 75 percent of the active
participants in such multiemployer plan.
If a plan emerges from critical status as provided under
subparagraph (B) before the end of such 10-year period,
the rehabilitation period shall end with the plan year
preceding the plan year for which the determination
under subparagraph (B) is made.
``(B) Emergence.--A plan in critical status shall
remain in such status until a plan year for which the
plan actuary certifies, in accordance with subsection
(b)(3)(A), that the plan is not projected to have an
accumulated funding deficiency for the plan year or any
of the 9 succeeding plan years, without regard to the
use of the shortfall method and taking into account any
extension of amortization periods under section 431(d).
``(5) Rehabilitation plan adoption period.--For purposes of
this section, the term `rehabilitation plan adoption period'
means the period beginning on the date of the certification
under subsection (b)(3)(A) for the initial critical year and
ending on the day before the first day of the rehabilitation
period.
``(6) Limitation on reduction in rates of future accruals.--
Any reduction in the rate of future accruals under the default
schedule described in paragraph (1)(B)(i) shall not reduce the
rate of future accruals below--
``(A) a monthly benefit (payable as a single life
annuity commencing at the participant's normal
retirement age) equal to 1 percent of the contributions
required to be made with respect to a participant, or
the equivalent standard accrual rate for a participant
or group of participants under the collective bargaining
agreements in effect as of the first day of the initial
critical year, or
``(B) if lower, the accrual rate under the plan on
such first day.
The equivalent standard accrual rate shall be determined by the
plan sponsor based on the standard or average contribution base
units which the plan sponsor determines to be representative for
active participants and such other factors as the plan sponsor
determines to be relevant. Nothing in this paragraph shall be
construed as limiting the ability of the plan sponsor to prepare
and provide the bargaining parties with alternative
[[Page 120 STAT. 910]]
schedules to the default schedule that established lower or
higher accrual and contribution rates than the rates otherwise
described in this paragraph.
``(7) Automatic employer surcharge.--
``(A) Imposition of surcharge.--Each employer
otherwise obligated to make a contribution for the
initial critical year shall be obligated to pay to the
plan for such year a surcharge equal to 5 percent of the
contribution otherwise required under the applicable
collective bargaining agreement (or other agreement
pursuant to which the employer contributes). For each
succeeding plan year in which the plan is in critical
status for a consecutive period of years beginning with
the initial critical year, the surcharge shall be 10
percent of the contribution otherwise so required.
``(B) Enforcement of surcharge.--The surcharges
under subparagraph (A) shall be due and payable on the
same schedule as the contributions on which the
surcharges 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.
``(C) Surcharge to terminate upon collective
bargaining agreement renegotiation.--
The <<NOTE: Termination date.>> surcharge under this
paragraph shall cease to be effective with respect to
employees covered by a collective bargaining agreement
(or other agreement pursuant to which the employer
contributes), beginning on the effective date of a
collective bargaining agreement (or other such
agreement) that includes terms consistent with a
schedule presented by the plan sponsor under paragraph
(1)(B)(i), as modified under subparagraph (B) of
paragraph (3).
``(D) Surcharge not to apply until employer receives
notice.--The <<NOTE: Effective date.>> surcharge under
this paragraph shall not apply to an employer until 30
days after the employer has been notified by the plan
sponsor that the plan is in critical status and that the
surcharge is in effect.
``(E) Surcharge not to generate increased benefit
accruals.--Notwithstanding any provision of a plan to
the contrary, the amount of any surcharge under this
paragraph shall not be the basis for any benefit accrual
under the plan.
``(8) Benefit adjustments.--
``(A) Adjustable benefits.--
``(i) In general.--Notwithstanding section
204(g), the plan sponsor shall, subject to the
notice requirement under subparagraph (C), make
any reductions to adjustable benefits which the
plan sponsor deems appropriate, based upon the
outcome of collective bargaining over the schedule
or schedules provided under paragraph (1)(B)(i).
``(ii) Exception for retirees.--Except in the
case of adjustable benefits described in clause
(iv)(III), the plan sponsor of a plan in critical
status shall not reduce adjustable benefits of any
participant or beneficiary whose benefit
commencement date is before the date on which the
plan provides notice to the participant
[[Page 120 STAT. 911]]
or beneficiary under subsection (b)(3)(D) for the
initial critical year.
``(iii) Plan sponsor flexibility.--The plan
sponsor 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 by the plan sponsor based on the
plan's then current overall funding status.
``(iv) Adjustable benefit defined.--For
purposes of this paragraph, the term `adjustable
benefit' means--
``(I) benefits, rights, and features
under the plan, including post-
retirement death benefits, 60-month
guarantees, disability benefits not yet
in pay status, and similar benefits,
``(II) any early retirement benefit
or retirement-type subsidy (within the
meaning of section 411(d)(6)(B)(i)) and
any benefit payment option (other than
the qualified joint and survivor
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 initial critical year because the
increases were adopted (or, if later,
took effect) less than 60 months before
such first day.
``(B) Normal retirement benefits protected.--Except
as provided in subparagraph (A)(iv)(III), 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.
``(C) Notice requirements.--
``(i) In general.--No reduction may be made to
adjustable benefits under subparagraph (A) unless
notice of such reduction has been given at least
30 days before the general effective date of such
reduction for all participants and beneficiaries
to--
``(I) plan participants and
beneficiaries,
``(II) each employer who has an
obligation to contribute (within the
meaning of section 4212(a)) under the
plan, and
``(III) each employee organization
which, for purposes of collective
bargaining, represents plan participants
employed by such an employer.
``(ii) Content of notice.--The notice under
clause (i) shall contain--
``(I) sufficient information to
enable participants and beneficiaries to
understand the effect of any reduction
on their benefits, including an estimate
(on an annual or monthly basis) of any
affected adjustable benefit that a
participant or beneficiary would
otherwise have been eligible for as of
the general effective date described in
clause (i), and
[[Page 120 STAT. 912]]
``(II) information as to the rights
and remedies of plan participants and
beneficiaries as well as how to contact
the Department of Labor for further
information and assistance where
appropriate.
``(iii) Form and manner.--Any notice under
clause (i)--
``(I) shall be provided in a form
and manner prescribed in regulations of
the Secretary of Labor,
``(II) shall be written in a manner
so as to be understood by the average
plan participant, and
``(III) may be provided in written,
electronic, or other appropriate form to
the extent such form is reasonably
accessible to persons to whom the notice
is required to be provided.
The Secretary of Labor shall in the regulations
prescribed under subclause (I) establish a model
notice that a plan sponsor may use to meet the
requirements of this subparagraph.
``(9) Adjustments disregarded in withdrawal liability
determination.--
``(A) Benefit reductions.--Any benefit reductions
under this subsection shall be disregarded in
determining a plan's unfunded vested benefits for
purposes of determining an employer's withdrawal
liability under section 4201 of the Employee Retirement
Income Security Act of 1974.
``(B) Surcharges.--Any surcharges under paragraph
(7) shall be disregarded in determining an employer's
withdrawal liability under section 4211 of such Act,
except for purposes of determining the unfunded vested
benefits attributable to an employer under section
4211(c)(4) of such Act or a comparable method approved
under section 4211(c)(5) of such Act.
``(C) Simplified calculations.--
The <<NOTE: Applicability.>> Pension Benefit Guaranty
Corporation shall prescribe simplified methods for the
application of this paragraph in determining withdrawal
liability.
``(f) Rules for Operation of Plan During Adoption and Rehabilitation
Period.--
``(1) Compliance with rehabilitation plan.--
``(A) In general.--A plan may not be amended after
the date of the adoption of a rehabilitation plan under
subsection (e) so as to be inconsistent with the
rehabilitation plan.
``(B) Special rules for benefit increases.--A plan
may not be amended after the date of the adoption of a
rehabilitation plan under subsection (e) so as to
increase benefits, including future benefit accruals,
unless the plan actuary certifies that such increase is
paid for out of additional contributions not
contemplated by the rehabilitation plan, and, after
taking into account the benefit increase, the
multiemployer plan still is reasonably expected to
emerge from critical status by the end of the
rehabilitation period on the schedule contemplated in
the rehabilitation plan.
``(2) Restriction on lump sums and similar benefits.--
[[Page 120 STAT. 913]]
``(A) In general.--Effective <<NOTE: Effective
date.>> on the date the notice of certification of the
plan's critical status for the initial critical year
under subsection (b)(3)(D) is sent, and notwithstanding
section 411(d)(6), the plan shall not pay--
``(i) any payment, in excess of the monthly
amount paid under a single life annuity (plus any
social security supplements described in the last
sentence of section 411(b)(1)(A)),
``(ii) any payment for the purchase of an
irrevocable commitment from an insurer to pay
benefits, and
``(iii) any other payment specified by the
Secretary by regulations.
``(B) Exception.--Subparagraph (A) shall not apply
to a benefit which under section 411(a)(11) may be
immediately distributed without the consent of the
participant or to any makeup payment in the case of a
retroactive annuity starting date or any similar payment
of benefits owed with respect to a prior period.
``(3) Adjustments disregarded in withdrawal liability
determination.--Any benefit reductions under this subsection
shall be disregarded in determining a plan's unfunded vested
benefits for purposes of determining an employer's withdrawal
liability under section 4201 of the Employee Retirement Income
Security Act of 1974.
``(4) Special rules for plan adoption period.--During the
rehabilitation plan adoption period--
``(A) the plan sponsor may not accept a collective
bargaining agreement or participation agreement with
respect to the multiemployer plan that provides for--
``(i) a reduction in the level of
contributions for any participants,
``(ii) a suspension of contributions with
respect to any period of service, or
``(iii) any new direct or indirect exclusion
of younger or newly hired employees from plan
participation, and
``(B) no amendment of the plan which increases the
liabilities of the plan by reason of any increase in
benefits, any change in the accrual of benefits, or any
change in the rate at which benefits become
nonforfeitable under the plan may be adopted unless the
amendment is required as a condition of qualification
under part I of subchapter D of chapter 1 or to comply
with other applicable law.
``(g) Expedited Resolution of Plan Sponsor Decisions.--
If, <<NOTE: Deadline.>> within 60 days of the due date for adoption of a
funding improvement plan or a rehabilitation plan under subsection (e),
the plan sponsor of a plan in endangered status or a plan in critical
status has not agreed on a funding improvement plan or rehabilitation
plan, then any member of the board or group that constitutes the plan
sponsor may require that the plan sponsor enter into an expedited
dispute resolution procedure for the development and adoption of a
funding improvement plan or rehabilitation plan.
``(h) Nonbargained Participation.--
``(1) Both bargained and nonbargained employee-
participants.--In the case of an employer that contributes to a
multiemployer plan with respect to both employees who are
covered by one or more collective bargaining agreements
[[Page 120 STAT. 914]]
and employees who are not so covered, if the plan is in
endangered status or in critical status, benefits of and
contributions for the nonbargained employees, including
surcharges on those contributions, shall be determined as if
those nonbargained employees were covered under the first to
expire of the employer's collective bargaining agreements in
effect when the plan entered endangered or critical status.
``(2) Nonbargained employees only.--In the case of an
employer that contributes to a multiemployer plan only with
respect to employees who are not covered by a collective
bargaining agreement, this section shall be applied as if the
employer were the bargaining party, and its participation
agreement with the plan were a collective bargaining agreement
with a term ending on the first day of the plan year beginning
after the employer is provided the schedule or schedules
described in subsections (c) and (e).
``(i) Definitions; Actuarial Method.--For purposes of this section--
``(1) Bargaining party.--The term `bargaining party' means--
``(A)(i) except as provided in clause (ii), an
employer who has an obligation to contribute under the
plan; or
``(ii) in the case of a plan described under section
404(c), or a continuation of such a plan, the
association of employers that is the employer settlor of
the plan; and
``(B) an employee organization which, for purposes
of collective bargaining, represents plan participants
employed by an employer who has an obligation to
contribute under the plan.
``(2) Funded percentage.--The term `funded percentage' means
the percentage equal to a fraction--
``(A) the numerator of which is the value of the
plan's assets, as determined under section 431(c)(2),
and
``(B) the denominator of which is the accrued
liability of the plan, determined using actuarial
assumptions described in section 431(c)(3).
``(3) Accumulated funding deficiency.--The term `accumulated
funding deficiency' has the meaning given such term in section
412(a).
``(4) Active participant.--The term `active participant'
means, in connection with a multiemployer plan, a participant
who is in covered service under the plan.
``(5) Inactive participant.--The term `inactive participant'
means, in connection with a multiemployer plan, a participant,
or the beneficiary or alternate payee of a participant, who--
``(A) is not in covered service under the plan, and
``(B) is in pay status under the plan or has a
nonforfeitable right to benefits under the plan.
``(6) Pay status.--A person is in pay status under a
multiemployer plan if--
``(A) at any time during the current plan year, such
person is a participant or beneficiary under the plan
and is paid an early, late, normal, or disability
retirement benefit under the plan (or a death benefit
under the plan related to a retirement benefit), or
[[Page 120 STAT. 915]]
``(B) to the extent provided in regulations of the
Secretary, such person is entitled to such a benefit
under the plan.
``(7) Obligation to contribute.--The term `obligation to
contribute' has the meaning given such term under section
4212(a) of the Employee Retirement Income Security Act of 1974.
``(8) Actuarial method.--Notwithstanding any other provision
of this section, the actuary's determinations with respect to a
plan's normal cost, actuarial accrued liability, and
improvements in a plan's funded percentage under this section
shall be based upon the unit credit funding method (whether or
not that method is used for the plan's actuarial valuation).
``(9) Plan sponsor.--In the case of a plan described under
section 404(c), or a continuation of such a plan, the term `plan
sponsor' means the bargaining parties described under paragraph
(1).
``(10) Benefit commencement date.--The term `benefit
commencement date' means the annuity starting date (or in the
case of a retroactive annuity starting date, the date on which
benefit payments begin).''
(b) Excise Taxes on Failures Relating to Multiemployer Plans in
Endangered or Critical Status.--
(1) In general.--Section 4971 of the Internal Revenue Code
of 1986 <<NOTE: 26 USC 4971.>> is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following:
``(g) Multiemployer Plans in Endangered or Critical Status.--
``(1) In general.--Except as provided in this subsection--
``(A) no tax shall be imposed under this section for
a taxable year with respect to a multiemployer plan if,
for the plan years ending with or within the taxable
year, the plan is in critical status pursuant to section
432, and
``(B) any tax imposed under this subsection for a
taxable year with respect to a multiemployer plan if,
for the plan years ending with or within the taxable
year, the plan is in endangered status pursuant to
section 432 shall be in addition to any other tax
imposed by this section.
``(2) Failure to comply with funding improvement or
rehabilitation plan.--
``(A) In general.--If any funding improvement plan
or rehabilitation plan in effect under section 432 with
respect to a multiemployer plan requires an employer to
make a contribution to the plan, there is hereby imposed
a tax on each failure of the employer to make the
required contribution within the time required under
such plan.
``(B) Amount of tax.--The amount of the tax imposed
by subparagraph (A) shall be equal to the amount of the
required contribution the employer failed to make in a
timely manner.
``(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.
``(3) Failure to meet requirements for plans in endangered
or critical status.--If--
[[Page 120 STAT. 916]]
``(A) a plan which is in seriously endangered status
fails to meet the applicable benchmarks by the end of
the funding improvement period, or
``(B) a plan which is in critical status either--
``(i) fails to meet the requirements of
section 432(e) by the end of the rehabilitation
period, or
``(ii) has received a certification under
section 432(b)(3)(A)(ii) for 3 consecutive plan
years that the plan is not making the scheduled
progress in meeting its requirements under the
rehabilitation plan,
the plan shall be treated as having an accumulated
funding deficiency for purposes of this section for the
last plan year in such funding improvement,
rehabilitation, or 3-consecutive year period (and each
succeeding plan year until such benchmarks or
requirements are met) in an amount equal to the greater
of the amount of the contributions necessary to meet
such benchmarks or requirements or the amount of such
accumulated funding deficiency without regard to this
paragraph.
``(4) Failure to adopt rehabilitation plan.--
``(A) In general.--In the case of a multiemployer
plan which is in critical status, there is hereby
imposed a tax on the failure of such plan to adopt a
rehabilitation plan within the time prescribed under
section 432.
``(B) Amount of tax.--The amount of the tax imposed
under subparagraph (A) with respect to any plan sponsor
for any taxable year shall be the greater of--
``(i) the amount of tax imposed under
subsection (a) for the taxable year (determined
without regard to this subsection), or
``(ii) the amount equal to $1,100 multiplied
by the number of days during the taxable year
which are included in the period beginning on the
first day of the 240-day period described in
section 432(e)(1)(A) 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.
``(5) Waiver.--In the case of a failure described in
paragraph (2) or (3) which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all of the tax
imposed by this subsection. For purposes of this paragraph,
reasonable cause includes unanticipated and material market
fluctuations, the loss of a significant contributing employer,
or other factors to the extent that the payment of tax under
this subsection with respect to the failure would be excessive
or otherwise inequitable relative to the failure involved.
``(6) Terms used in section 432.--For purposes of this
subsection, any term used in this subsection which is also used
in section 432 shall have the meaning given such term by section
432.''.
[[Page 120 STAT. 917]]
(2) Controlled groups.--Section 4971(c)(2) <<NOTE: 26 USC
4971.>> of such Code is amended--
(A) by striking ``In the case of a plan other than a
multiemployer plan, if the'' and inserting ``If an'',
and
(B) by striking ``or (f)'' and inserting ``(f), or
(g)''.
(c) No Additional Contribution Required.--Section 412(b) of the
Internal Revenue Code of 1986, <<NOTE: 26 USC 412.>> as amended by this
Act, is amended by adding at the end the following new paragraph:
``(3) Multiemployer plans in critical status.--Paragraph (1)
shall not apply in the case of a multiemployer plan for any plan
year in which the plan is in critical status pursuant to section
432. This paragraph shall only apply if the plan adopts a
rehabilitation plan in accordance with section 432(e) and
complies with such rehabilitation plan (and any modifications of
the plan).''.
(d) 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.''.
(e) <<NOTE: 26 USC 412 note.>> Effective Dates.--
(1) In general.--The amendments made by this section shall
apply with respect to plan years beginning after 2007.
(2) Special rule for certain notices.--In any case in which
a plan's actuary certifies that it is reasonably expected that a
multiemployer plan will be in critical status under section
305(b)(3) of the Employee Retirement Income Security Act of
1974, as added by this section, with respect to the first plan
year beginning after 2007, the notice required under
subparagraph (D) of such section may be provided at any time
after the date of enactment, so long as it is provided on or
before the last date for providing the notice under such
subparagraph.
(3) Special rule for certain restored benefits.--In the case
of a multiemployer plan--
(A) with respect to which benefits were reduced
pursuant to a plan amendment adopted on or after January
1, 2002, and before June 30, 2005, and
(B) which, pursuant to the plan document, the trust
agreement, or a formal written communication from the
plan sponsor to participants provided before June 30,
2005, provided for the restoration of such benefits,
the amendments made by this section shall not apply to such
benefit restorations to the extent that any restriction on the
providing or accrual of such benefits would otherwise apply by
reason of such amendments.
SEC. 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
[[Page 120 STAT. 918]]
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) <<NOTE: 26 USC 418E note.>> Effective Date.--The amendments made
by this section shall apply with respect to the determinations made in
plan years beginning after 2007.
SEC. 214. <<NOTE: 26 USC 4971 note.>> EXEMPTION FROM EXCISE TAXES FOR
CERTAIN MULTIEMPLOYER PENSION PLANS.
(a) In General.--Notwithstanding any other provision of law, no tax
shall be imposed under subsection (a) or (b) of section 4971 of the
Internal Revenue Code of 1986 with respect to any accumulated funding
deficiency of a plan described in subsection (b) of this section for any
taxable year beginning before the earlier of--
(1) the taxable year in which the plan sponsor adopts a
rehabilitation plan under section 305(e) of the Employee
Retirement Income Security Act of 1974 and section 432(e) of
such Code (as added by this Act); or
(2) the taxable year that contains January 1, 2009.
(b) Plan Described.--A plan described under this subsection is a
multiemployer pension plan--
(1) with less than 100 participants;
(2) with respect to which the contributing employers
participated in a Federal fishery capacity reduction program;
(3) with respect to which employers under the plan
participated in the Northeast Fisheries Assistance Program; and
(4) with respect to which the annual normal cost is less
than $100,000 and the plan is experiencing a funding deficiency
on the date of enactment of this Act.
Subtitle C--Sunset of Additional Funding Rules
SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES.
(a) Report.--Not later than December 31, 2011, the Secretary of
Labor, the Secretary of the Treasury, and the Executive Director of the
Pension Benefit Guaranty Corporation shall conduct a study of the effect
of the amendments made by this subtitle on the operation and funding
status of multiemployer plans and shall report the results of such
study, including any recommendations for legislation, to the Congress.
(b) Matters Included in Study.--The study required under subsection
(a) shall include--
(1) the effect of funding difficulties, funding rules in
effect before the date of the enactment of this Act, and the
amendments made by this subtitle on small businesses
participating in multiemployer plans,
(2) the effect on the financial status of small employers
of--
(A) funding targets set in funding improvement and
rehabilitation plans and associated contribution
increases,
(B) funding deficiencies,
(C) excise taxes,
(D) withdrawal liability,
[[Page 120 STAT. 919]]
(E) the possibility of alternative schedules and
procedures for financially troubled employers, and
(F) other aspects of the multiemployer system, and
(3) the role of the multiemployer pension plan system in
helping small employers to offer pension benefits.
(c) <<NOTE: 26 USC 412 note.>> Sunset.--
(1) In general.--Except as provided in this subsection,
notwithstanding any other provision of this Act, the provisions
of, and the amendments made by, sections 201(b), 202, and 212
shall not apply to plan years beginning after December 31, 2014.
(2) Funding improvement and rehabilitation plans.--If a plan
is operating under a funding improvement or rehabilitation plan
under section 305 of such Act or 432 of such Code for its last
year beginning before January 1, 2015, such plan shall continue
to operate under such funding improvement or rehabilitation plan
during any period after December 31, 2014, such funding
improvement or rehabilitation plan is in effect and all
provisions of such Act or Code relating to the operation of such
funding improvement or rehabilitation plan shall continue in
effect during such period.
TITLE III--INTEREST RATE ASSUMPTIONS
SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.
(a) Amendments of ERISA.--
(1) Determination of range.--Subclause (II) of section
302(b)(5)(B)(ii) of the Employee Retirement Income Security Act
of 1974 <<NOTE: 29 USC 1082.>> is amended--
(A) by striking ``2006'' and inserting ``2008'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, 2006, and 2007''.
(2) Determination of current liability.--Subclause (IV) of
section 302(d)(7)(C)(i) of such Act is amended--
(A) by striking ``or 2005'' and inserting ``, 2005,
2006, or 2007'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, 2006, and 2007''.
(3) PBGC premium rate.--Subclause (V) of section
4006(a)(3)(E)(iii) of such Act <<NOTE: 29 USC 1306.>> is amended
by striking ``2006'' and inserting ``2008''.
(b) Amendments of Internal Revenue Code.--
(1) Determination of range.--Subclause (II) of section
412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 <<NOTE: 26
USC 412.>> is amended--
(A) by striking ``2006'' and inserting ``2008'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, 2006, and 2007''.
(2) Determination of current liability.--Subclause (IV) of
section 412(l)(7)(C)(i) of such Code is amended--
(A) by striking ``or 2005'' and inserting ``, 2005,
2006, or 2007'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, 2006, and 2007''.
[[Page 120 STAT. 920]]
(c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) of the
Pension Funding Equity Act of 2004 <<NOTE: 29 USC 1082.>> is amended by
striking ``2006'' and inserting ``2008''.
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 subparagraph (A) of section 303(h)(3) (without regard
to subparagraph (C) or (D) of such section).
``(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) were applied by
substituting the average yields for the month described
in clause (ii) for the average yields for the 24-month
period described in such section,
``(II) section 303(h)(2)(G)(i)(II) were applied by
substituting `section 205(g)(3)(B)(iii)(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 The applicable percentage is:
beginning in:
2008............................ 20 percent
2009............................ 40 percent
2010............................ 60 percent
2011............................ 80 percent.''.
(b) Amendment to Internal Revenue Code of 1986.--Paragraph (3) of
section 417(e) of the Internal Revenue Code of <<NOTE: 26 USC
417.>> 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
[[Page 120 STAT. 921]]
Secretary, based on the mortality table specified for
the plan year under subparagraph (A) of section
430(h)(3) (without regard to subparagraph (C) or (D) of
such section).
``(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) were applied by
substituting the average yields for the month
described in clause (ii) for the average yields
for the 24-month period described in such section,
``(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 The applicable percentage is:
beginning in:
2008............................ 20 percent
2009............................ 40 percent
2010............................ 60 percent
2011............................ 80 percent.''.
(c) <<NOTE: 26 USC 417 note.>> Effective Date.--The amendments made
by this section shall apply with respect to plan years beginning after
December 31, 2007.
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 <<NOTE: 26 USC 415.>> 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 greatest
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) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
by subsection (a) shall apply to distributions made in years beginning
after December 31, 2005.
[[Page 120 STAT. 922]]
TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS
SEC. 401. PBGC PREMIUMS.
(a) Variable-Rate Premiums.--
(1) Conforming amendments related to funding rules for
single-employer plans.--Section 4006(a)(3)(E) of the Employee
Retirement Income and Security Act of 1974 (29 U.S.C.
1306(a)(3)(E)) is amended by striking clauses (iii) and (iv) and
inserting the following:
``(iii) For purposes of clause (ii), the term `unfunded vested
benefits' means, for a plan year, the excess (if any) of--
``(I) the funding target of the plan as determined under
section 303(d) for the plan year by only taking into account
vested benefits and by using the interest rate described in
clause (iv), over
``(II) the fair market value of plan assets for the plan
year which are held by the plan on the valuation date.
``(iv) The interest rate used in valuing benefits for purposes of
subclause (I) of clause (iii) shall be equal to the first, second, or
third segment rate for the month preceding the month in which the plan
year begins, which would be determined under section 303(h)(2)(C) if
section 303(h)(2)(D) were applied by using the monthly yields for the
month preceding the month in which the plan year begins on investment
grade corporate bonds with varying maturities and in the top 3 quality
levels rather than the average of such yields for a 24-month period.''.
(2) <<NOTE: 29 USC 1306 note.>> Effective date.--The
amendments made by paragraph (1) shall apply with respect to
plan years beginning after 2007.
(b) Termination Premiums.--
(1) Repeal of sunset provision.--Subparagraph (E) of section
4006(a)(7) of such Act is repealed.
(2) Technical correction.--
(A) In general.--Section 4006(a)(7)(C)(ii) of such
Act is amended by striking ``subparagraph (B)(i)(I)''
and inserting ``subparagraph (B)''.
(B) <<NOTE: 29 USC 1306 note.>> Effective date.--The
amendment made by this paragraph shall take effect as if
included in the provision of the Deficit Reduction Act
of 2005 to which it relates.
SEC. 402. <<NOTE: 26 USC 430 note.>> SPECIAL FUNDING RULES FOR CERTAIN
PLANS MAINTAINED BY COMMERCIAL AIRLINES.
(a) In General.--The plan sponsor of an eligible plan may elect to
either--
(1) have the rules of subsection (b) apply, or
(2) have section 303 of the Employee Retirement Income
Security Act of 1974 and section 430 of the Internal Revenue
Code of 1986 applied to its first taxable year beginning in 2008
by amortizing the shortfall amortization base for such taxable
year over a period of 10 plan years (rather than 7 plan years)
beginning with such plan year.
(b) Alternative Funding Schedule.--
(1) In general.--If an election is made under subsection
(a)(1) to have this subsection apply to an eligible plan and the
requirements of paragraphs (2) and (3) are met with respect to
the plan--
[[Page 120 STAT. 923]]
(A) in the case of any applicable plan year
beginning before January 1, 2008, the plan shall not
have an accumulated funding deficiency for purposes of
section 302 of the Employee Retirement Income Security
Act of 1974 and sections 412 and 4971 of the Internal
Revenue Code of 1986 if contributions to the plan for
the plan year are not less than the minimum required
contribution determined under subsection (e) for the
plan for the plan year, and
(B) in the case of any applicable plan year
beginning on or after January 1, 2008, the minimum
required contribution determined under sections 303 of
such Act and 430 of such Code shall, for purposes of
sections 302 and 303 of such Act and sections 412, 430,
and 4971 of such Code, be equal to the minimum required
contribution determined under subsection (e) for the
plan for the plan year.
(2) Accrual restrictions.--
(A) In general.--The requirements of this paragraph
are met if, effective as of the first day of the first
applicable plan year and at all times thereafter while
an election under this section is in effect, the plan
provides that--
(i) the accrued benefit, any death or
disability benefit, and any social security
supplement described in the last sentence of
section 411(a)(9) of such Code and section
204(b)(1)(G) of such Act, of each participant are
frozen at the amount of such benefit or supplement
immediately before such first day, and
(ii) all other benefits under the plan are
eliminated,
but only to the extent the freezing or elimination of
such benefits would have been permitted under section
411(d)(6) of such Code and section 204(g) of such Act if
they had been implemented by a plan amendment adopted
immediately before such first day.
(B) Increases in section 415 limits.--If a plan
provides that an accrued benefit of a participant which
has been subject to any limitation under section 415 of
such Code will be increased if such limitation is
increased, the plan shall not be treated as meeting the
requirements of this section unless, effective as of the
first day of the first applicable plan year (or, if
later, the date of the enactment of this Act) and at all
times thereafter while an election under this section is
in effect, the plan provides that any such increase
shall not take effect. A plan shall not fail to meet the
requirements of section 411(d)(6) of such Code and
section 204(g) of such Act solely because the plan is
amended to meet the requirements of this subparagraph.
(3) Restriction on applicable benefit increases.--
(A) In general.--The requirements of this paragraph
are met if no applicable benefit increase takes effect
at any time during the period beginning on July 26,
2005, and ending on the day before the first day of the
first applicable plan year.
(B) Applicable benefit increase.--For purposes of
this paragraph, the term ``applicable benefit increase''
means, with respect to any plan year, any increase in
[[Page 120 STAT. 924]]
liabilities of the plan by plan amendment (or otherwise
provided in regulations provided by the Secretary)
which, but for this paragraph, would occur during the
plan year by reason of--
(i) any increase in benefits,
(ii) any change in the accrual of benefits, or
(iii) any change in the rate at which benefits
become nonforfeitable under the plan.
(4) Exception for imputed disability service.--Paragraphs
(2) and (3) shall not apply to any accrual or increase with
respect to imputed service provided to a participant during any
period of the participant's disability occurring on or after the
effective date of the plan amendment providing the restrictions
under paragraph (2) (or on or after July 26, 2005, in the case
of the restrictions under paragraph (3)) if the partici- pant--
(A) was receiving disability benefits as of such
date, or
(B) was receiving sick pay and subsequently
determined to be eligible for disability benefits as of
such date.
(c) Definitions.--For purposes of this section--
(1) Eligible plan.--The term ``eligible plan'' means a
defined benefit plan (other than a multiemployer plan) to which
sections 302 of such Act and 412 of such Code applies which is
sponsored by an employer--
(A) which is a commercial airline passenger airline,
or
(B) the principal business of which is providing
catering services to a commercial passenger airline.
(2) Applicable plan year.--The term ``applicable plan year''
means each plan year to which the election under subsection
(a)(1) applies under subsection (d)(1)(A).
(d) Elections and Related Terms.--
(1) <<NOTE: Deadlines.>> Years for which election made.--
(A) Alternative funding schedule.--If an election
under subsection (a)(1) was made with respect to an
eligible plan, the plan sponsor may select either a plan
year beginning in 2006 or a plan year beginning in 2007
as the first plan year to which such election applies.
The election shall apply to such plan year and all
subsequent years. The election shall be made--
(i) not later than December 31, 2006, in the
case of an election for a plan year beginning in
2006, or
(ii) not later than December 31, 2007, in the
case of an election for a plan year beginning in
2007.
(B) 10 year amortization.--An election under
subsection (a)(2) shall be made not later than December
31, 2007.
(C) Election of new plan year for alternative
funding schedule.--In the case of an election under
subsection (a)(1), the plan sponsor may specify a new
plan year in such election and the plan year of the plan
may be changed to such new plan year without the
approval of the Secretary of the Treasury.
(2) Manner of election.--A plan sponsor shall make any
election under subsection (a) in such manner as the Secretary
[[Page 120 STAT. 925]]
of the Treasury may prescribe. Such election, once made, may be
revoked only with the consent of such Secretary.
(e) Minimum Required Contribution.--In the case of an eligible plan
with respect to which an election is made under subsection (a)(1)--
(1) In general.--In the case of any applicable plan year
during the amortization period, the minimum required
contribution shall be the amount necessary to amortize the
unfunded liability of the plan, determined as of the first day
of the plan year, in equal annual installments (until fully
amortized) over the remainder of the amortization period. Such
amount shall be separately determined for each applicable plan
year.
(2) Years after amortization period.--In the case of any
plan year beginning after the end of the amortization period,
section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of
such Code shall apply to such plan, but the prefunding balance
and funding standard carryover balance as of the first day of
the first of such years under section 303(f) of such Act and
section 430(f) of such Code shall be zero.
(3) Definitions.--For purposes of this section--
(A) Unfunded liability.--The term ``unfunded
liability'' means the unfunded accrued liability under
the plan, determined under the unit credit funding
method.
(B) Amortization period.--The term ``amortization
period'' means the 17-plan year period beginning with
the first applicable plan year.
(4) Other rules.--In determining the minimum required
contribution and amortization amount under this subsection--
(A) <<NOTE: Applicability.>> the provisions of
section 302(c)(3) of such Act and section 412(c)(3) of
such Code, as in effect before the date of enactment of
this section, shall apply,
(B) a rate of interest of 8.85 percent shall be used
for all calculations requiring an interest rate, and
(C) the value of plan assets shall be equal to their
fair market value.
(5) Special rule for certain plan spinoffs.--For purposes of
subsection (b), if, with respect to any eligible plan to which
this subsection applies--
(A) any applicable plan year includes the date of
the enactment of this Act,
(B) a plan was spun off from the eligible plan
during the plan year but before such date of enactment,
the minimum required contribution under paragraph (1) for the
eligible plan for such applicable plan year shall be an
aggregate amount determined as if the plans were a single plan
for that plan year (based on the full 12-month plan year in
effect prior to the spin-off). The employer shall designate the
allocation of such aggregate amount between such plans for the
applicable plan year.
(f) Special Rules for Certain Balances and Waivers.--In the case of
an eligible plan with respect to which an election is made under
subsection (a)(1)--
(1) Funding standard account and credit balances.--Any
charge or credit in the funding standard account under section
302 of such Act or section 412 of such Code, and any prefunding
balance or funding standard carryover balance
[[Page 120 STAT. 926]]
under section 303 of such Act or section 430 of such Code, as of
the day before the first day of the first applicable plan year,
shall be reduced to zero.
(2) Waived funding deficiencies.--Any waived funding
deficiency under sections 302 and 303 of such Act or section 412
of such Code, as in effect before the date of enactment of this
section, shall be deemed satisfied as of the first day of the
first applicable plan year and the amount of such waived funding
deficiency shall be taken into account in determining the plan's
unfunded liability under subsection (e)(3)(A). In the case of a
plan amendment adopted to satisfy the requirements of subsection
(b)(2), the plan shall not be deemed to violate section 304(b)
of such Act or section 412(f) of such Code, as so in effect, by
reason of such amendment or any increase in benefits provided to
such plan's participants under a separate plan that is a defined
contribution plan or a multiemployer plan.
(g) Other Rules for Plans Making Election Under This Section.--
(1) Successor plans to certain plans.--If--
(A) an election under paragraph (1) or (2) of
subsection (a) is in effect with respect to any eligible
plan, and
(B) the eligible plan is maintained by an employer
that establishes or maintains 1 or more other defined
benefit plans (other than any multiemployer plan), and
such other plans in combination provide benefit accruals
to any substantial number of successor employees,
the Secretary of the Treasury may, in the Secretary's
discretion, determine that any trust of which any other such
plan is a part does not constitute a qualified trust under
section 401(a) of the Internal Revenue Code of 1986 unless all
benefit obligations of the eligible plan have been satisfied.
For purposes of this paragraph, the term ``successor employee''
means any employee who is or was covered by the eligible plan
and any employees who perform substantially the same type of
work with respect to the same business operations as an employee
covered by such eligible plan.
(2) Special rules for terminations.--
(A) PBGC liability limited.--Section 4022 of the
Employee Retirement Income Security Act of 1974, as
amended by this Act, <<NOTE: 29 USC 1322.>> is amended
by adding at the end the following new subsection:
``(h) Special Rule for Plans Electing Certain Funding
Requirements.--If any plan makes an election under section 402(a)(1) of
the Pension Protection Act of 2006 and is terminated effective before
the end of the 10-year period beginning on the first day of the first
applicable plan year--
``(1) this section shall be applied--
``(A) by treating the first day of the first
applicable plan year as the termination date of the
plan, and
``(B) by determining the amount of guaranteed
benefits on the basis of plan assets and liabilities as
of such assumed termination date, and
``(2) notwithstanding section 4044(a), plan assets shall
first be allocated to pay the amount, if any, by which--
``(A) the amount of guaranteed benefits under this
section (determined without regard to paragraph (1) and
on
[[Page 120 STAT. 927]]
the basis of plan assets and liabilities as of the
actual date of plan termination), exceeds
``(B) the amount determined under paragraph (1).''.
(B) Termination premium.--In applying section
4006(a)(7)(A) of the Employee Retirement Income Security
Act of 1974 to an eligible plan during any period in
which an election under subsection (a)(1) is in effect--
(i) ``$2,500'' shall be substituted for
``$1,250'' in such section if such plan terminates
during the 5-year period beginning on the first
day of the first applicable plan year with respect
to such plan, and
(ii) <<NOTE: Applicability.>> such section
shall be applied without regard to subparagraph
(B) of section 8101(d)(2) of the Deficit Reduction
Act of 2005 (relating to special rule for plans
terminated in bankruptcy).
The substitution described in clause (i) shall not apply
with respect to any plan if the Secretary of Labor
determines that such plan terminated as a result of
extraordinary circumstances such as a terrorist attack
or other similar event.
(3) Limitation on deductions under certain plans.--Section
404(a)(7)(C)(iv) of the Internal Revenue Code of 1986, as added
by this Act, shall not apply with respect to any taxable year of
a plan sponsor of an eligible plan if any applicable plan year
with respect to such plan ends with or within such taxable year.
(4) Notice.--In <<NOTE: Deadline.>> the case of a plan
amendment adopted in order to comply with this section, any
notice required under section 204(h) of such Act or section
4980F(e) of such Code shall be provided within 15 days of the
effective date of such plan amendment. This subsection shall not
apply to any plan unless such plan is maintained pursuant to one
or more collective bargaining agreements between employee
representatives and 1 or more employers.
(h) Exclusion of Certain Employees From Minimum Coverage
Requirements.--
(1) In general.--Section 410(b)(3) of such Code <<NOTE: 26
USC 410.>> is amended by striking the last sentence and
inserting the following: ``For purposes of subparagraph (B),
management pilots who are not represented in accordance with
title II of the Railway Labor Act shall be treated as covered by
a collective bargaining agreement described in such subparagraph
if the management pilots manage the flight operations of air
pilots who are so represented and the management pilots are,
pursuant to the terms of the agreement, included in the group of
employees benefitting under the trust described in such
subparagraph. Subparagraph (B) shall not apply in the case of a
plan which provides contributions or benefits for employees
whose principal duties are not customarily performed aboard an
aircraft in flight (other than management pilots described in
the preceding sentence).''
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning before, on, or after the date of
the enactment of this Act.
(i) Extension of Special Rule for Additional Funding Requirements.--
In the case of an employer which is a commercial passenger airline,
section 302(d)(12) of the Employee Retirement Income Security Act of
1974 and section 412(l)(12) of the Internal
[[Page 120 STAT. 928]]
Revenue Code of 1986, as in effect before the date of the enactment of
this Act, shall each be applied--
(1) by substituting ``December 28, 2007'' for ``December 28,
2005'' in subparagraph (D)(i) thereof, and
(2) without regard to subparagraph (D)(ii).
(j) Effective Date.--Except as otherwise provided in this section,
the provisions of and amendments made by this section shall apply to
plan years ending after the date of the enactment of this Act.
SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND OTHER BENEFITS.
(a) In General.--Section 4022(b) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)) is amended by adding at the end
the following:
``(8) If an unpredictable contingent event benefit (as
defined in section 206(g)(1)) is payable by reason of the
occurrence of any event, this section shall be applied as if a
plan amendment had been adopted on the date such event
occurred.''.
(b) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendment made
by this section shall apply to benefits that become payable as a result
of an event which occurs after July 26, 2005.
SEC. 404. RULES RELATING TO BANKRUPTCY OF EMPLOYER.
(a) Guarantee.--Section 4022 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322) is amended by adding at the end
the following:
``(g) Bankruptcy Filing Substituted for Termination Date.--If a
contributing sponsor of a plan has filed or has had filed against such
person a petition seeking liquidation or reorganization in a case under
title 11, United States Code, or under any similar Federal law or law of
a State or political subdivision, and the case has not been dismissed as
of the termination date of the plan, then this section shall be applied
by treating the date such petition was filed as the termination date of
the plan.''.
(b) Allocation of Assets Among Priority Groups in Bankruptcy
Proceedings.--Section 4044 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1344) is amended by adding at the end the
following:
``(e) Bankruptcy Filing Substituted for Termination Date.--If a
contributing sponsor of a plan has filed or has had filed against such
person a petition seeking liquidation or reorganization in a case under
title 11, United States Code, or under any similar Federal law or law of
a State or political subdivision, and the case has not been dismissed as
of the termination date of the plan, then subsection (a)(3) shall be
applied by treating the date such petition was filed as the termination
date of the plan.''.
(c) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendments made
this section shall apply with respect to proceedings initiated under
title 11, United States Code, or under any similar Federal law or law of
a State or political subdivision, on or after the date that is 30 days
after the date of enactment of this Act.
SEC. 405. PBGC PREMIUMS FOR SMALL PLANS.
(a) Small Plans.--Paragraph (3) of section 4006(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)) is amended--
[[Page 120 STAT. 929]]
(1) by striking ``The additional'' in subparagraph (E)(i)
and inserting ``Except as provided in subparagraph (H), the
additional'', and
(2) by inserting after subparagraph (G) the following new
subparagraph:
``(H)(i) In the case of an employer who has 25 or fewer employees on
the first day of the plan year, the additional premium determined under
subparagraph (E) for each participant shall not exceed $5 multiplied by
the number of participants in the plan as of the close of the preceding
plan year.
``(ii) For purposes of clause (i), whether an employer has 25 or
fewer employees on the first day of the plan year is determined by
taking into consideration all of the employees of all members of the
contributing sponsor's controlled group. In the case of a plan
maintained by two or more contributing sponsors, the employees of all
contributing sponsors and their controlled groups shall be aggregated
for purposes of determining whether the 25-or-fewer-employees limitation
has been satisfied.''
(b) <<NOTE: 29 USC 1306 note.>> Effective Dates.--The amendment made
by this section shall apply to plan years beginning after December 31,
2006.
SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT
REFUNDS.
(a) In General.--Section 4007(b) of the Employment Retirement Income
Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
(1) by striking ``(b)'' and inserting ``(b)(1)'', and
(2) by inserting at the end the following new paragraph:
``(2) <<NOTE: Regulations.>> The corporation is authorized to pay,
subject to regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a designated payor.
Interest under this paragraph shall be calculated at the same rate and
in the same manner as interest is calculated for underpayments under
paragraph (1).''
(b) <<NOTE: 29 USC 1307 note.>> Effective Date.--The amendments made
by subsection (a) shall apply to interest accruing for periods beginning
not earlier than the date of the enactment of this Act.
SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.
(a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1322(b)(5)) is amended to read as follows:
``(5)(A) For purposes of this paragraph, the term `majority owner'
means an individual who, at any time during the 60-month period ending
on the date the determination is being made--
``(i) owns the entire interest in an unincorporated trade or
business,
``(ii) in the case of a partnership, is a partner who owns,
directly or indirectly, 50 percent or more of either the capital
interest or the profits interest in such partnership, or
``(iii) in the case of a corporation, owns, directly or
indirectly, 50 percent or more in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 (other than
paragraph (3)(C) thereof) shall apply, including the application of such
rules under section 414(c) of such Code.
[[Page 120 STAT. 930]]
``(B) In the case of a participant who is a majority owner, the
amount of benefits guaranteed under this section shall equal the product
of--
``(i) a fraction (not to exceed 1) the numerator of which is
the number of years from the later of the effective date or the
adoption date of the plan to the termination date, and the
denominator of which is 10, and
``(ii) the amount of benefits that would be guaranteed under
this section if the participant were not a majority owner.''
(b) Modification of Allocation of Assets.--
(1) Section 4044(a)(4)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by
striking ``section 4022(b)(5)'' and inserting ``section
4022(b)(5)(B)''.
(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is
amended--
(A) by striking ``(5)'' in paragraph (2) and
inserting ``(4), (5),'', and
(B) by redesignating paragraphs (3) through (6) as
paragraphs (4) through (7), respectively, and by
inserting after paragraph (2) the following new
paragraph:
``(3) If assets available for allocation under paragraph (4)
of subsection (a) are insufficient to satisfy in full the
benefits of all individuals who are described in that paragraph,
the assets shall be allocated first to benefits described in
subparagraph (A) of that paragraph. Any remaining assets shall
then be allocated to benefits described in subparagraph (B) of
that paragraph. If assets allocated to such subparagraph (B) are
insufficient to satisfy in full the benefits described in that
subparagraph, the assets shall be allocated pro rata among
individuals on the basis of the present value (as of the
termination date) of their respective benefits described in that
subparagraph.''.
(c) Conforming Amendments.--
(1) Section 4021 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1321) is amended--
(A) in subsection (b)(9), by striking ``as defined
in section 4022(b)(6)'', and
(B) by adding at the end the following new
subsection:
``(d) For purposes of subsection (b)(9), the term `substantial
owner' means an individual who, at any time during the 60-month period
ending on the date the determination is being made--
``(1) owns the entire interest in an unincorporated trade or
business,
``(2) in the case of a partnership, is a partner who owns,
directly or indirectly, more than 10 percent of either the
capital interest or the profits interest in such partnership, or
``(3) in the case of a corporation, owns, directly or
indirectly, more than 10 percent in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 (other than
paragraph (3)(C) thereof) shall apply, including the application of such
rules under section 414(c) of such Code.''.
(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is
amended by striking ``section 4022(b)(6)'' and inserting
``section 4021(d)''.
[[Page 120 STAT. 931]]
(d) <<NOTE: 29 USC 1321 note.>> Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan termi-
nations--
(A) under section 4041(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1341(c)) with
respect to which notices of intent to terminate are
provided under section 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) after December 31, 2005, and
(B) under section 4042 of such Act (29 U.S.C. 1342)
with respect to which notices of determination are
provided under such section after such date.
(2) Conforming amendments.--The <<NOTE: Effective
date.>> amendments made by subsection (c) shall take effect on
January 1, 2006.
SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BENEFITS ATTRIBUTABLE TO
RECOVERIES FROM EMPLOYERS.
(a) Modification of Average Recovery Percentage of Outstanding
Amount of Benefit Liabilities Payable by Corporation to Participants and
Beneficiaries.--Section 4022(c)(3)(B)(ii) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1322(c)(3)(B)(ii)) is amended to
read as follows:
``(ii) notices of intent to terminate were
provided (or in the case of a termination by the
corporation, a notice of determination under
section 4042 was issued) during the 5-Federal
fiscal year period ending with the third fiscal
year preceding the fiscal year in which occurs the
date of the notice of intent to terminate (or the
notice of determination under section 4042) with
respect to the plan termination for which the
recovery ratio is being determined.''
(b) Valuation of Section 4062(c) Liability for Determining Amounts
Payable by Corporation to Participants and Beneficiaries.--
(1) Single-employer plan benefits guaranteed.--Section
4022(c)(3)(A) of the Employee Retirement Income Security Act of
1974 <<NOTE: 29 USC 1322.>> (29 U.S.C. 13) is amended to read
as follows:
``(A) In general.--Except as provided in
subparagraph (C), the term `recovery ratio' means the
ratio which--
``(i) the sum of the values of all recoveries
under section 4062, 4063, or 4064, determined by
the corporation in connection with plan
terminations described under subparagraph (B),
bears to
``(ii) the sum of all unfunded benefit
liabilities under such plans as of the termination
date in connection with any such prior
termination.''.
(2) Allocation of assets.--Section 4044 of the Employee
Retirement Income Security Act of 1974 <<NOTE: 29 USC 1344.>>
(29 U.S.C. 1362) is amended by adding at the end the following
new subsection:
``(e) Valuation of Section 4062(c) Liability for Determining Amounts
Payable by Corporation to Participants and Beneficiaries.--
``(1) In general.--In the case of a terminated plan, the
value of the recovery of liability under section 4062(c)
allocable as a plan asset under this section for purposes of
determining the amount of benefits payable by the corporation
shall be determined by multiplying--
[[Page 120 STAT. 932]]
``(A) the amount of liability under section 4062(c)
as of the termination date of the plan, by
``(B) the applicable section 4062(c) recovery ratio.
``(2) Section 4062(c) recovery ratio.--For purposes of this
subsection--
``(A) In general.--Except as provided in
subparagraph (C), the term `section 4062(c) recovery
ratio' means the ratio which--
``(i) the sum of the values of all recoveries
under section 4062(c) determined by the
corporation in connection with plan terminations
described under subparagraph (B), bears to
``(ii) the sum of all the amounts of liability
under section 4062(c) with respect to such plans
as of the termination date in connection with any
such prior termination.
``(B) Prior terminations.--A plan termination
described in this subparagraph is a termination with
respect to which--
``(i) the value of recoveries under section
4062(c) have been determined by the corporation,
and
``(ii) notices of intent to terminate were
provided (or in the case of a termination by the
corporation, a notice of determination under
section 4042 was issued) during the 5-Federal
fiscal year period ending with the third fiscal
year preceding the fiscal year in which occurs the
date of the notice of intent to terminate (or the
notice of determination under section 4042) with
respect to the plan termination for which the
recovery ratio is being determined.
``(C) Exception.--In the case of a terminated plan
with respect to which the outstanding amount of benefit
liabilities exceeds $20,000,000, the term `section
4062(c) recovery ratio' means, with respect to the
termination of such plan, the ratio of--
``(i) the value of the recoveries on behalf of
the plan under section 4062(c), to
``(ii) the amount of the liability owed under
section 4062(c) as of the date of plan termination
to the trustee appointed under section 4042 (b) or
(c).
``(3) Subsection not to apply.--This subsection shall not
apply with respect to the determination of--
``(A) whether the amount of outstanding benefit
liabilities exceeds $20,000,000, or
``(B) the amount of any liability under section 4062
to the corporation or the trustee appointed under
section 4042 (b) or (c).
``(4) Determinations.--Determinations under this subsection
shall be made by the corporation. Such determinations shall be
binding unless shown by clear and convincing evidence to be
unreasonable.''.
(c) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendments made
by this section shall apply for any termination for which notices of
intent to terminate are provided (or in the case of a termination by the
corporation, a notice of determination under section 4042 under the
Employee Retirement Income Security Act of 1974 is issued) on or after
[[Page 120 STAT. 933]]
the date which is 30 days after the date of enactment of this section.
SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR CHANGE IN
MEMBERSHIP OF A CONTROLLED GROUP.
(a) In General.--Section 4041(b) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1341(b)) is amended by adding at the end
the following new paragraph:
``(5) Special rule for certain plans where cessation or
change in membership of a controlled group.--
``(A) In general.--Except as provided in
subparagraph (B), if--
``(i) there is transaction or series of
transactions which result in a person ceasing to
be a member of a controlled group, and
``(ii) such person immediately before the
transaction or series of transactions maintained a
single-employer plan which is a defined benefit
plan which is fully funded,
then the interest rate used in determining whether the
plan is sufficient for benefit liabilities or to
otherwise assess plan liabilities for purposes of this
subsection or section 4042(a)(4) shall be not less than
the interest rate used in determining whether the plan
is fully funded.
``(B) Limitations.--Subparagraph (A) shall not apply
to any transaction or series of transactions unless--
``(i) any employer maintaining the plan
immediately before or after such transaction or
series of transactions--
``(I) has an outstanding senior
unsecured debt instrument which is rated
investment grade by each of the
nationally recognized statistical rating
organizations for corporate bonds that
has issued a credit rating for such
instrument, or
``(II) if no such debt instrument of
such employer has been rated by such an
organization but 1 or more of such
organizations has made an issuer credit
rating for such employer, all such
organizations which have so rated the
employer have rated such employer
investment grade, and
``(ii) the employer maintaining the plan after
the transaction or series of transactions employs
at least 20 percent of the employees located in
the United States who were employed by such
employer immediately before the transaction or
series of transactions.
``(C) Fully funded.--For purposes of subparagraph
(A), a plan shall be treated as fully funded with
respect to any transaction or series of transactions
if--
``(i) in the case of a transaction or series
of transactions which occur in a plan year
beginning before January 1, 2008, the funded
current liability percentage determined under
section 302(d) for the plan year is at least 100
percent, and
``(ii) in the case of a transaction or series
of transactions which occur in a plan year
beginning on or
[[Page 120 STAT. 934]]
after such date, the funding target attainment
percentage determined under section 303 is, as of
the valuation date for such plan year, at least
100 percent.
``(D) 2 year limitation.--Subparagraph (A) shall not
apply to any transaction or series of transactions if
the plan referred to in subparagraph (A)(ii) is
terminated under section 4041(c) or 4042 after the close
of the 2-year period beginning on the date on which the
first such transaction occurs.''.
(b) <<NOTE: 29 USC 1341 note.>> Effective Date.--The amendments made
by this section shall apply to any transaction or series of transactions
occurring on and after the date of the enactment of this Act.
SEC. 410. MISSING PARTICIPANTS.
(a) In General.--Section 4050 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating
subsection (c) as subsection (e) and by inserting after subsection (b)
the following new subsections:
``(c) Multiemployer Plans.--The <<NOTE: Regulations.>> corporation
shall prescribe rules similar to the rules in subsection (a) for
multiemployer plans covered by this title that terminate under section
4041A.
``(d) Plans Not Otherwise Subject to Title.--
``(1) Transfer to corporation.--The plan administrator of a
plan described in paragraph (4) may elect to transfer a missing
participant's benefits to the corporation upon termination of
the plan.
``(2) Information to the corporation.--To the extent
provided in regulations, the plan administrator of a plan
described in paragraph (4) shall, upon termination of the plan,
provide the corporation information with respect to benefits of
a missing participant if the plan transfers such benefits--
``(A) to the corporation, or
``(B) to an entity other than the corporation or a
plan described in paragraph (4)(B)(ii).
``(3) Payment by the corporation.--If benefits of a missing
participant were transferred to the corporation under paragraph
(1), the corporation shall, upon location of the participant or
beneficiary, pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit) either--
``(A) in a single sum (plus interest), or
``(B) in such other form as is specified in
regulations of the corporation.
``(4) Plans described.--A plan is described in this
paragraph if--
``(A) the plan is a pension plan (within the meaning
of section 3(2))--
``(i) to which the provisions of this section
do not apply (without regard to this subsection),
and
``(ii) which is not a plan described in
paragraphs (2) through (11) of section 4021(b),
and
``(B) at the time the assets are to be distributed
upon termination, the plan--
``(i) has missing participants, and
``(ii) has not provided for the transfer of
assets to pay the benefits of all missing
participants to
[[Page 120 STAT. 935]]
another pension plan (within the meaning of
section 3(2)).
``(5) Certain provisions not to apply.--Subsections (a)(1)
and (a)(3) shall not apply to a plan described in paragraph
(4).''.
(b) Conforming Amendments.--Section 206(f) of such Act (29 U.S.C.
1056(f)) is amended--
(1) by striking ``title IV'' and inserting ``section 4050'';
and
(2) by striking ``the plan shall provide that,''.
(c) Effective Date.--The <<NOTE: Regulations. 29 USC 1056
note.>> amendments made by this section shall apply to distributions
made after final regulations implementing subsections (c) and (d) of
section 4050 of the Employee Retirement Income Security Act of 1974 (as
added by subsection (a)), respectively, are prescribed.
SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION.
(a) In General.--Title IV of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1301 et seq.) is amended--
(1) by striking the second sentence of section
4002(a) <<NOTE: 29 USC 1302.>> and inserting the following: ``In
carrying out its functions under this title, the corporation
shall be administered by a Director, who shall be appointed by
the President, by and with the advice and consent of the Senate,
and who shall act in accordance with the policies established by
the board.''; and
(2) in section 4003(b), <<NOTE: 29 USC 1303.>> by--
(A) striking ``under this title, any member'' and
inserting ``under this title, the Director, any
member''; and
(B) striking ``designated by the chairman'' and
inserting ``designated by the Director or chairman''.
(b) Compensation of Director.--Section 5314 of title 5, United
States Code, is amended by adding at the end the following new item:
``Director, Pension Benefit Guaranty Corporation.''.
(c) Jurisdiction of Nomination.--
(1) In general.--The Committee on Finance of the Senate and
the Committee on Health, Education, Labor, and Pensions of the
Senate shall have joint jurisdiction over the nomination of a
person nominated by the President to fill the position of
Director of the Pension Benefit Guaranty Corporation under
section 4002 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1302) (as amended by this Act), and if one
committee votes to order reported such a nomination, the other
shall report within 30 calendar days, or be automatically
discharged.
(2) Rulemaking of the senate.--This subsection is enacted by
Congress--
(A) as an exercise of rulemaking power of the
Senate, and as such it is deemed a part of the rules of
the Senate, but applicable only with respect to the
procedure to be followed in the Senate in the case of a
nomination described in such sentence, and it supersedes
other rules only to the extent that it is inconsistent
with such rules; and
(B) with full recognition of the constitutional
right of the Senate to change the rules (so far as
relating to the procedure of the Senate) at any time, in
the same
[[Page 120 STAT. 936]]
manner and to the same extent as in the case of any
other rule of the Senate.
(d) <<NOTE: Termination date. 29 USC 1302 note.>> Transition.--The
term of the individual serving as Executive Director of the Pension
Benefit Guaranty Corporation on the date of enactment of this Act shall
expire on such date of enactment. Such individual, or any other
individual, may serve as interim Director of such Corporation until an
individual is appointed as Director of such Corporation under section
4002 of the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1302) (as amended by this Act).
SEC. 412. INCLUSION OF INFORMATION IN THE PBGC ANNUAL REPORT.
Section 4008 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1308) is amended by--
(1) striking ``As soon as practicable'' and inserting ``(a)
As soon as practicable''; and
(2) adding at the end the following:
``(b) The report under subsection (a) shall include--
``(1) a summary of the Pension Insurance Modeling System
microsimulation model, including the specific simulation
parameters, specific initial values, temporal parameters, and
policy parameters used to calculate the financial statements for
the corporation;
``(2) a comparison of--
``(A) the average return on investments earned with
respect to assets invested by the corporation for the
year to which the report relates; and
``(B) an amount equal to 60 percent of the average
return on investment for such year in the Standard &
Poor's 500 Index, plus 40 percent of the average return
on investment for such year in the Lehman Aggregate Bond
Index (or in a similar fixed income index); and
``(3) a statement regarding the deficit or surplus for such
year that the corporation would have had if the corporation had
earned the return described in paragraph (2)(B) with respect to
assets invested by the corporation.''.
TITLE V--DISCLOSURE
SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.
(a) In General.--Section 101(f) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021(f)) is amended to read as follows:
``(f) Defined Benefit Plan Funding Notices.--
``(1) In general.--The administrator of a defined benefit
plan to which title IV applies shall for each plan year provide
a plan funding notice to the Pension Benefit Guaranty
Corporation, to each plan participant and beneficiary, to each
labor organization representing such participants or
beneficiaries, and, in the case of a multiemployer plan, to each
employer that has an obligation to contribute to the plan.
``(2) Information contained in notices.--
``(A) Identifying information.--Each notice required
under paragraph (1) shall contain identifying
information, including the name of the plan, the address
and phone number of the plan administrator and the
plan's principal
[[Page 120 STAT. 937]]
administrative officer, each plan sponsor's employer
identification number, and the plan number of the plan.
``(B) Specific information.--A plan funding notice
under paragraph (1) shall include--
``(i)(I) in the case of a single-employer
plan, a statement as to whether the plan's funding
target attainment percentage (as defined in
section 303(d)(2)) for the plan year to which the
notice relates, and for the 2 preceding plan
years, is at least 100 percent (and, if not, the
actual percentages), or
``(II) in the case of a multiemployer plan, a
statement as to whether the plan's funded
percentage (as defined in section 305(i)) for the
plan year to which the notice relates, and for the
2 preceding plan years, is at least 100 percent
(and, if not, the actual percentages),
``(ii)(I) in the case of a single-employer
plan, a statement of--
``(aa) the total assets (separately
stating the prefunding balance and the
funding standard carryover balance) and
liabilities of the plan, determined in
the same manner as under section 303,
for the plan year for which the latest
annual report filed under section 104(a)
was filed and for the 2 preceding plan
years, as reported in the annual report
for each such plan year, and
``(bb) the value of the plan's
assets and liabilities for the plan year
to which the notice relates as of the
last day of the plan year to which the
notice relates determined using the
asset valuation under subclause (II) of
section 4006(a)(3)(E)(iii) and the
interest rate under section
4006(a)(3)(E)(iv), and
``(II) in the case of a multiemployer plan, a
statement of the value of the plan's assets and
liabilities for the plan year to which the notice
relates as the last day of such plan year and the
preceding 2 plan years,
``(iii) a statement of the number of
participants who are--
``(I) retired or separated from
service and are receiving benefits,
``(II) retired or separated
participants entitled to future
benefits, and
``(III) active participants under
the plan,
``(iv) a statement setting forth the funding
policy of the plan and the asset allocation of
investments under the plan (expressed as
percentages of total assets) as of the end of the
plan year to which the notice relates,
``(v) in the case of a multiemployer plan,
whether the plan was in critical or endangered
status under section 305 for such plan year and,
if so--
``(I) a statement describing how a
person may obtain a copy of the plan's
funding improvement or rehabilitation
plan, as appropriate, adopted under
section 305 and the actuarial and
financial
[[Page 120 STAT. 938]]
data that demonstrate any action taken
by the plan toward fiscal improvement,
and
``(II) 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,
``(vi) in the case of any plan amendment,
scheduled benefit increase or reduction, or other
known event taking effect in the current plan year
and having a material effect on plan liabilities
or assets for the year (as defined in regulations
by the Secretary), an explanation of the
amendment, schedule increase or reduction, or
event, and a projection to the end of such plan
year of the effect of the amendment, scheduled
increase or reduction, or event on plan
liabilities,
``(vii)(I) in the case of a single-employer
plan, a summary of the rules governing termination
of single-employer plans under subtitle C of title
IV, or
``(II) in the case of a multiemployer plan, a
summary of the rules governing reorganization or
insolvency, including the limitations on benefit
payments,
``(viii) a general description of the benefits
under the plan which are eligible to be guaranteed
by the Pension Benefit Guaranty Corporation, along
with an explanation of the limitations on the
guarantee and the circumstances under which such
limitations apply,
``(ix) a statement that a person may obtain a
copy of the annual report of the plan filed under
section 104(a) upon request, through the Internet
website of the Department of Labor, or through an
Intranet website maintained by the applicable plan
sponsor (or plan administrator on behalf of the
plan sponsor), and
``(x) if applicable, a statement that each
contributing sponsor, and each member of the
contributing sponsor's controlled group, of the
single-employer plan was required to provide the
information under section 4010 for the plan year
to which the notice relates.
``(C) Other information.--Each notice under
paragraph (1) shall include--
``(i) <<NOTE: Reports.>> in the case of a
multiemployer plan, a statement that the plan
administrator shall provide, upon written request,
to any labor organization representing plan
participants and beneficiaries and any employer
that has an obligation to contribute to the plan,
a copy of the annual report filed with the
Secretary under section 104(a), and
``(ii) any additional information which the
plan administrator elects to include to the extent
not inconsistent with regulations prescribed by
the Secretary.
``(3) Time for providing notice.--
``(A) In general.--Any notice under paragraph (1)
shall be provided not later than 120 days after the end
of the plan year to which the notice relates.
``(B) Exception for small plans.--In the case of a
small plan (as such term is used under section
303(g)(2)(B)) any notice under paragraph (1) shall be
provided upon filing of the annual report under section
104(a).
[[Page 120 STAT. 939]]
``(4) Form and manner.--Any notice under paragraph (1)--
``(A) <<NOTE: Regulations.>> shall be provided in a
form and manner prescribed in regulations of the
Secretary,
``(B) shall be written in a manner so as to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, or
other appropriate form to the extent such form is
reasonably accessible to persons to whom the notice is
required to be provided.''.
(b) Repeal of Notice to Participants of Funding Status.--
(1) In general.--Title IV of such Act (29 U.S.C. 1301 et
seq.) is amended by striking section <<NOTE: 29 USC
1311.>> 4011.
(2) Clerical amendment.--Section 1 of such Act is amended in
the table of contents by striking the item relating to section
4011.
(c) <<NOTE: Deadline. 29 USC 1021 note.>> Model Notice.--Not later
than 1 year after the date of the enactment of this Act, the Secretary
of Labor shall publish a model version of the notice required by section
101(f) of the Employee Retirement Income Security Act of 1974. The
Secretary of Labor may promulgate any interim final rules as the
Secretary determines appropriate to carry out the provisions of this
subsection.
(d) <<NOTE: 29 USC 1021 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2007, except
that the amendment made by subsection (b) shall apply to plan
years beginning after December 31, 2006.
(2) Transition rule.--Any requirement under section 101(f)
of the Employee Retirement Income Security Act of 1974 (as
amended by this section) to report the funding target attainment
percentage or funded percentage of a plan with respect to any
plan year beginning before January 1, 2008, shall be treated as
met if the plan reports--
(A) in the case of a plan year beginning in 2006,
the funded current liability percentage (as defined in
section 302(d)(8) of such Act) of the plan for such plan
year, and
(B) in the case of a plan year beginning in 2007,
the funding target attainment percentage or funded
percentage as determined using such methods of
estimation as the Secretary of the Treasury may provide.
SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.
(a) Financial Information With Respect to Multiemployer Plans.--
(1) In general.--Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021), as amended by
section 103, is amended--
(A) by redesignating subsection (k) as subsection
(l); and
(B) by inserting after subsection (j) the following
new subsection:
``(k) Multiemployer Plan Information Made Available on Request.--
``(1) <<NOTE: Reports.>> In general.--Each administrator of
a multiemployer plan shall, upon written request, furnish to any
plan participant
[[Page 120 STAT. 940]]
or beneficiary, employee representative, or any employer that
has an obligation to contribute to the plan--
``(A) a copy of any periodic actuarial report
(including any sensitivity testing) received by the plan
for any plan year which has been in the plan's
possession for at least 30 days,
``(B) a copy of any quarterly, semi-annual, or
annual financial report prepared for the plan by any
plan investment manager or advisor or other fiduciary
which has been in the plan's possession for at least 30
days, and
``(C) a copy of any application filed with the
Secretary of the Treasury requesting an extension under
section 304 of this Act or section 431(d) of the
Internal Revenue Code of 1986 and the determination of
such Secretary pursuant to such application.
``(2) Compliance.--Information required to be provided under
paragraph (1)--
``(A) <<NOTE: Deadline. Regulations.>> shall be
provided to the requesting participant, beneficiary, or
employer within 30 days after the request in a form and
manner prescribed in regulations of the Secretary,
``(B) may be provided in written, electronic, or
other appropriate form to the extent such form is
reasonably accessible to persons to whom the information
is required to be provided, and
``(C) shall not--
``(i) include any individually identifiable
information regarding any plan participant,
beneficiary, employee, fiduciary, or contributing
employer, or
``(ii) reveal any proprietary information
regarding the plan, any contributing employer, or
entity providing services to the plan.
``(3) Limitations.--In no case shall a participant,
beneficiary, or employer be entitled under this subsection to
receive more than one copy of any report or application
described in paragraph (1) during any one 12-month period. The
administrator may make a reasonable charge to cover copying,
mailing, and other costs of furnishing copies of information
pursuant to paragraph (1). The Secretary may by regulations
prescribe the maximum amount which will constitute a reasonable
charge under the preceding sentence.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by striking ``section 101(j)'' and
inserting ``subsection (j) or (k) of section 101''.
(3) <<NOTE: 29 USC 1021 note.>> Regulations.--The Secretary
shall prescribe regulations under section 101(k)(2) of the
Employee Retirement Income Security Act of 1974 (as added by
paragraph (1)) not later than 1 year after the date of the
enactment of this Act.
(b) Notice of Potential Withdrawal Liability to Multiemployer
Plans.--
(1) In general.--Section 101 of such Act (as amended by
subsection (a)) <<NOTE: 29 USC 1021.>> is amended--
(A) by redesignating subsection (l) as subsection
(m); and
(B) by inserting after subsection (k) the following
new subsection:
``(l) Notice of Potential Withdrawal Liability.--
[[Page 120 STAT. 941]]
``(1) In general.--The plan sponsor or administrator of a
multiemployer plan shall, upon written request, furnish to any
employer who has an obligation to contribute to the plan a
notice of--
``(A) the estimated amount which would be the amount
of such employer's withdrawal liability under part 1 of
subtitle E of title IV if such employer withdrew on the
last day of the plan year preceding the date of the
request, and
``(B) an explanation of how such estimated liability
amount was determined, including the actuarial
assumptions and methods used to determine the value of
the plan liabilities and assets, the data regarding
employer contributions, unfunded vested benefits, annual
changes in the plan's unfunded vested benefits, and the
application of any relevant limitations on the estimated
withdrawal liability.
For purposes of subparagraph (B), the term `employer
contribution' means, in connection with a participant, a
contribution made by an employer as an employer of such
participant.
``(2) Compliance.--Any notice required to be provided under
paragraph (1)--
``(A) <<NOTE: Regulations.>> shall be provided in a
form and manner prescribed in regulations of the
Secretary to the requesting employer within--
``(i) <<NOTE: Deadline.>> 180 days after the
request, or
``(ii) subject to regulations of the
Secretary, such longer time as may be necessary in
the case of a plan that determines withdrawal
liability based on any method described under
paragraph (4) or (5) of section 4211(c); and
``(B) may be provided in written, electronic, or
other appropriate form to the extent such form is
reasonably accessible to employers to whom the
information is required to be provided.
``(3) Limitations.--In no case shall an employer be entitled
under this subsection to receive more than one notice described
in paragraph (1) during any one 12-month period. The person
required to provide such notice may make a reasonable charge to
cover copying, mailing, and other costs of furnishing such
notice pursuant to paragraph (1). The Secretary may by
regulations prescribe the maximum amount which will constitute a
reasonable charge under the preceding sentence.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by striking ``section 101(j) or (k)'' and
inserting ``subsection (j), (k), or (l) of section 101''.
(c) Notice of Amendment Reducing Future Accruals.--
(1) Amendment of erisa.--Section 204(h)(1) of such Act (29
U.S.C. 1054(h)(1)) is amended by inserting at the end before the
period the following: ``and to each employer who has an
obligation to contribute to the plan''.
(2) Amendment of internal revenue code.--Section 4980F(e)(1)
of such Code <<NOTE: 26 USC 4980F.>> is amended by adding at the
end before the period the following: ``and to each employer who
has an obligation to contribute to the plan''.
(d) <<NOTE: 26 USC 4980F note.>> Effective Date.--The amendments
made by this section shall apply to plan years beginning after December
31, 2007.
[[Page 120 STAT. 942]]
SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.
(a) Additional Annual Reporting Requirements With Respect to Defined
Benefit Plans.--
(1) In general.--Section 103 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1023) is amended--
(A) in subsection (a)(1)(B), by striking
``subsections (d) and (e)'' and inserting ``subsections
(d), (e), and (f)''; and
(B) by adding at the end the following new
subsection:
``(f) Additional Information With Respect to Defined Benefit
Plans.--
``(1) Liabilities under 2 or more plans.--
``(A) In general.--In any case in which any
liabilities to participants or their beneficiaries under
a defined benefit plan as of the end of a plan year
consist (in whole or in part) of liabilities to such
participants and beneficiaries under 2 or more pension
plans as of immediately before such plan year, an annual
report under this section for such plan year shall
include the funded percentage of each of such 2 or more
pension plans as of the last day of such plan year and
the funded percentage of the plan with respect to which
the annual report is filed as of the last day of such
plan year.
``(B) Funded percentage.--For purposes of this
paragraph, the term `funded percentage'--
``(i) in the case of a single-employer plan,
means the funding target attainment percentage, as
defined in section 303(d)(2), and
``(ii) in the case of a multiemployer plan,
has the meaning given such term in section
305(i)(2).
``(2) Additional information for multiemployer plans.--With
respect to any defined benefit plan which is a multiemployer
plan, an annual report under this section for a plan year shall
include, in addition to the information required under paragraph
(1), the following, as of the end of the plan year to which the
report relates:
``(A) The number of employers obligated to
contribute to the plan.
``(B) A list of the employers that contributed more
than 5 percent of the total contributions to the plan
during such plan year.
``(C) The number of participants under the plan on
whose behalf no contributions were made by an employer
as an employer of the participant for such plan year and
for each of the 2 preceding plan years.
``(D) The ratios of--
``(i) the number of participants under the
plan on whose behalf no employer had an obligation
to make an employer contribution during the plan
year, to
``(ii) the number of participants under the
plan on whose behalf no employer had an obligation
to make an employer contribution during each of
the 2 preceding plan years.
``(E) Whether the plan received an amortization
extension under section 304(d) of this Act or section
431(d) of the Internal Revenue Code of 1986 for such
plan year
[[Page 120 STAT. 943]]
and, if so, the amount of the difference between the
minimum required contribution for the year and the
minimum required contribution which would have been
required without regard to the extension, and the period
of such extension.
``(F) Whether the plan used the shortfall funding
method (as such term is used in section 305) for such
plan year and, if so, the amount of the difference
between the minimum required contribution for the year
and the minimum required contribution which would have
been required without regard to the use of such method,
and the period of use of such method.
``(G) Whether the plan was in critical or endangered
status under section 305 for such plan year, and if so,
a summary of any funding improvement or rehabilitation
plan (or modification thereto) adopted during the plan
year, and the funded percentage of the plan.
``(H) The number of employers that withdrew from the
plan during the preceding plan year and the aggregate
amount of withdrawal liability assessed, or estimated to
be assessed, against such withdrawn employers.
``(I) In the case of a multiemployer plan that has
merged with another plan or to which assets and
liabilities have been transferred, the actuarial
valuation of the assets and liabilities of each affected
plan during the year preceding the effective date of the
merger or transfer, based upon the most recent data
available as of the day before the first day of the plan
year, or other valuation method performed under
standards and procedures as the Secretary may prescribe
by regulation.''.
(2) <<NOTE: Deadline. 29 USC 1023 note.>> Guidance by
secretary of labor.--Not later than 1 year after the date of
enactment of this Act, the Secretary of Labor shall publish
guidance to assist multiemployer defined benefit plans to--
(A) identify and enumerate plan participants for
whom there is no employer with an obligation to make an
employer contribution under the plan; and
(B) report such information under section
103(f)(2)(D) of the Employee Retirement Income Security
Act of 1974 (as added by this section).
(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) Repeal of Summary Annual Report Requirement for Defined Benefit
Plans.--
(1) In general.--Section 104(b)(3) of such Act (29 U.S.C.
1024(b)(3)) is amended by inserting ``(other than an
administrator of a defined benefit plan to which the
requirements of section 103(f) applies)'' after ``the
administrators''.
[[Page 120 STAT. 944]]
(2) Conforming amendment.--Section 101(a)(2) of such Act (29
U.S.C. 1021(a)(2)) is amended by inserting ``subsection (f)
and'' before ``sections 104(b)(3) and 105(a) and (c)''.
(d) Furnishing Summary Plan Information to Employers and Employee
Representatives of Multiemployer Plans.--Section 104 of such Act (29
U.S.C. 1024) is amended--
(1) in the header, by striking ``participants'' and
inserting ``participants and certain employers'';
(2) by redesignating subsection (d) as subsection (e); and
(3) by inserting after subsection (c) the following:
``(d) Furnishing Summary Plan Information to Employers and Employee
Representatives of Multiemployer Plans.--
``(1) In general.--With <<NOTE: Deadline.>> respect to a
multiemployer plan subject to this section, within 30 days after
the due date under subsection (a)(1) for the filing of the
annual report for the fiscal year of the plan, the
administrators shall furnish to each employee organization and
to each employer with an obligation to contribute to the plan a
report that contains--
``(A) a description of the contribution schedules
and benefit formulas under the plan, and any
modification to such schedules and formulas, during such
plan year;
``(B) the number of employers obligated to
contribute to the plan;
``(C) a list of the employers that contributed more
than 5 percent of the total contributions to the plan
during such plan year;
``(D) the number of participants under the plan on
whose behalf no contributions were made by an employer
as an employer of the participant for such plan year and
for each of the 2 preceding plan years;
``(E) whether the plan was in critical or endangered
status under section 305 for such plan year and, if so,
include--
``(i) a list of the actions taken by the plan
to improve its funding status; and
``(ii) a statement describing how a person may
obtain a copy of the plan's improvement or
rehabilitation plan, as applicable, adopted under
section 305 and the actuarial and financial data
that demonstrate any action taken by the plan
toward fiscal improvement;
``(F) the number of employers that withdrew from the
plan during the preceding plan year and the aggregate
amount of withdrawal liability assessed, or estimated to
be assessed, against such withdrawn employers, as
reported on the annual report for the plan year to which
the report under this subsection relates;
``(G) in the case of a multiemployer plan that has
merged with another plan or to which assets and
liabilities have been transferred, the actuarial
valuation of the assets and liabilities of each affected
plan during the year preceding the effective date of the
merger or transfer, based upon the most recent data
available as of the day before the first day of the plan
year, or other valuation method performed under
standards and procedures as the Secretary may prescribe
by regulation;
``(H) a description as to whether the plan--
[[Page 120 STAT. 945]]
``(i) sought or received an amortization
extension under section 304(d) of this Act or
section 431(d) of the Internal Revenue Code of
1986 for such plan year; or
``(ii) used the shortfall funding method (as
such term is used in section 305) for such plan
year; and
``(I) <<NOTE: Notification.>> notification of the
right under this section of the recipient to a copy of
the annual report filed with the Secretary under
subsection (a), summary plan description, summary of any
material modification of the plan, upon written request,
but that--
``(i) in no case shall a recipient be entitled
to receive more than one copy of any such document
described during any one 12-month period; and
``(ii) the administrator may make a reasonable
charge to cover copying, mailing, and other costs
of furnishing copies of information pursuant to
this subparagraph.
``(2) Effect of subsection.--Nothing in this subsection
waives any other provision under this title requiring plan
administrators to provide, upon request, information to
employers that have an obligation to contribute under the
plan.''.
(e) <<NOTE: Deadline. 29 USC 1021 note.>> Model Form.--Not later
than 1 year 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
101(f) of the Employee Retirement Income Security Act of 1974, as
amended by this section. The Secretary of Labor may promulgate any
interim final rules as the Secretary determines appropriate to carry out
the provisions of this subsection.
(f) <<NOTE: 29 USC 1021 note.>> Effective Date.--The amendments made
by this section shall apply to plan years beginning after December 31,
2007.
SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT INFORMATION.
(a) Electronic Display of Information.--Section 104(b) of such Act
(29 U.S.C. 1024(b)) is amended by adding at the end the following:
``(5) Identification and basic plan information and actuarial
information included in the annual report for any plan year shall be
filed with the Secretary in an electronic format which accommodates
display on the Internet, in accordance with regulations which shall be
prescribed by the Secretary. The Secretary shall provide for display of
such information included in the annual report, within 90 days after the
date of the filing of the annual report, on an Internet website
maintained by the Secretary and other appropriate
media. <<NOTE: Regulations.>> Such information shall also be displayed
on any Intranet website maintained by the plan sponsor (or by the plan
administrator on behalf of the plan sponsor) for the purpose of
communicating with employees and not the public, in accordance with
regulations which shall be prescribed by the Secretary.''.
(b) <<NOTE: 29 USC 1024 note.>> Effective Date.--The amendment made
by this section shall apply to plan years beginning after December 31,
2007.
[[Page 120 STAT. 946]]
SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.
(a) Change in Criteria for Persons Required To Provide Information
to PBGC.--Section 4010(b) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1310(b)) is amended by striking paragraph (1) and
inserting the following:
``(1) the funding target attainment percentage (as defined
in subsection (d)) at the end of the preceding plan year of a
plan maintained by the contributing sponsor or any member of its
controlled group is less than 80 percent;''.
(b) Additional Information Required.--Section 4010 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1310) is amended by
adding at the end the following new subsection:
``(d) Additional Information Required.--
``(1) In general.--The information submitted to the
corporation under subsection (a) shall include--
``(A) the amount of benefit liabilities under the
plan determined using the assumptions used by the
corporation in determining liabilities;
``(B) the funding target of the plan determined as
if the plan has been in at-risk status for at least 5
plan years; and
``(C) the funding target attainment percentage of
the plan.
``(2) Definitions.--For purposes of this subsection:
``(A) Funding target.--The term `funding target' has
the meaning provided under section 303(d)(1).
``(B) Funding target attainment percentage.--The
term `funding target attainment percentage' has the
meaning provided under section 302(d)(2).
``(C) At-risk status.--The term `at-risk status' has
the meaning provided in section 303(i)(4).
``(e) Notice to Congress.--The corporation shall, on an annual
basis, submit to the Committee on Health, Education, Labor, and Pensions
and the Committee on Finance of the Senate and the Committee on
Education and the Workforce and the Committee on Ways and Means of the
House of Representatives, a summary report in the aggregate of the
information submitted to the corporation under this section.''.
(c) <<NOTE: 29 USC 1310 note.>> Effective Date.--The amendments made
by this section shall apply with respect to years beginning after 2007.
SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN PARTICIPANTS.
(a) Distress Terminations.--
(1) In general.--Section 4041(c)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) is
amended by adding at the end the following:
``(D) Disclosure of termination information.--
``(i) In general.--A plan administrator that
has filed a notice of intent to terminate under
subsection (a)(2) shall provide to an affected
party any information provided to the corporation
under subsection (a)(2) not later than 15 days
after--
``(I) receipt of a request from the
affected party for the information; or
``(II) the provision of new
information to the corporation relating
to a previous request.
[[Page 120 STAT. 947]]
``(ii) Confidentiality.--
``(I) In general.--The plan
administrator shall not provide
information under clause (i) in a form
that includes any information that may
directly or indirectly be associated
with, or otherwise identify, an
individual participant or beneficiary.
``(II) Limitation.--A court may
limit disclosure under this subparagraph
of confidential information described in
section 552(b) of title 5, United States
Code, to any authorized representative
of the participants or beneficiaries
that agrees to ensure the
confidentiality of such information.
``(iii) Form and manner of information;
charges.--
``(I) Form and manner.--The
corporation may prescribe the form and
manner of the provision of information
under this subparagraph, which shall
include delivery in written, electronic,
or other appropriate form to the extent
that such form is reasonably accessible
to individuals to whom the information
is required to be provided.
``(II) Reasonable charges.--A plan
administrator may charge a reasonable
fee for any information provided under
this subparagraph in other than
electronic form.
``(iv) Authorized representative.--For
purposes of this subparagraph, the term
`authorized representative' means any employee
organization representing participants in the
pension plan.''.
(2) Conforming amendment.--Section 4041(c)(1) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1341(c)(1)) is amended in subparagraph (C) by striking
``subparagraph (B)'' and inserting ``subparagraphs (B) and
(D)''.
(b) Involuntary Terminations.--
(1) In general.--Section 4042(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended by--
(A) striking ``(c) If the'' and inserting ``(c)(1)
If the'';
(B) redesignating paragraph (3) as paragraph (2);
and
(C) adding at the end the following:
``(3) Disclosure of termination information.--
``(A) In general.--
``(i) Information from plan sponsor or
administrator.--A plan sponsor or plan
administrator of a single-employer plan that has
received a notice from the corporation of a
determination that the plan should be terminated
under this section shall provide to an affected
party any information provided to the corporation
in connection with the plan termination.
``(ii) Information from corporation.--The
corporation shall provide a copy of the
administrative record, including the trusteeship
decision record of a termination of a plan
described under clause (i).
[[Page 120 STAT. 948]]
``(B) <<NOTE: Deadline.>> Timing of disclosure.--The
plan sponsor, plan administrator, or the corporation, as
applicable, shall provide the information described in
subparagraph (A) not later than 15 days after--
``(i) receipt of a request from an affected
party for such information; or
``(ii) in the case of information described
under subparagraph (A)(i), the provision of any
new information to the corporation relating to a
previous request by an affected party.
``(C) Confidentiality.--
``(i) In general.--The plan administrator and
plan sponsor shall not provide information under
subparagraph (A)(i) in a form which includes any
information that may directly or indirectly be
associated with, or otherwise identify, an
individual participant or beneficiary.
``(ii) Limitation.--A court may limit
disclosure under this paragraph of confidential
information described in section 552(b) of title
5, United States Code, to authorized
representatives (within the meaning of section
4041(c)(2)(D)(iv)) of the participants or
beneficiaries that agree to ensure the
confidentiality of such information.
``(D) Form and manner of information; charges.--
``(i) Form and manner.--The corporation may
prescribe the form and manner of the provision of
information under this paragraph, which shall
include delivery in written, electronic, or other
appropriate form to the extent that such form is
reasonably accessible to individuals to whom the
information is required to be provided.
``(ii) Reasonable charges.--A plan sponsor may
charge a reasonable fee for any information
provided under this paragraph in other than
electronic form.''.
(c) <<NOTE: 29 USC 1341 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to any plan termination under title IV of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1301 et seq.)
with respect to which the notice of intent to terminate (or in
the case of a termination by the Pension Benefit Guaranty
Corporation, a notice of determination under section 4042 of
such Act (29 U.S.C. 1342)) occurs after the date of enactment of
this Act.
(2) Transition rule.--If notice under section 4041(c)(2)(D)
or 4042(c)(3) of the Employee Retirement Income Security Act of
1974 (as added by this section) would otherwise be required to
be provided before the 90th day after the date of the enactment
of this Act, such notice shall not be required to be provided
until such 90th day.
SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES.
(a) In General.--Section 101 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021), as amended by this Act, is
amended by redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following:
[[Page 120 STAT. 949]]
``(m) <<NOTE: Deadline.>> Notice of Right To Divest.--Not later than
30 days before the first date on which an applicable individual of an
applicable individual account plan is eligible to exercise the right
under section 204(j) to direct the proceeds from the divestment of
employer securities with respect to any type of contribution, the
administrator shall provide to such individual a notice--
``(1) setting forth such right under such section, and
``(2) describing the importance of diversifying the
investment of retirement account assets.
The notice required by this subsection shall be written in a manner
calculated to be understood by the average plan participant and may be
delivered in written, electronic, or other appropriate form to the
extent that such form is reasonably accessible to the recipient.''.
(b) Penalties.--Section 502(c)(7) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended by striking
``section 101(i)'' and inserting ``subsection (i) or (m) of section
101''.
(c) <<NOTE: Deadline. 29 USC 1021 note.>> Model Notice.--The
Secretary of the Treasury shall, within 180 days after the date of the
enactment of this subsection, prescribe a model notice for purposes of
satisfying the requirements of the amendments made by this section.
(d) <<NOTE: 29 USC 1021 note.>> Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
(2) Transition rule.--If notice under section 101(m) of the
Employee Retirement Income Security Act of 1974 (as added by
this section) would otherwise be required to be provided before
the 90th day after the date of the enactment of this Act, such
notice shall not be required to be provided until such 90th day.
SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS.
(a) Amendments of ERISA.--
(1) In general.--Section 105(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended to
read as follows:
``(a) Requirements To Provide Pension Benefit Statements.--
``(1) Requirements.--
``(A) Individual account plan.--The administrator of
an individual account plan (other than a one-participant
retirement plan described in section 101(i)(8)(B)) shall
furnish a pension benefit statement--
``(i) at least once each calendar quarter to a
participant or beneficiary who has the right to
direct the investment of assets in his or her
account under the plan,
``(ii) at least once each calendar year to a
participant or beneficiary who has his or her own
account under the plan but does not have the right
to direct the investment of assets in that
account, and
``(iii) upon written request to a plan
beneficiary not described in clause (i) or (ii).
[[Page 120 STAT. 950]]
``(B) Defined benefit plan.--The administrator of a
defined benefit plan (other than a one-participant
retirement plan described in section 101(i)(8)(B)) shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each
participant with a nonforfeitable accrued benefit
and who is employed by the employer maintaining
the plan at the time the statement is to be
furnished, and
``(ii) to a participant or beneficiary of the
plan upon written request.
Information furnished under clause (i) to a participant
may be based on reasonable estimates determined under
regulations prescribed by the Secretary, in consultation
with the Pension Benefit Guaranty Corporation.
``(2) Statements.--
``(A) In general.--A pension benefit statement under
paragraph (1)--
``(i) shall indicate, on the basis of the
latest available information--
``(I) the total benefits accrued,
and
``(II) the nonforfeitable pension
benefits, if any, which have accrued, or
the earliest date on which benefits will
become nonforfeitable,
``(ii) shall include an explanation of any
permitted disparity under section 401(l) of the
Internal Revenue Code of 1986 or any floor-offset
arrangement that may be applied in determining any
accrued benefits described in clause (i),
``(iii) shall be written in a manner
calculated to be understood by the average plan
participant, and
``(iv) may be delivered in written,
electronic, or other appropriate form to the
extent such form is reasonably accessible to the
participant or beneficiary.
``(B) Additional information.--In the case of an
individual account plan, any pension benefit statement
under clause (i) or (ii) of paragraph (1)(A) shall
include--
``(i) the value of each investment to which
assets in the individual account have been
allocated, determined as of the most recent
valuation date under the plan, including the value
of any assets held in the form of employer
securities, without regard to whether such
securities were contributed by the plan sponsor or
acquired at the direction of the plan or of the
participant or beneficiary, and
``(ii) in the case of a pension benefit
statement under paragraph (1)(A)(i)--
``(I) an explanation of any
limitations or restrictions on any right
of the participant or beneficiary under
the plan to direct an investment,
``(II) an explanation, written in a
manner calculated to be understood by
the average plan participant, of the
importance, for the long-term retirement
security of participants and
beneficiaries, of a well-balanced and
diversified investment portfolio,
including a statement of the risk that
holding more than 20 percent of a
portfolio
[[Page 120 STAT. 951]]
in the security of one entity (such as
employer securities) may not be
adequately diversified, and
``(III) <<NOTE: Notices.>> a notice
directing the participant or beneficiary
to the Internet website of the
Department of Labor for sources of
information on individual investing and
diversification.
``(C) Alternative notice.--The requirements of
subparagraph (A)(i)(II) are met if, at least annually
and in accordance with requirements of the Secretary,
the plan--
``(i) updates the information described in
such paragraph which is provided in the pension
benefit statement, or
``(ii) provides in a separate statement such
information as is necessary to enable a
participant or beneficiary to determine their
nonforfeitable vested benefits.
``(3) Defined benefit plans.--
``(A) Alternative notice.--In the case of a defined
benefit plan, the requirements of paragraph (1)(B)(i)
shall be treated as met with respect to a participant if
at least once each year the administrator provides to
the participant notice of the availability of the
pension benefit statement and the ways in which the
participant may obtain such statement. Such notice may
be delivered in written, electronic, or other
appropriate form to the extent such form is reasonably
accessible to the participant.
``(B) Years in which no benefits accrue.--The
Secretary may provide that years in which no employee or
former employee benefits (within the meaning of section
410(b) of the Internal Revenue Code of 1986) under the
plan need not be taken into account in determining the
3-year period under paragraph (1)(B)(i).''.
(2) Conforming amendments.--
(A) Section 105 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1025) is amended by
striking subsection (d).
(B) Section 105(b) of such Act (29 U.S.C. 1025(b))
is amended to read as follows:
``(b) Limitation on Number of Statements.--In no case shall a
participant or beneficiary of a plan be entitled to more than 1
statement described in subparagraph (A)(iii) or (B)(ii) of subsection
(a)(1), whichever is applicable, in any 12-month period.''.
(C) Section 502(c)(1) of such Act (29 U.S.C.
1132(c)(1)) is amended by striking ``or section 101(f)''
and inserting ``section 101(f), or section 105(a)''.
(b) <<NOTE: 29 USC 1025 note. Deadline.>> Model Statements.--
(1) In general.--The Secretary of Labor shall, within 1 year
after the date of the enactment of this section, develop 1 or
more model benefit statements that are written in a manner
calculated to be understood by the average plan participant and
that may be used by plan administrators in complying with the
requirements of section 105 of the Employee Retirement Income
Security Act of 1974.
(2) Interim final rules.--The Secretary of Labor may
promulgate any interim final rules as the Secretary determines
appropriate to carry out the provisions of this subsection.
[[Page 120 STAT. 952]]
(c) <<NOTE: 29 USC 1025 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
(2) Special rule for collectively bargained agreements.--In
the case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified on or before the date of the enactment
of this Act, paragraph (1) shall be applied to benefits pursuant
to, and individuals covered by, any such agreement by
substituting for ``December 31, 2006'' the earlier of--
(A) the later of--
(i) December 31, 2007, or
(ii) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof after such date of enactment), or
(B) December 31, 2008.
SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.
(a) In General.--Section 101(i)(8)(B) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is amended by
striking clauses (i) through (iv), by redesignating clause (v) as clause
(ii), and by inserting before clause (ii), as so redesignated, the
following new clause:
``(i) on the first day of the plan year--
``(I) covered only one individual
(or the individual and the individual's
spouse) and the individual (or the
individual and the individual's spouse)
owned 100 percent of the plan sponsor
(whether or not incorporated), or
``(II) covered only one or more
partners (or partners and their spouses)
in the plan sponsor, and''.
(b) <<NOTE: 29 USC 1021 note.>> Effective Date.--The amendments made
by this subsection shall take effect as if included in the provisions of
section 306 of Public Law 107-204 (116 Stat. 745 et seq.).
TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY
RULES
Subtitle A--Investment Advice
SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF INVESTMENT
ADVICE.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) 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:
[[Page 120 STAT. 953]]
``(14) Any transaction in connection with the provision of
investment advice described in section 3(21)(A)(ii) to a
participant or beneficiary of an individual account plan that
permits such participant or beneficiary to direct the investment
of assets in their individual account, if--
``(A) the transaction is--
``(i) the provision of the investment advice
to the participant or beneficiary of the plan with
respect to a security or other property available
as an investment under the plan,
``(ii) the acquisition, holding, or sale of a
security or other property available as an
investment under the plan pursuant to the
investment advice, or
``(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 an acquisition,
holding, or sale of a security or other property
available as an investment under the plan pursuant
to the investment advice; and
``(B) the requirements of subsection (g) are met.''.
(2) Requirements.--Section 408 of such Act <<NOTE: 29 USC
1108.>> is amended further by adding at the end the following
new subsection:
``(g) Provision of Investment Advice to Participant and
Beneficiaries.--
``(1) In general.--The prohibitions provided in section 406
shall not apply to transactions described in subsection (b)(14)
if the investment advice provided by a fiduciary adviser is
provided under an eligible investment advice arrangement.
``(2) Eligible investment advice arrangement.--For purposes
of this subsection, the term `eligible investment advice
arrangement' means an arrangement--
``(A) which either--
``(i) provides that any fees (including any
commission or other compensation) received by the
fiduciary adviser for investment advice or with
respect to the sale, holding, or acquisition of
any security or other property for purposes of
investment of plan assets do not vary depending on
the basis of any investment option selected, or
``(ii) uses a computer model under an
investment advice program meeting the requirements
of paragraph (3) in connection with the provision
of investment advice by a fiduciary adviser to a
participant or beneficiary, and
``(B) with respect to which the requirements of
paragraph (4), (5), (6), (7), (8), and (9) are met.
``(3) Investment advice program using computer model.--
``(A) In general.--An investment advice program
meets the requirements of this paragraph if the
requirements of subparagraphs (B), (C), and (D) are met.
``(B) Computer model.--The requirements of this
subparagraph are met if the investment advice provided
[[Page 120 STAT. 954]]
under the investment advice program is provided pursuant
to a computer model that--
``(i) applies generally accepted investment
theories that take into account the historic
returns of different asset classes over defined
periods of time,
``(ii) utilizes relevant information about the
participant, which may include age, life
expectancy, retirement age, risk tolerance, other
assets or sources of income, and preferences as to
certain types of investments,
``(iii) utilizes prescribed objective criteria
to provide asset allocation portfolios comprised
of investment options available under the plan,
``(iv) operates in a manner that is not biased
in favor of investments offered by the fiduciary
adviser or a person with a material affiliation or
contractual relationship with the fiduciary
adviser, and
``(v) takes into account all investment
options under the plan in specifying how a
participant's account balance should be invested
and is not inappropriately weighted with respect
to any investment option.
``(C) Certification.--
``(i) In general.--The requirements of this
subparagraph are met with respect to any
investment advice program if an eligible
investment expert certifies, prior to the
utilization of the computer model and in
accordance with rules prescribed by the Secretary,
that the computer model meets the requirements of
subparagraph (B).
``(ii) Renewal of certifications.--If, as
determined under regulations prescribed by the
Secretary, there are material modifications to a
computer model, the requirements of this
subparagraph are met only if a certification
described in clause (i) is obtained with respect
to the computer model as so modified.
``(iii) Eligible investment expert.--The term
`eligible investment expert' means any person--
``(I) which meets such requirements
as the Secretary may provide, and
``(II) does not bear any material
affiliation or contractual relationship
with any investment adviser or a related
person thereof (or any employee, agent,
or registered representative of the
investment adviser or related person).
``(D) Exclusivity of recommendation.--The
requirements of this subparagraph are met with respect
to any investment advice program if--
``(i) the only investment advice provided
under the program is the advice generated by the
computer model described in subparagraph (B), and
``(ii) any transaction described in subsection
(b)(14)(B)(ii) occurs solely at the direction of
the participant or beneficiary.
Nothing in the preceding sentence shall preclude the
participant or beneficiary from requesting investment
advice other than that described in subparagraph (A),
but
[[Page 120 STAT. 955]]
only if such request has not been solicited by any
person connected with carrying out the arrangement.
``(4) Express authorization by separate fiduciary.--The
requirements of this paragraph are met with respect to an
arrangement if the arrangement is expressly authorized by a plan
fiduciary other than the person offering the investment advice
program, any person providing investment options under the plan,
or any affiliate of either.
``(5) Annual audit.--The requirements of this paragraph are
met if an independent auditor, who has appropriate technical
training or experience and proficiency and so represents in
writing--
``(A) conducts an annual audit of the arrangement
for compliance with the requirements of this subsection,
and
``(B) <<NOTE: Reports.>> following completion of the
annual audit, issues a written report to the fiduciary
who authorized use of the arrangement which presents its
specific findings regarding compliance of the
arrangement with the requirements of this subsection.
For purposes of this paragraph, an auditor is considered
independent if it is not related to the person offering the
arrangement to the plan and is not related to any person
providing investment options under the plan.
``(6) Disclosure.--The requirements of this paragraph are
met if--
``(A) the fiduciary adviser provides to a
participant or a beneficiary before the initial
provision of the investment advice with regard to any
security or other property offered as an investment
option, a written notification (which may consist of
notification by means of electronic communication)--
``(i) of the role of any party that has a
material affiliation or contractual relationship
with the financial adviser in the development of
the investment advice program and in the selection
of investment options available under the plan,
``(ii) of the past performance and historical
rates of return of the investment options
available under the plan,
``(iii) 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,
``(iv) of any material affiliation or
contractual relationship of the fiduciary adviser
or affiliates thereof in the security or other
property,
``(v) the manner, and under what
circumstances, any participant or beneficiary
information provided under the arrangement will be
used or disclosed,
``(vi) of the types of services provided by
the fiduciary adviser in connection with the
provision of investment advice by the fiduciary
adviser,
``(vii) that the adviser is acting as a
fiduciary of the plan in connection with the
provision of the advice, and
[[Page 120 STAT. 956]]
``(viii) 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, and
``(B) at all times during the provision of advisory
services to the participant or beneficiary, the
fiduciary adviser--
``(i) maintains the information described in
subparagraph (A) in accurate form and in the
manner described in paragraph (8),
``(ii) provides, without charge, accurate
information to the recipient of the advice no less
frequently than annually,
``(iii) provides, without charge, accurate
information to the recipient of the advice upon
request of the recipient, and
``(iv) provides, without charge, accurate
information to the recipient of the advice
concerning any material change to the information
required to be provided to the recipient of the
advice at a time reasonably contemporaneous to the
change in information.
``(7) Other conditions.--The requirements of this paragraph
are met if--
``(A) 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,
``(B) the sale, acquisition, or holding occurs
solely at the direction of the recipient of the advice,
``(C) 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
``(D) 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.
``(8) Standards for presentation of information.--
``(A) In general.--The requirements of this
paragraph are met if the notification required to be
provided to participants and beneficiaries under
paragraph (6)(A) is written in a clear and conspicuous
manner and in a manner calculated to be understood by
the average plan participant and is 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 (6)(A)(iii) which meets the
requirements of subparagraph (A).
``(9) Maintenance for 6 years of evidence of compliance.--
The requirements of this paragraph are met if a fiduciary
adviser who has provided advice referred to in paragraph (1)
maintains, for a period of not less than 6 years after the
provision of the advice, any records necessary for determining
whether the requirements of the preceding provisions of this
[[Page 120 STAT. 957]]
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.
``(10) 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 eligible investment advice
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 eligible investment
advice arrangement require compliance by the
fiduciary adviser with the requirements of this
subsection, and
``(iii) the terms of the eligible investment
advice 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 eligible investment advice arrangement
for the provision of investment 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).
``(11) 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 referred to in section 3(21)(A)(ii) by
the person to the participant or beneficiary of the plan
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,
[[Page 120 STAT. 958]]
``(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 clauses
(i) through (v) who satisfies the requirements of
applicable insurance, banking, and securities laws
relating to the provision of the advice.
For purposes of this part, a person who develops the
computer model described in paragraph (3)(B) or markets
the investment advice program or computer model shall be
treated as a person who is a fiduciary of the plan by
reason of the provision of investment advice referred to
in section 3(21)(A)(ii) to the participant or
beneficiary and shall be treated as a fiduciary adviser
for purposes of this subsection and subsection (b)(14),
except that the Secretary may prescribe rules under
which only 1 fiduciary adviser may elect to be treated
as a fiduciary with respect to the plan.
``(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).''.
(3) <<NOTE: 29 USC 1108 note.>> Effective date.--The
amendments made by this subsection shall apply with respect to
advice referred to in section 3(21)(A)(ii) of the Employee
Retirement Income Security Act of 1974 provided after December
31, 2006.
(b) Amendments to Internal Revenue Code of 1986.--
(1) Exemption from prohibited transactions.--Subsection (d)
of section 4975 of the Internal Revenue Code of 1986 <<NOTE: 26
USC 4975.>> (relating to exemption from tax on prohibited
transactions) is amended--
(A) in paragraph (15), by striking ``or'' at the
end;
(B) in paragraph (16), by striking the period at the
end and inserting ``;or''; and
(C) by adding at the end the following new
paragraph:
[[Page 120 STAT. 959]]
``(17) Any transaction in connection with the provision of
investment advice described in subsection (e)(3)(B) to a
participant or beneficiary in a plan and that permits such
participant or beneficiary to direct the investment of plan
assets in an individual account, if--
``(A) the transaction is--
``(i) the provision of the investment advice
to the participant or beneficiary of the plan with
respect to a security or other property available
as an investment under the plan,
``(ii) the acquisition, holding, or sale of a
security or other property available as an
investment under the plan pursuant to the
investment advice, or
``(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 an acquisition,
holding, or sale of a security or other property
available as an investment under the plan pursuant
to the investment advice; and
``(B) the requirements of subsection (f)(8) are
met.''.
(2) Requirements.--Subsection (f) of such <<NOTE: 26 USC
4975.>> section 4975 (relating to other definitions and special
rules) is amended by adding at the end the following new
paragraph:
``(8) Provision of investment advice to participant and
beneficiaries.-- I24 ``(A) In general.--The prohibitions
provided in subsection (c) shall not apply to transactions
described in subsection (b)(14) if the investment advice
provided by a fiduciary adviser is provided under an eligible
investment advice arrangement.
``(B) Eligible investment advice arrangement.--For
purposes of this paragraph, the term `eligible
investment advice arrangement' means an arrangement--
``(i) which either--
``(I) provides that any fees
(including any commission or other
compensation) received by the fiduciary
adviser for investment advice or with
respect to the sale, holding, or
acquisition of any security or other
property for purposes of investment of
plan assets do not vary depending on the
basis of any investment option selected,
or
``(II) uses a computer model under
an investment advice program meeting the
requirements of subparagraph (C) in
connection with the provision of
investment advice by a fiduciary adviser
to a participant or beneficiary, and
``(ii) with respect to which the requirements
of subparagraphs (D), (E), (F), (G), (H), and (I)
are met.
``(C) Investment advice program using computer
model.--
``(i) In general.--An investment advice
program meets the requirements of this
subparagraph if the requirements of clauses (ii),
(iii), and (iv) are met.
``(ii) Computer model.--The requirements of
this clause are met if the investment advice
provided under
[[Page 120 STAT. 960]]
the investment advice program is provided pursuant
to a computer model that--
``(I) applies generally accepted
investment theories that take into
account the historic returns of
different asset classes over defined
periods of time,
``(II) utilizes relevant information
about the participant, which may include
age, life expectancy, retirement age,
risk tolerance, other assets or sources
of income, and preferences as to certain
types of investments,
``(III) utilizes prescribed
objective criteria to provide asset
allocation portfolios comprised of
investment options available under the
plan,
``(IV) operates in a manner that is
not biased in favor of investments
offered by the fiduciary adviser or a
person with a material affiliation or
contractual relationship with the
fiduciary adviser, and
``(V) takes into account all
investment options under the plan in
specifying how a participant's account
balance should be invested and is not
inappropriately weighted with respect to
any investment option.
``(iii) Certification.--
``(I) In general.--The requirements
of this clause are met with respect to
any investment advice program if an
eligible investment expert certifies,
prior to the utilization of the computer
model and in accordance with rules
prescribed by the Secretary of Labor,
that the computer model meets the
requirements of clause (ii).
``(II) Renewal of certifications.--
If, as determined under regulations
prescribed by the Secretary of Labor,
there are material modifications to a
computer model, the requirements of this
clause are met only if a certification
described in subclause (I) is obtained
with respect to the computer model as so
modified.
``(III) Eligible investment
expert.--The term `eligible investment
expert' means any person which meets
such requirements as the Secretary of
Labor may provide and which does not
bear any material affiliation or
contractual relationship with any
investment adviser or a related person
thereof (or any employee, agent, or
registered representative of the
investment adviser or related person).
``(iv) Exclusivity of recommendation.--The
requirements of this clause are met with respect
to any investment advice program if--
``(I) the only investment advice
provided under the program is the advice
generated by the computer model
described in clause (ii), and
``(II) any transaction described in
subsection (b)(14)(B)(ii) occurs solely
at the direction of the participant or
beneficiary.
[[Page 120 STAT. 961]]
Nothing in the preceding sentence shall preclude
the participant or beneficiary from requesting
investment advice other than that described in
clause (i), but only if such request has not been
solicited by any person connected with carrying
out the arrangement.
``(D) Express authorization by separate fiduciary.--
The requirements of this subparagraph are met with
respect to an arrangement if the arrangement is
expressly authorized by a plan fiduciary other than the
person offering the investment advice program, any
person providing investment options under the plan, or
any affiliate of either.
``(E) Audits.--
``(i) In general.--The requirements of this
subparagraph are met if an independent auditor,
who has appropriate technical training or
experience and proficiency and so represents in
writing--
``(I) conducts an annual audit of
the arrangement for compliance with the
requirements of this paragraph, and
``(II) <<NOTE: Reports.>> following
completion of the annual audit, issues a
written report to the fiduciary who
authorized use of the arrangement which
presents its specific findings regarding
compliance of the arrangement with the
requirements of this paragraph.
``(ii) Special rule for individual retirement
and similar plans.--In the case of a plan
described in subparagraphs (B) through (F) (and so
much of subparagraph (G) as relates to such
subparagraphs) of subsection (e)(1), in lieu of
the requirements of clause (i), audits of the
arrangement shall be conducted at such times and
in such manner as the Secretary of Labor may
prescribe.
``(iii) Independent auditor.--For purposes of
this subparagraph, an auditor is considered
independent if it is not related to the person
offering the arrangement to the plan and is not
related to any person providing investment options
under the plan.
``(F) Disclosure.--The requirements of this
subparagraph are met if--
``(i) the fiduciary adviser provides to a
participant or a beneficiary before the initial
provision of the investment advice with regard to
any security or other property offered as an
investment option, a written notification (which
may consist of notification by means of electronic
communication)--
``(I) of the role of any party that
has a material affiliation or
contractual relationship with the
financial adviser in the development of
the investment advice program and in the
selection of investment options
available under the plan,
``(II) of the past performance and
historical rates of return of the
investment options available under the
plan,
``(III) of all fees or other
compensation relating to the advice that
the fiduciary adviser or any
[[Page 120 STAT. 962]]
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,
``(IV) of any material affiliation
or contractual relationship of the
fiduciary adviser or affiliates thereof
in the security or other property,
``(V) the manner, and under what
circumstances, any participant or
beneficiary information provided under
the arrangement will be used or
disclosed,
``(VI) of the types of services
provided by the fiduciary adviser in
connection with the provision of
investment advice by the fiduciary
adviser,
``(VII) that the adviser is acting
as a fiduciary of the plan in connection
with the provision of the advice, and
``(VIII) 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, and
``(ii) at all times during the provision of
advisory services to the participant or
beneficiary, the fiduciary adviser--
``(I) maintains the information
described in clause (i) in accurate form
and in the manner described in
subparagraph (H),
``(II) provides, without charge,
accurate information to the recipient of
the advice no less frequently than
annually,
``(III) provides, without charge,
accurate information to the recipient of
the advice upon request of the
recipient, and
``(IV) provides, without charge,
accurate information to the recipient of
the advice concerning any material
change to the information required to be
provided to the recipient of the advice
at a time reasonably contemporaneous to
the change in information.
``(G) Other conditions.--The requirements of this
subparagraph are met if--
``(i) 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,
``(ii) the sale, acquisition, or holding
occurs solely at the direction of the recipient of
the advice,
``(iii) 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
[[Page 120 STAT. 963]]
``(iv) 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.
``(H) Standards for presentation of information.--
``(i) In general.--The requirements of this
subparagraph are met if the notification required
to be provided to participants and beneficiaries
under subparagraph (F)(i) is written in a clear
and conspicuous manner and in a manner calculated
to be understood by the average plan participant
and is sufficiently accurate and comprehensive to
reasonably apprise such participants and
beneficiaries of the information required to be
provided in the notification.
``(ii) Model form for disclosure of fees and
other compensation.--The Secretary of Labor shall
issue a model form for the disclosure of fees and
other compensation required in subparagraph
(F)(i)(III) which meets the requirements of clause
(i).
``(I) Maintenance for 6 years of evidence of
compliance.--The requirements of this subparagraph are
met if a fiduciary adviser who has provided advice
referred to in subparagraph (A) maintains, for a period
of not less than 6 years after the provision of the
advice, any records necessary for determining whether
the requirements of the preceding provisions of this
paragraph and of subsection (d)(17) 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.
``(J) Definitions.--For purposes of this paragraph
and subsection (d)(17)--
``(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 participant or beneficiary of the plan 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.),
[[Page 120 STAT. 964]]
``(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 subclauses (I) through (V)
who satisfies the requirements of
applicable insurance, banking, and
securities laws relating to the
provision of the advice.
For purposes of this title, a person who develops
the computer model described in subparagraph
(C)(ii) or markets the investment advice program
or computer model shall be treated as a person who
is a fiduciary of the plan by reason of the
provision of investment advice referred to in
subsection (e)(3)(B) to the participant or
beneficiary and shall be treated as a fiduciary
adviser for purposes of this paragraph and
subsection (d)(17), except that the Secretary of
Labor may prescribe rules under which only 1
fiduciary adviser may elect to be treated as a
fiduciary with respect to the plan.
``(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).''.
(3) <<NOTE: 26 USC 4975 note.>> Determination of feasibility
of application of computer model investment advice programs for
individual retirement and similar plans.--
(A) Solicitation of information.--As soon as
practicable after the date of the enactment of this Act,
the Secretary of Labor, in consultation with the
Secretary of the Treasury, shall--
(i) solicit information as to the feasibility
of the application of computer model investment
advice programs for plans described in
subparagraphs (B) through (F) (and so much of
subparagraph (G) as relates to such subparagraphs)
of section 4975(e)(1) of the Internal Revenue Code
of 1986, including soliciting information from--
(I) at least the top 50 trustees of
such plans, determined on the basis of
assets held by such trustees, and
(II) other persons offering computer
model investment advice programs based
on nonproprietary products, and
(ii) shall on the basis of such information
make the determination under subparagraph (B).
The information solicited by the Secretary of Labor
under clause (i) from persons described in subclauses
(I) and (II) of clause (i) shall include information on
computer
[[Page 120 STAT. 965]]
modeling capabilities of such persons with respect to
the current year and preceding year, including such
capabilities for investment accounts maintained by such
persons.
(B) Determination of feasibility.--The Secretary of
Labor, in consultation with the Secretary of the
Treasury, shall, on the basis of information received
under subparagraph (A), determine whether there is any
computer model investment advice program which may be
utilized by a plan described in subparagraph (A)(i) to
provide investment advice to the account beneficiary of
the plan which--
(i) utilizes relevant information about the
account beneficiary, which may include age, life
expectancy, retirement age, risk tolerance, other
assets or sources of income, and preferences as to
certain types of investments,
(ii) takes into account the full range of
investments, including equities and bonds, in
determining the options for the investment
portfolio of the account beneficiary, and
(iii) allows the account beneficiary, in
directing the investment of assets, sufficient
flexibility in obtaining advice to evaluate and
select investment options.
The <<NOTE: Reports. Deadline.>> Secretary of Labor
shall report the results of such determination to the
committees of Congress referred to in subparagraph
(D)(ii) not later than December 31, 2007.
(C) Application of computer model investment advice
program.--
(i) Certification required for use of computer
model.--
(I) Restriction on use.--Subclause
(II) of section 4975(f)(8)(B)(i) of the
Internal Revenue Code of 1986 shall not
apply to a plan described in
subparagraph (A)(i).
(II) Restriction lifted if model
certified.--If the Secretary of Labor
determines under subparagraph (B) or (D)
that there is a computer model
investment advice program described in
subparagraph (B), subclause (I) shall
cease to apply as of the date of such
determination.
(ii) Class exemption if no initial
certification by secretary.--If the Secretary of
Labor determines under subparagraph (B) that there
is no computer model investment advice program
described in subparagraph (B), the Secretary of
Labor shall grant a class exemption from treatment
as a prohibited transaction under section 4975(c)
of the Internal Revenue Code of 1986 to any
transaction described in section 4975(d)(17)(A) of
such Code with respect to plans described in
subparagraph (A)(i), subject to such conditions as
set forth in such exemption as are in the
interests of the plan and its account beneficiary
and protective of the rights of the account
beneficiary and as are necessary to--
[[Page 120 STAT. 966]]
(I) ensure the requirements of
sections 4975(d)(17) and 4975(f)(8)
(other than subparagraph (C) thereof) of
the Internal Revenue Code of 1986 are
met, and
(II) ensure the investment advice
provided under the investment advice
program utilizes prescribed objective
criteria to provide asset allocation
portfolios comprised of securities or
other property available as investments
under the plan.
If <<NOTE: Deadline.>> the Secretary of Labor
solicits any information under subparagraph (A)
from a person and such person does not provide
such information within 60 days after the
solicitation, then, unless such failure was due to
reasonable cause and not wilful neglect, such
person shall not be entitled to utilize the class
exemption under this clause.
(D) Subsequent determination.--
(i) In general.--If the Secretary of Labor
initially makes a determination described in
subparagraph (C)(ii), the Secretary may
subsequently determine that there is a computer
model investment advice program described in
subparagraph (B). If the Secretary makes such
subsequent determination, then the class exemption
described in subparagraph (C)(ii) shall cease to
apply after the later of--
(I) the date which is 2 years after
such subsequent determination, or
(II) the date which is 3 years after
the first date on which such exemption
took effect.
(ii) Requests for determination.--
Any <<NOTE: Deadlines.>> person may request the
Secretary of Labor to make a determination under
this subparagraph with respect to any computer
model investment advice program, and the Secretary
of Labor shall make a determination with respect
to such request within 90 days. If the Secretary
of Labor makes a determination that such program
is not described in subparagraph (B), the
Secretary shall, within 10 days of such
determination, notify the Committee on Ways and
Means and the Committee on Education and the
Workforce of the House of Representatives and the
Committee on Finance and the Committee on Health,
Education, Labor, and Pensions of the Senate of
such determination and the reasons for such
determination.
(E) Effective date.--The provisions of this
paragraph shall take effect on the date of the enactment
of this Act.
(4) <<NOTE: 26 USC 4975 note.>> Effective date.--Except as
provided in this subsection, the amendments made by this
subsection shall apply with respect to advice referred to in
section 4975(c)(3)(B) of the Internal Revenue Code of 1986
provided after December 31, 2006.
(c) <<NOTE: 26 USC 4975 note.>> Coordination With Existing
Exemptions.--Any exemption under section 408(b) of the Employee
Retirement Income Security Act of 1974 and section 4975(d) of the
Internal Revenue Code of 1986 provided by the amendments made by this
section shall
[[Page 120 STAT. 967]]
not in any manner alter existing individual or class exemptions,
provided by statute or administrative action.
Subtitle B--Prohibited Transactions
SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO FINANCIAL
INVESTMENTS.
(a) 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 amended by adding at the end the
following new paragraph:
``(15)(A) Any transaction involving the purchase or sale of
securities, or other property (as determined by the Secretary),
between a plan and a party in interest (other than a fiduciary
described in section 3(21)(A)) with respect to a plan if--
``(i) the transaction involves a block trade,
``(ii) at the time of the transaction, the interest
of the plan (together with the interests of any other
plans maintained by the same plan sponsor), does not
exceed 10 percent of the aggregate size of the block
trade,
``(iii) the terms of the transaction, including the
price, are at least as favorable to the plan as an arm's
length transaction, and
``(iv) the compensation associated with the purchase
and sale is not greater than the compensation associated
with an arm's length transaction with an unrelated
party.
``(B) For purposes of this paragraph, the term `block trade'
means any trade of at least 10,000 shares or with a market value
of at least $200,000 which will be allocated across two or more
unrelated client accounts of a fiduciary.''.
(2) 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), as amended by section 601, 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) any transaction involving the purchase or sale of
securities, or other property (as determined by the Secretary of
Labor), 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,
``(C) the terms of the transaction, including the
price, are at least as favorable to the plan as an arm's
length transaction, and
``(D) the compensation associated with the purchase
and sale is not greater than the compensation associated
with an arm's length transaction with an unrelated
party.''.
(B) Special rule relating to block trade.--
Subsection (f) of section 4975 of such Code (relating to
other
[[Page 120 STAT. 968]]
definitions and special rules), as amended by section
601, is amended by adding at the end the following new
paragraph:
``(9) Block trade.--The term `block trade' means any trade
of at least 10,000 shares or with a market value of at least
$200,000 which will be allocated across two or more unrelated
client accounts of a fiduciary.''.
(b) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 1112(a))
is amended--
(1) by redesignating paragraph (2) as paragraph (3),
(2) by striking ``and'' at the end of paragraph (1), and
(3) by inserting after paragraph (1) the following new
paragraph:
``(2) no bond shall be required of any entity which is
registered as a broker or a dealer under section 15(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the broker
or dealer is subject to the fidelity bond requirements of a
self-regulatory organization (within the meaning of section
3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).''.
(c) Exemption for Electronic Communication Network.--
(1) Amendments to employee retirement income security act of
1974.--Section 408(b) of such Act, as amended by subsection
(a), <<NOTE: 29 USC 1108.>> is amended by adding at the end the
following:
``(16) Any transaction involving the purchase or sale of
securities, or other property (as determined by the Secretary),
between a plan and a party in interest if--
``(A) the transaction is executed through an
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 foreign regulatory entity as the
Secretary may determine by regulation,
``(B) either--
``(i) the transaction is effected pursuant to
rules designed to match purchases and sales at the
best price available through the execution system
in accordance with applicable rules of the
Securities and Exchange Commission or other
relevant governmental authority, or
``(ii) 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 price and compensation associated with the
purchase and sale are not greater than the price and
compensation associated with an arm's length transaction
with an unrelated party,
``(D) if the party in interest has an ownership
interest in the system or venue described in
subparagraph (A), the system or venue has been
authorized by the plan sponsor or other independent
fiduciary for transactions described in this paragraph,
and
``(E) <<NOTE: Deadline. Notice.>> not less than 30
days prior to the initial transaction described in this
paragraph executed through any system or venue described
in subparagraph (A), a plan fiduciary is provided
written or electronic notice of the
[[Page 120 STAT. 969]]
execution of such transaction through such system or
venue.''.
(2) Amendments to internal revenue code of 1986.--Subsection
(d) of section 4975 of the Internal Revenue Code of 1986
(relating to exemptions), as amended by subsection (a), is
amended by striking ``or'' at the end of paragraph (17), by
striking the period at the end of paragraph (18) and inserting
``, or'', and by adding at the end the following new paragraph:
``(19) any transaction involving the purchase or sale of
securities, or other property (as determined by the Secretary of
Labor), between a plan and a party in interest if--
``(A) the transaction is executed through an
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 foreign regulatory entity as the
Secretary of Labor may determine by regulation,
``(B) either--
``(i) the transaction is effected pursuant to
rules designed to match purchases and sales at the
best price available through the execution system
in accordance with applicable rules of the
Securities and Exchange Commission or other
relevant governmental authority, or
``(ii) 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 price and compensation associated with the
purchase and sale are not greater than the price and
compensation associated with an arm's length transaction
with an unrelated party,
``(D) if the party in interest has an ownership
interest in the system or venue described in
subparagraph (A), the system or venue has been
authorized by the plan sponsor or other independent
fiduciary for transactions described in this paragraph,
and
``(E) <<NOTE: Deadline. Notice.>> not less than 30
days prior to the initial transaction described in this
paragraph executed through any system or venue described
in subparagraph (A), a plan fiduciary is provided
written or electronic notice of the execution of such
transaction through such system or venue.''.
(d) Exemption for Service Providers.--
(1) Amendments to employee retirement income security act of
1974.--Section 408(b) of such Act <<NOTE: 29 USC 1108.>> (29
U.S.C. 1106), as amended by subsection (c), is 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 person that is
a party in interest other than a fiduciary (or an affiliate) who
has or exercises any discretionary authority or control with
respect to the investment of the plan assets involved in the
transaction or renders investment advice (within the meaning of
section 3(21)(A)(ii)) with respect to those assets, solely by
reason of providing services to the plan or solely by reason of
a relationship to such a service provider described
[[Page 120 STAT. 970]]
in subparagraph (F), (G), (H), or (I) of section 3(14), or both,
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.''.
(2) Amendment to internal revenue code of 1986.--
(A) In general.--Subsection (d) of section 4975 of
the Internal Revenue Code of 1986 (relating to
exemptions), as amended by subsection (c), is amended by
striking ``or'' at the end of paragraph (18), by
striking the period at the end of paragraph (19) and
inserting ``, or'', and by adding at the end the
following new paragraph:
``(20) transactions described in subparagraphs (A), (B), and
(D) of subsection (c)(1) between a plan and a person that is a
party in interest other than a fiduciary (or an affiliate) who
has or exercises any discretionary authority or control with
respect to the investment of the plan assets involved in the
transaction or renders investment advice (within the meaning of
subsection (e)(3)(B)) with respect to those assets, solely by
reason of providing services to the plan or solely by reason of
a relationship to such a service provider described in
subparagraph (F), (G), (H), or (I) of subsection (e)(2), or
both, but only if in connection with such transaction the plan
receives no less, nor pays no more, than adequate
consideration.''.
(B) Special rule relating to service providers.--
Subsection (f) of section 4975 of such Code (relating to
other definitions and special rules), as amended by
subsection (a), is amended by adding at the end the
following new paragraph:
``(10) Adequate consideration.--The term `adequate
consideration' means--
``(A) 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
[[Page 120 STAT. 971]]
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
``(B) 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 of Labor.''.
(e) Relief for Foreign Exchange Transactions.--
(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 subsection (d), is amended by adding at the end the
following new paragraph:
``(18) Foreign exchange transactions.--Any foreign exchange
transactions, between a bank or broker-dealer (or any affiliate
of either), and a plan (as defined in section 3(3)) with respect
to which such bank or broker-dealer (or affiliate) is a trustee,
custodian, fiduciary, or other party in interest, if--
``(A) the transaction is in connection with the
purchase, holding, or sale of securities or other
investment assets (other than a foreign exchange
transaction unrelated to any other investment in
securities or other investment assets),
``(B) at the time the foreign exchange transaction
is entered into, the terms of the transaction are not
less favorable to the plan than the terms generally
available in comparable arm's length foreign exchange
transactions between unrelated parties, or the terms
afforded by the bank or broker-dealer (or any affiliate
of either) in comparable arm's-length foreign exchange
transactions involving unrelated parties,
``(C) the exchange rate used by such bank or broker-
dealer (or affiliate) for a particular foreign exchange
transaction does not deviate by more or less than 3
percent from the interbank bid and asked rates for
transactions of comparable size and maturity at the time
of the transaction as displayed on an independent
service that reports rates of exchange in the foreign
currency market for such currency, and
``(D) the bank or broker-dealer (or any affiliate of
either) does not have investment discretion, or provide
investment advice, with respect to the transaction.''.
(2) Amendment to internal revenue code of 1986.--Subsection
(d) of section 4975 of the Internal Revenue Code of 1986
(relating to exemptions), as amended by subsection (d), is
amended by striking ``or'' at the end of paragraph (19), by
striking the period at the end of paragraph (20) and inserting
``, or'', and by adding at the end the following new paragraph:
[[Page 120 STAT. 972]]
``(21) any foreign exchange transactions, between a bank or
broker-dealer (or any affiliate of either) and a plan (as
defined in this section) with respect to which such bank or
broker-dealer (or affiliate) is a trustee, custodian, fiduciary,
or other party in interest person, if--
``(A) the transaction is in connection with the
purchase, holding, or sale of securities or other
investment assets (other than a foreign exchange
transaction unrelated to any other investment in
securities or other investment assets),
``(B) at the time the foreign exchange transaction
is entered into, the terms of the transaction are not
less favorable to the plan than the terms generally
available in comparable arm's length foreign exchange
transactions between unrelated parties, or the terms
afforded by the bank or broker-dealer (or any affiliate
of either) in comparable arm's-length foreign exchange
transactions involving unrelated parties,
``(C) the exchange rate used by such bank or broker-
dealer (or affiliate) for a particular foreign exchange
transaction does not deviate by more or less than 3
percent from the interbank bid and asked rates for
transactions of comparable size and maturity at the time
of the transaction as displayed on an independent
service that reports rates of exchange in the foreign
currency market for such currency, and
``(D) the bank or broker-dealer (or any affiliate of
either) does not have investment discretion, or provide
investment advice, with respect to the transaction.''.
(f) 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 25 percent of the total value of each class of
equity interest in the entity is held by benefit plan investors. For
purposes of determinations pursuant to this paragraph, the value of any
equity interest held by a person (other than such a benefit plan
investor) 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
25 percent threshold. An entity shall be considered to hold plan assets
only to the extent of the percentage of the equity interest held by
benefit plan investors. For purposes of this paragraph, the term
`benefit plan investor' means an employee benefit plan subject to part
4, any plan to which section 4975 of the Internal Revenue Code of 1986
applies, and any entity whose underlying assets include plan assets by
reason of a plan's investment in such entity.''.
(g) Exemption for Cross 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 subsection (e), is amended by adding at the end the
following new paragraph:
[[Page 120 STAT. 973]]
``(19) Cross trading.--Any transaction described in sections
406(a)(1)(A) and 406(b)(2) involving the purchase and sale of a
security between a plan and any other account managed by the
same investment manager, if--
``(A) the transaction is a purchase or sale, for no
consideration other than cash payment against prompt
delivery of a security for which market quotations are
readily available,
``(B) the transaction is effected at the independent
current market price of the security (within the meaning
of section 270.17a-7(b) of title 17, Code of Federal
Regulations),
``(C) no brokerage commission, fee (except for
customary transfer fees, the fact of which is disclosed
pursuant to subparagraph (D)), or other remuneration is
paid in connection with the transaction,
``(D) a fiduciary (other than the investment manager
engaging in the cross-trades or any affiliate) for each
plan participating in the transaction authorizes in
advance of any cross-trades (in a document that is
separate from any other written agreement of the
parties) the investment manager to engage in cross
trades at the investment manager's discretion, after
such fiduciary has received disclosure regarding the
conditions under which cross trades may take place (but
only if such disclosure is separate from any other
agreement or disclosure involving the asset management
relationship), including the written policies and
procedures of the investment manager described in
subparagraph (H),
``(E) each plan participating in the transaction has
assets of at least $100,000,000, except that if the
assets of a plan are invested in a master trust
containing the assets of plans maintained by employers
in the same controlled group (as defined in section
407(d)(7)), the master trust has assets of at least
$100,000,000,
``(F) the investment manager provides to the plan
fiduciary who authorized cross trading under
subparagraph (D) a quarterly report detailing all cross
trades executed by the investment manager in which the
plan participated during such quarter, including the
following information, as applicable: (i) the identity
of each security bought or sold; (ii) the number of
shares or units traded; (iii) the parties involved in
the cross-trade; and (iv) trade price and the method
used to establish the trade price,
``(G) the investment manager does not base its fee
schedule on the plan's consent to cross trading, and no
other service (other than the investment opportunities
and cost savings available through a cross trade) is
conditioned on the plan's consent to cross trading,
``(H) the investment manager has adopted, and cross-
trades are effected in accordance with, written cross-
trading policies and procedures that are fair and
equitable to all accounts participating in the cross-
trading program, and that include a description of the
manager's pricing policies and procedures, and the
manager's policies and procedures for allocating cross
trades in an objective manner among accounts
participating in the cross-trading program, and
[[Page 120 STAT. 974]]
``(I) <<NOTE: Reports. Deadline.>> the investment
manager has designated an individual responsible for
periodically reviewing such purchases and sales to
ensure compliance with the written policies and
procedures described in subparagraph (H), and following
such review, the individual shall issue an annual
written report no later than 90 days following the
period to which it relates signed under penalty of
perjury to the plan fiduciary who authorized cross
trading under subparagraph (D) describing the steps
performed during the course of the review, the level of
compliance, and any specific instances of non-
compliance.
The <<NOTE: Notification.>> written report under subparagraph
(I) shall also notify the plan fiduciary of the plan's right to
terminate participation in the investment manager's cross-
trading program at any time.''.
(2) Amendments of internal revenue code of 1986.--Subsection
(d) of section 4975 of the Internal Revenue Code of 1986
(relating to exemptions), as amended by subsection (e), is
amended by striking ``or'' at the end of paragraph (20), by
striking the period at the end of paragraph (21) and inserting
``, or'', and by adding at the end the following new paragraph:
``(22) any transaction described in subsection (c)(1)(A)
involving the purchase and sale of a security between a plan and
any other account managed by the same investment manager, if--
``(A) the transaction is a purchase or sale, for no
consideration other than cash payment against prompt
delivery of a security for which market quotations are
readily available,
``(B) the transaction is effected at the independent
current market price of the security (within the meaning
of section 270.17a-7(b) of title 17, Code of Federal
Regulations),
``(C) no brokerage commission, fee (except for
customary transfer fees, the fact of which is disclosed
pursuant to subparagraph (D)), or other remuneration is
paid in connection with the transaction,
``(D) a fiduciary (other than the investment manager
engaging in the cross-trades or any affiliate) for each
plan participating in the transaction authorizes in
advance of any cross-trades (in a document that is
separate from any other written agreement of the
parties) the investment manager to engage in cross
trades at the investment manager's discretion, after
such fiduciary has received disclosure regarding the
conditions under which cross trades may take place (but
only if such disclosure is separate from any other
agreement or disclosure involving the asset management
relationship), including the written policies and
procedures of the investment manager described in
subparagraph (H),
``(E) each plan participating in the transaction has
assets of at least $100,000,000, except that if the
assets of a plan are invested in a master trust
containing the assets of plans maintained by employers
in the same controlled group (as defined in section
407(d)(7) of the Employee Retirement Income Security Act
of 1974), the master trust has assets of at least
$100,000,000,
[[Page 120 STAT. 975]]
``(F) the investment manager provides to the plan
fiduciary who authorized cross trading under
subparagraph (D) a quarterly report detailing all cross
trades executed by the investment manager in which the
plan participated during such quarter, including the
following information, as applicable: (i) the identity
of each security bought or sold; (ii) the number of
shares or units traded; (iii) the parties involved in
the cross-trade; and (iv) trade price and the method
used to establish the trade price,
``(G) the investment manager does not base its fee
schedule on the plan's consent to cross trading, and no
other service (other than the investment opportunities
and cost savings available through a cross trade) is
conditioned on the plan's consent to cross trading,
``(H) the investment manager has adopted, and cross-
trades are effected in accordance with, written cross-
trading policies and procedures that are fair and
equitable to all accounts participating in the cross-
trading program, and that include a description of the
manager's pricing policies and procedures, and the
manager's policies and procedures for allocating cross
trades in an objective manner among accounts
participating in the cross-trading program, and
``(I) <<NOTE: Reports. Deadline.>> the investment
manager has designated an individual responsible for
periodically reviewing such purchases and sales to
ensure compliance with the written policies and
procedures described in subparagraph (H), and following
such review, the individual shall issue an annual
written report no later than 90 days following the
period to which it relates signed under penalty of
perjury to the plan fiduciary who authorized cross
trading under subparagraph (D) describing the steps
performed during the course of the review, the level of
compliance, and any specific instances of non-
compliance.
The <<NOTE: Notification.>> written report shall also notify
the plan fiduciary of the plan's right to terminate
participation in the investment manager's cross-trading program
at any time.''.
(3) Regulations.--No <<NOTE: Deadline. 29 USC 1108 note.>>
later than 180 days after the date of the enactment of this Act,
the Secretary of Labor, after consultation with the Securities
and Exchange Commission, shall issue regulations regarding the
content of policies and procedures required to be adopted by an
investment manager under section 408(b)(19) of the Employee
Retirement Income Security Act of 1974.
(h) <<NOTE: 26 USC 4975 note.>> Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to transactions
occurring after the date of the enactment of this Act.
(2) Bonding rule.--The amendments made by subsection (b)
shall apply to plan years beginning after such date.
SEC. 612. 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 601 and 611, is further
amended by adding at the end the following new paragraph:
[[Page 120 STAT. 976]]
``(20)(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
trans- action--
``(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 sections 601 and 611, is amended by striking ``or''
at the end of paragraph (21), by striking the period at the end
of paragraph (22) and inserting ``, or'', and by adding at the
end the following new paragraph:
``(23) except as provided in subsection (f)(11), 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 sections 601 and 611, is
amended by adding at the end the following new paragraph:
``(11) Correction period.--
[[Page 120 STAT. 977]]
``(A) In general.--For purposes of subsection
(d)(23), 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)(23)) constitute a
prohibited transaction.
``(B) Exceptions.--
``(i) Employer securities.--Subsection (d)(23)
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)(23) 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)(23),
then no tax under subsections (a) and (b) shall be
assessed with respect to such transaction, and if
assessed the assessment shall be abated, and if
collected shall be credited or refunded as an
overpayment.
``(D) Definitions.--For purposes of this paragraph
and subsection (d)(23)--
``(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) <<NOTE: 26 USC 4975 note.>> 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.
[[Page 120 STAT. 978]]
Subtitle C--Fiduciary and Other Rules
SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING
SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO
DIRECT INVESTMENTS.
(a) In General.--Section 404(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(c)) is amended--
(1) in paragraph (1)--
(A) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively, and by inserting
``(A)'' after ``(c)(1)'',
(B) in subparagraph (A)(ii) (as redesignated by
paragraph (1)), by inserting before the period the
following: ``, except that this clause shall not apply
in connection with such participant or beneficiary for
any blackout period during which the ability of such
participant or beneficiary to direct the investment of
the assets in his or her account is suspended by a plan
sponsor or fiduciary'', and
(C) by adding at the end the following new
subparagraphs:
``(B) If a person referred to in subparagraph (A)(ii) meets the
requirements of this title in connection with authorizing and
implementing the blackout period, any person who is otherwise a
fiduciary shall not be liable under this title for any loss occurring
during such period.
``(C) For purposes of this paragraph, the term `blackout period' has
the meaning given such term by section 101(i)(7).''; and
(2) by adding at the end the following:
``(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 account of the participant or beneficiary
is reallocated among one or more remaining or 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 stated characteristics of the remaining
or new investment options provided under clause (i),
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 30 days and no more than 60 days
prior to the effective date of the change, the plan
administrator furnishes written notice of the change to
the participants
[[Page 120 STAT. 979]]
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 or beneficiary 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 were 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) <<NOTE: 29 USC 1104 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2007.
(2) <<NOTE: Applicability.>> Special rule for collectively
bargained agreements.--In the case of a plan maintained pursuant
to 1 or more collective bargaining agreements between employee
representatives and 1 or more employers ratified on or before
the date of the enactment of this Act, paragraph (1) shall be
applied to benefits pursuant to, and individuals covered by, any
such agreement by substituting for ``December 31, 2007'' the
earlier of--
(A) the later of--
(i) December 31, 2008, or
(ii) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof after such date of enactment), or
(B) December 31, 2009.
SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT.
(a) In General.--Section 412(a) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1112), as amended by section 611(b), is
amended by adding at the end the following: ``In the case of a plan that
holds employer securities (within the meaning of section 407(d)(1)),
this subsection shall be applied by substituting `$1,000,000' for
`$500,000' each place it appears.''.
(b) <<NOTE: 29 USC 1112 note.>> Effective Date.--The amendment made
by this section shall apply to plan years beginning after December 31,
2007.
SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE WITH EXERCISE
OF ERISA RIGHTS.
(a) In General.--Section 511 of the Employment Retirement Income
Security Act of 1974 (29 U.S.C. 1141) is amended--
(1) by striking ``$10,000'' and inserting ``$100,000'', and
(2) by striking ``one year'' and inserting ``10 years''.
(b) <<NOTE: 29 USC 1141 note.>> Effective Date.--The amendments made
by this section shall apply to violations occurring on and after the
date of the enactment of this Act.
[[Page 120 STAT. 980]]
SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE PARTICIPANT
FAILS TO EXERCISE INVESTMENT ELECTION.
(a) In General.--Section 404(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(c)), as amended by section 622, is
amended by adding at the end the following new paragraph:
``(5) Default investment arrangements.--
``(A) In general.--For purposes of paragraph (1), a
participant in an individual account plan meeting the
notice requirements of subparagraph (B) shall be treated
as exercising control over the assets in the account
with respect to the amount of contributions and earnings
which, in the absence of an investment election by the
participant, are invested by the plan in accordance with
regulations prescribed by the Secretary. The regulations
under this subparagraph shall provide guidance on the
appropriateness of designating default investments that
include a mix of asset classes consistent with capital
preservation or long-term capital appreciation, or a
blend of both.
``(B) Notice requirements.--
``(i) In general.--The requirements of this
subparagraph are met if each participant--
``(I) receives, within a reasonable
period of time before each plan year, a
notice explaining the employee's right
under the plan to designate how
contributions and earnings will be
invested and explaining how, in the
absence of any investment election by
the participant, such contributions and
earnings will be invested, and
``(II) has a reasonable period of
time after receipt of such notice and
before the beginning of the plan year to
make such designation.
``(ii) Form of notice.--
The <<NOTE: Applicability.>> requirements of
clauses (i) and (ii) of section 401(k)(12)(D) of
the Internal Revenue Code of 1986 shall apply with
respect to the notices described in this
subparagraph.''.
(b) <<NOTE: 29 USC 1104 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
(2) Regulations.--Final <<NOTE: Deadline.>> regulations
under section 404(c)(5)(A) of the Employee Retirement Income
Security Act of 1974 (as added by this section) shall be issued
no later than 6 months after the date of the enactment of this
Act.
SEC. 625. <<NOTE: 29 USC 1104 note. Deadline.>> CLARIFICATION OF
FIDUCIARY RULES.
(a) In General.--Not later than 1 year after the date of the
enactment of this Act, the Secretary of Labor shall issue final
regulations clarifying that the selection of an annuity contract as an
optional form of distribution from an individual account plan to a
participant or beneficiary--
(1) is not subject to the safest available annuity standard
under Interpretive Bulletin 95-1 (29 CFR 2509.95-1), and
(2) is subject to all otherwise applicable fiduciary
standards.
(b) Effective Date.--This section shall take effect on the date of
enactment of this Act.
[[Page 120 STAT. 981]]
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) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1054(b)) is amended by adding at
the end the following new paragraph:
``(5) Special rules relating to age.--
``(A) Comparison to similarly situated younger
individual.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1)(H)(i) if a participant's accrued benefit, as
determined as of any date under the terms of the
plan, would be equal to or greater than that of
any similarly situated, younger individual who is
or could be a participant.
``(ii) Similarly situated.--For purposes of
this subparagraph, a participant is similarly
situated to any other individual if such
participant is identical to such other individual
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 accrued
benefit as of any date for purposes of this
clause, the subsidized portion of any early
retirement benefit or retirement-type subsidy
shall be disregarded.
``(iv) Accrued benefit.--For purposes of this
subparagraph, the accrued benefit may, under the
terms of the plan, be expressed as an annuity
payable at normal retirement age, the balance of a
hypothetical account, or the current value of the
accumulated percentage of the employee's final
average compensation.
``(B) Applicable defined benefit plans.--
``(i) Interest credits.--
``(I) In general.--An applicable
defined benefit plan shall be treated as
failing to meet the requirements of
paragraph (1)(H) unless the terms of the
plan provide that any interest credit
(or an equivalent amount) for any plan
year shall be at a rate which is not
greater than a market rate of return. A
plan shall not be treated as failing to
meet the requirements of this subclause
merely because the plan provides for a
reasonable minimum guaranteed rate of
return or for a rate of return that is
equal to the greater of a fixed or
variable rate of return.
``(II) Preservation of capital.--An
interest credit (or an equivalent
amount) of less than zero shall in no
event result in the account balance or
similar amount being less than the
aggregate amount of contributions
credited to the account.
[[Page 120 STAT. 982]]
``(III) Market rate of return.--The
Secretary of the Treasury may provide by
regulation for rules governing the
calculation of a market rate of return
for purposes of subclause (I) 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 subclause (I).
``(ii) Special rule for plan conversions.--If,
after June 29, 2005, an applicable plan amendment
is adopted, the plan shall be treated as failing
to meet the requirements of paragraph (1)(H)
unless the requirements of clause (iii) are met
with respect to each individual who was a
participant in the plan immediately before the
adoption of the amendment.
``(iii) Rate of benefit accrual.--Subject to
clause (iv), the requirements of this clause are
met with respect to any participant if the accrued
benefit of the participant under the terms of the
plan as in effect after the amendment is not less
than the sum of--
``(I) the participant's accrued
benefit for years of service before the
effective date of the amendment,
determined under the terms of the plan
as in effect before the amendment, plus
``(II) the participant's accrued
benefit for years of service after the
effective date of the amendment,
determined under the terms of the plan
as in effect after the amendment.
``(iv) Special rules for early retirement
subsidies.--For purposes of clause (iii)(I), the
plan shall credit the accumulation account or
similar amount with the amount of any early
retirement benefit or retirement-type subsidy for
the plan year in which the participant retires if,
as of such time, the participant has met the age,
years of service, and other requirements under the
plan for entitlement to such benefit or subsidy.
``(v) Applicable plan amendment.--For purposes
of this subparagraph--
``(I) In general.--The term
`applicable plan amendment' means an
amendment to a defined benefit plan
which has the effect of converting the
plan to an applicable defined benefit
plan.
``(II) Special rule for coordinated
benefits.--If the benefits of 2 or more
defined benefit plans established or
maintained by an employer are
coordinated in such a manner as to have
the effect of the adoption of an
amendment described in subclause (I),
the sponsor of the defined benefit plan
or plans providing for such coordination
shall be treated as having adopted such
a plan amendment as of the date such
coordination begins.
``(III) Multiple amendments.--
The <<NOTE: Regulations.>> Secretary of
the Treasury shall issue regulations to
prevent the avoidance of the purposes of
this subparagraph
[[Page 120 STAT. 983]]
through the use of 2 or more plan
amendments rather than a single
amendment.
``(IV) Applicable defined benefit
plan.--For purposes of this
subparagraph, the term `applicable
defined benefit plan' has the meaning
given such term by section 203(f)(3).
``(vi) Termination requirements.--An
applicable defined benefit plan shall not be
treated as meeting the requirements of clause (i)
unless the plan provides that, upon the
termination of the plan--
``(I) if the interest credit rate
(or an equivalent amount) under the plan
is a variable rate, the rate of interest
used to determine accrued benefits under
the plan shall be equal to the average
of the rates of interest used under the
plan during the 5-year period ending on
the termination date, and
``(II) the interest rate and
mortality table used to determine the
amount of any benefit under the plan
payable in the form of an annuity
payable at normal retirement age shall
be the rate and table specified under
the plan for such purpose as of the
termination date, except that if such
interest rate is a variable rate, the
interest rate shall be determined under
the rules of subclause (I).
``(C) Certain offsets permitted.--A plan shall not
be treated as failing to meet the requirements of
paragraph (1)(H)(i) solely because the plan provides
offsets against benefits under the plan to the extent
such offsets are allowable in applying the requirements
of section 401(a) of the Internal Revenue Code of 1986.
``(D) Permitted disparities in plan contributions or
benefits.--A plan shall not be treated as failing to
meet the requirements of paragraph (1)(H) 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.
``(E) Indexing permitted.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1)(H) solely because the plan provides for
indexing of accrued benefits under the plan.
``(ii) Protection against loss.--Except in the
case of any benefit provided in the form of a
variable annuity, clause (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
subparagraph, 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.
``(F) Early retirement benefit or retirement-type
subsidy.--For purposes of this paragraph, the terms
`early
[[Page 120 STAT. 984]]
retirement benefit' and `retirement-type subsidy' have
the meaning given such terms in subsection (g)(2)(A).
``(G) Benefit accrued to date.--For purposes of this
paragraph, any reference to the accrued benefit shall be
a reference to such benefit accrued to date.''.
(2) Determinations of accrued benefit as balance of benefit
account or equivalent amounts.--Section 203 of such Act (29
U.S.C. 1053) is amended by adding at the end the following new
subsection:
``(f) Special Rules for Plans Computing Accrued Benefits by
Reference to Hypothetical Account Balance or Equivalent Amounts.--
``(1) In general.--An applicable defined benefit plan shall
not be treated as failing to meet--
``(A) subject to paragraph (2), the requirements of
subsection (a)(2), or
``(B) the requirements of section 204(c) or section
205(g) with respect to contributions other than employee
contributions,
solely because the present value of the accrued benefit (or any
portion thereof) of any participant is, under the terms of the
plan, equal to the amount expressed as the balance in the
hypothetical account described in paragraph (3) or as an
accumulated percentage of the participant's final average
compensation.
``(2) 3-year vesting.--In the case of an applicable defined
benefit plan, such plan shall be treated as meeting the
requirements of subsection (a)(2) only if an employee who has
completed at least 3 years of service has a nonforfeitable right
to 100 percent of the employee's accrued benefit derived from
employer contributions.
``(3) Applicable defined benefit plan and related rules.--
For purposes of this subsection--
``(A) In general.--The term `applicable defined
benefit plan' means a defined benefit plan under which
the accrued benefit (or any portion thereof) is
calculated as the balance of a hypothetical account
maintained for the participant or as an accumulated
percentage of the participant's final average
compensation.
``(B) Regulations to include similar plans.--The
Secretary of the Treasury shall issue regulations which
include in the definition of an applicable defined
benefit plan any defined benefit plan (or any portion of
such a plan) which has an effect similar to an
applicable defined benefit plan.''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Rules relating to reduction in rate of benefit
accrual.--Subsection (b) of section 411 of the Internal Revenue
Code of 1986 <<NOTE: 26 USC 411.>> is amended by adding at the
end the following new paragraph:
``(5) Special rules relating to age.--
``(A) Comparison to similarly situated younger
individual.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1)(H)(i) if a participant's accrued benefit, as
determined as of any date under the terms of the
plan, would be
[[Page 120 STAT. 985]]
equal to or greater than that of any similarly
situated, younger individual who is or could be a
participant.
``(ii) Similarly situated.--For purposes of
this subparagraph, a participant is similarly
situated to any other individual if such
participant is identical to such other individual
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 accrued
benefit as of any date for purposes of this
clause, the subsidized portion of any early
retirement benefit or retirement-type subsidy
shall be disregarded.
``(iv) Accrued benefit.--For purposes of this
subparagraph, the accrued benefit may, under the
terms of the plan, be expressed as an annuity
payable at normal retirement age, the balance of a
hypothetical account, or the current value of the
accumulated percentage of the employee's final
average compensation.
``(B) Applicable defined benefit plans.--
``(i) Interest credits.--
``(I) In general.--An applicable
defined benefit plan shall be treated as
failing to meet the requirements of
paragraph (1)(H) unless the terms of the
plan provide that any interest credit
(or an equivalent amount) for any plan
year shall be at a rate which is not
greater than a market rate of return. A
plan shall not be treated as failing to
meet the requirements of this subclause
merely because the plan provides for a
reasonable minimum guaranteed rate of
return or for a rate of return that is
equal to the greater of a fixed or
variable rate of return.
``(II) Preservation of capital.--An
interest credit (or an equivalent
amount) of less than zero shall in no
event result in the account balance or
similar amount being less than the
aggregate amount of contributions
credited to the account.
``(III) Market rate of return.--The
Secretary may provide by regulation for
rules governing the calculation of a
market rate of return for purposes of
subclause (I) 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 subclause (I).
``(ii) Special rule for plan conversions.--If,
after June 29, 2005, an applicable plan amendment
is adopted, the plan shall be treated as failing
to meet the requirements of paragraph (1)(H)
unless the requirements of clause (iii) are met
with respect to each individual who was a
participant in the plan immediately before the
adoption of the amendment.
``(iii) Rate of benefit accrual.--Subject to
clause (iv), the requirements of this clause are
met with respect to any participant if the accrued
benefit of
[[Page 120 STAT. 986]]
the participant under the terms of the plan as in
effect after the amendment is not less than the
sum of--
``(I) the participant's accrued
benefit for years of service before the
effective date of the amendment,
determined under the terms of the plan
as in effect before the amendment, plus
``(II) the participant's accrued
benefit for years of service after the
effective date of the amendment,
determined under the terms of the plan
as in effect after the amendment.
``(iv) Special rules for early retirement
subsidies.--For purposes of clause (iii)(I), the
plan shall credit the accumulation account or
similar amount with the amount of any early
retirement benefit or retirement-type subsidy for
the plan year in which the participant retires if,
as of such time, the participant has met the age,
years of service, and other requirements under the
plan for entitlement to such benefit or subsidy.
``(v) Applicable plan amendment.--For purposes
of this subparagraph--
``(I) In general.--The term
`applicable plan amendment' means an
amendment to a defined benefit plan
which has the effect of converting the
plan to an applicable defined benefit
plan.
``(II) Special rule for coordinated
benefits.--If the benefits of 2 or more
defined benefit plans established or
maintained by an employer are
coordinated in such a manner as to have
the effect of the adoption of an
amendment described in subclause (I),
the sponsor of the defined benefit plan
or plans providing for such coordination
shall be treated as having adopted such
a plan amendment as of the date such
coordination begins.
``(III) Multiple amendments.--
The <<NOTE: Regulations.>> Secretary
shall issue regulations to prevent the
avoidance of the purposes of this
subparagraph through the use of 2 or
more plan amendments rather than a
single amendment.
``(IV) Applicable defined benefit
plan.--For purposes of this
subparagraph, the term `applicable
defined benefit plan' has the meaning
given such term by section 411(a)(13).
``(vi) Termination requirements.--An
applicable defined benefit plan shall not be
treated as meeting the requirements of clause (i)
unless the plan provides that, upon the
termination of the plan--
``(I) if the interest credit rate
(or an equivalent amount) under the plan
is a variable rate, the rate of interest
used to determine accrued benefits under
the plan shall be equal to the average
of the rates of interest used under the
plan during the 5-year period ending on
the termination date, and
``(II) the interest rate and
mortality table used to determine the
amount of any benefit under the
[[Page 120 STAT. 987]]
plan payable in the form of an annuity
payable at normal retirement age shall
be the rate and table specified under
the plan for such purpose as of the
termination date, except that if such
interest rate is a variable rate, the
interest rate shall be determined under
the rules of subclause (I).
``(C) Certain offsets permitted.--A plan shall not
be treated as failing to meet the requirements of
paragraph (1)(H)(i) solely because the plan provides
offsets against benefits under the plan to the extent
such offsets are allowable in applying the requirements
of section 401(a).
``(D) Permitted disparities in plan contributions or
benefits.--A plan shall not be treated as failing to
meet the requirements of paragraph (1)(H) solely because
the plan provides a disparity in contributions or
benefits with respect to which the requirements of
section 401(l) are met.
``(E) Indexing permitted.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1)(H) solely because the plan provides for
indexing of accrued benefits under the plan.
``(ii) Protection against loss.--Except in the
case of any benefit provided in the form of a
variable annuity, clause (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
subparagraph, 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.
``(F) Early retirement benefit or retirement-type
subsidy.--For purposes of this paragraph, the terms
`early retirement benefit' and `retirement-type subsidy'
have the meaning given such terms in subsection
(d)(6)(B)(i).
``(G) Benefit accrued to date.--For purposes of this
paragraph, any reference to the accrued benefit shall be
a reference to such benefit accrued to date.''.
(2) Determinations of accrued benefit as balance of benefit
account or equivalent amounts.--Subsection (a) of section 411 of
such Code is amended by adding at the end the following new
paragraph:
``(13) Special rules for plans computing accrued benefits by
reference to hypothetical account balance or equivalent
amounts.--
``(A) In general.--An applicable defined benefit
plan shall not be treated as failing to meet--
``(i) subject to paragraph (2), the
requirements of subsection (a)(2), or
``(ii) the requirements of subsection (c) or
section 417(e) with respect to contributions other
than employee contributions,
solely because the present value of the accrued benefit
(or any portion thereof) of any participant is, under
the
[[Page 120 STAT. 988]]
terms of the plan, equal to the amount expressed as the
balance in the hypothetical account described in
paragraph (3) or as an accumulated percentage of the
participant's final average compensation.
``(B) 3-year vesting.--In the case of an applicable
defined benefit plan, such plan shall be treated as
meeting the requirements of subsection (a)(2) only if an
employee who has completed at least 3 years of service
has a nonforfeitable right to 100 percent of the
employee's accrued benefit derived from employer
contributions.
``(C) Applicable defined benefit plan and related
rules.--For purposes of this subsection--
``(i) In general.--The term `applicable
defined benefit plan' means a defined benefit plan
under which the accrued benefit (or any portion
thereof) is calculated as the balance of a
hypothetical account maintained for the
participant or as an accumulated percentage of the
participant's final average compensation.
``(ii) Regulations to include similar plans.--
The Secretary shall issue regulations which
include in the definition of an applicable defined
benefit plan any defined benefit plan (or any
portion of such a plan) which has an effect
similar to an applicable defined benefit plan.''.
(c) Amendments to Age Discrimination in Employment Act.--Section
4(i) of the Age Discrimination in Employment Act of 1967 (29 U.S.C.
623(i)) is amended by adding at the end the following new paragraph:
``(10) Special rules relating to age.--
``(A) Comparison to similarly situated younger
individual.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1) if a participant's accrued benefit, as
determined as of any date under the terms of the
plan, would be equal to or greater than that of
any similarly situated, younger individual who is
or could be a participant.
``(ii) Similarly situated.--For purposes of
this subparagraph, a participant is similarly
situated to any other individual if such
participant is identical to such other individual
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 accrued
benefit as of any date for purposes of this
clause, the subsidized portion of any early
retirement benefit or retirement-type subsidy
shall be disregarded.
``(iv) Accrued benefit.--For purposes of this
subparagraph, the accrued benefit may, under the
terms of the plan, be expressed as an annuity
payable at normal retirement age, the balance of a
hypothetical account, or the current value of the
accumulated percentage of the employee's final
average compensation.
``(B) Applicable defined benefit plans.--
[[Page 120 STAT. 989]]
``(i) Interest credits.--
``(I) In general.--An applicable
defined benefit plan shall be treated as
failing to meet the requirements of
paragraph (1) unless the terms of the
plan provide that any interest credit
(or an equivalent amount) for any plan
year shall be at a rate which is not
greater than a market rate of return. A
plan shall not be treated as failing to
meet the requirements of this subclause
merely because the plan provides for a
reasonable minimum guaranteed rate of
return or for a rate of return that is
equal to the greater of a fixed or
variable rate of return.
``(II) Preservation of capital.--An
interest credit (or an equivalent
amount) of less than zero shall in no
event result in the account balance or
similar amount being less than the
aggregate amount of contributions
credited to the account.
``(III) Market rate of return.--The
Secretary of the Treasury may provide by
regulation for rules governing the
calculation of a market rate of return
for purposes of subclause (I) 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 subclause (I).
``(ii) Special rule for plan conversions.--If,
after June 29, 2005, an applicable plan amendment
is adopted, the plan shall be treated as failing
to meet the requirements of paragraph (1)(H)
unless the requirements of clause (iii) are met
with respect to each individual who was a
participant in the plan immediately before the
adoption of the amendment.
``(iii) Rate of benefit accrual.--Subject to
clause (iv), the requirements of this clause are
met with respect to any participant if the accrued
benefit of the participant under the terms of the
plan as in effect after the amendment is not less
than the sum of--
``(I) the participant's accrued
benefit for years of service before the
effective date of the amendment,
determined under the terms of the plan
as in effect before the amendment, plus
``(II) the participant's accrued
benefit for years of service after the
effective date of the amendment,
determined under the terms of the plan
as in effect after the amendment.
``(iv) Special rules for early retirement
subsidies.--For purposes of clause (iii)(I), the
plan shall credit the accumulation account or
similar amount with the amount of any early
retirement benefit or retirement-type subsidy for
the plan year in which the participant retires if,
as of such time, the participant has met the age,
years of service, and other requirements under the
plan for entitlement to such benefit or subsidy.
[[Page 120 STAT. 990]]
``(v) Applicable plan amendment.--For purposes
of this subparagraph--
``(I) In general.--The term
`applicable plan amendment' means an
amendment to a defined benefit plan
which has the effect of converting the
plan to an applicable defined benefit
plan.
``(II) Special rule for coordinated
benefits.--If the benefits of 2 or more
defined benefit plans established or
maintained by an employer are
coordinated in such a manner as to have
the effect of the adoption of an
amendment described in subclause (I),
the sponsor of the defined benefit plan
or plans providing for such coordination
shall be treated as having adopted such
a plan amendment as of the date such
coordination begins.
``(III) Multiple amendments.--
The <<NOTE: Regulations.>> Secretary of
the Treasury shall issue regulations to
prevent the avoidance of the purposes of
this subparagraph through the use of 2
or more plan amendments rather than a
single amendment.
``(IV) Applicable defined benefit
plan.--For purposes of this
subparagraph, the term `applicable
defined benefit plan' has the meaning
given such term by section 203(f)(3) of
the Employee Retirement Income Security
Act of 1974.
``(vi) Termination requirements.--An
applicable defined benefit plan shall not be
treated as meeting the requirements of clause (i)
unless the plan provides that, upon the
termination of the plan--
``(I) if the interest credit rate
(or an equivalent amount) under the plan
is a variable rate, the rate of interest
used to determine accrued benefits under
the plan shall be equal to the average
of the rates of interest used under the
plan during the 5-year period ending on
the termination date, and
``(II) the interest rate and
mortality table used to determine the
amount of any benefit under the plan
payable in the form of an annuity
payable at normal retirement age shall
be the rate and table specified under
the plan for such purpose as of the
termination date, except that if such
interest rate is a variable rate, the
interest rate shall be determined under
the rules of subclause (I).
``(C) Certain offsets permitted.--A plan shall not
be treated as failing to meet the requirements of
paragraph (1) solely because the plan provides offsets
against benefits under the plan to the extent such
offsets are allowable in applying the requirements of
section 401(a) of the Internal Revenue Code of 1986.
``(D) Permitted disparities in plan contributions or
benefits.--A plan shall not be treated as failing to
meet the requirements of paragraph (1) 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.
[[Page 120 STAT. 991]]
``(E) Indexing permitted.--
``(i) In general.--A plan shall not be treated
as failing to meet the requirements of paragraph
(1) solely because the plan provides for indexing
of accrued benefits under the plan.
``(ii) Protection against loss.--Except in the
case of any benefit provided in the form of a
variable annuity, clause (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
subparagraph, 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.
``(F) Early retirement benefit or retirement-type
subsidy.--For purposes of this paragraph, the terms
`early retirement benefit' and `retirement-type subsidy'
have the meaning given such terms in section
203(g)(2)(A) of the Employee Retirement Income Security
Act of 1974.
``(G) Benefit accrued to date.--For purposes of this
paragraph, any reference to the accrued benefit shall be
a reference to such benefit accrued to date.''.
(d) <<NOTE: 26 USC 411 note.>> No Inference.--Nothing in the
amendments made by this section shall be construed to create an
inference with respect to--
(1) the treatment of applicable defined benefit plans or
conversions to applicable defined benefit plans under sections
204(b)(1)(H) of the Employee Retirement Income Security Act of
1974, 4(i)(1) of the Age Discrimination in Employment Act of
1967, and 411(b)(1)(H) of the Internal Revenue Code of 1986, as
in effect before such amendments, or
(2) the determination of whether an applicable defined
benefit plan fails to meet the requirements of sections
203(a)(2), 204(c), or 204(g) of the Employee Retirement Income
Security Act of 1974 or sections 411(a)(2), 411(c), or 417(e) of
such Code, as in effect before such amendments, solely because
the present value of the accrued benefit (or any portion
thereof) of any participant is, under the terms of the plan,
equal to the amount expressed as the balance in a hypothetical
account or as an accumulated percentage of the participant's
final average compensation.
For purposes of this subsection, the term ``applicable defined benefit
plan'' has the meaning given such term by section 203(f)(3) of the
Employee Retirement Income Security Act of 1974 and section
411(a)(13)(C) of such Code, as in effect after such amendments.
(e) <<NOTE: Applicability. 26 USC 411 note.>> Effective Date.--
(1) In general.--The amendments made by this section shall
apply to periods beginning on or after June 29, 2005.
(2) Present value of accrued benefit.--The amendments made
by subsections (a)(2) and (b)(2) shall apply to distributions
made after the date of the enactment of this Act.
(3) Vesting and interest credit requirements.--In the case
of a plan in existence on June 29, 2005, the requirements of
clause (i) of section 411(b)(5)(B) of the Internal Revenue Code
of 1986, clause (i) of section 204(b)(5)(B) of the Employee
[[Page 120 STAT. 992]]
Retirement Income Security Act of 1974, and clause (i) of
section 4(i)(10)(B) of the Age Discrimination in Employment Act
of 1967 (as added by this Act) and the requirements of 203(f)(2)
of the Employee Retirement Income Security Act of 1974 and
section 411(a)(13)(B) of the Internal Revenue Code of 1986 (as
so added) shall, for purposes of applying the amendments made by
subsections (a) and (b), apply to years beginning after December
31, 2007, unless the plan sponsor elects the application of such
requirements for any period after June 29, 2005, and before the
first year beginning after December 31, 2007.
(4) Special rule for collectively bargained plans.--In the
case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or
more employers ratified on or before the date of the enactment
of this Act, the requirements described in paragraph (3) shall,
for purposes of applying the amendments made by subsections (a)
and (b), not apply to plan years beginning before--
(A) the earlier of--
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof on or after such date of enactment), or
(ii) January 1, 2008, or
(B) January 1, 2010.
(5) Conversions.--The requirements of clause (ii) of section
411(b)(5)(B) of the Internal Revenue Code of 1986, clause (ii)
of section 204(b)(5)(B) of the Employee Retirement Income
Security Act of 1974, and clause (ii) of section 4(i)(10)(B) of
the Age Discrimination in Employment Act of 1967 (as added by
this Act), shall apply to plan amendments adopted after, and
taking effect after, June 29, 2005, except that the plan sponsor
may elect to have such amendments apply to plan amendments
adopted before, and taking effect after, such date.
SEC. 702. <<NOTE: Deadline. 26 USC 411 note.>> REGULATIONS RELATING TO
MERGERS AND ACQUISITIONS.
The Secretary of the Treasury or his delegate shall, not later than
12 months after the date of the enactment of this Act, prescribe
regulations for the application of the amendments made by, and the
provisions of, this title in cases where the conversion of a plan to an
applicable defined benefit plan is made with respect to a group of
employees who become employees by reason of a merger, acquisition, or
similar transaction.
TITLE VIII--PENSION RELATED REVENUE PROVISIONS
Subtitle A--Deduction Limitations
SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.
(a) In General.--Section 404 of the Internal Revenue Code of
1986 <<NOTE: 26 USC 404.>> (relating to deduction for contributions of
an employer
[[Page 120 STAT. 993]]
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 greater of--
``(A) the sum of the amounts determined under
paragraph (2) with respect to each plan year ending with
or within the taxable year, or
``(B) the sum of the minimum required contributions
under section 430 for such plan years.
``(2) Determination of amount.--
``(A) In general.--The amount determined under this
paragraph for any plan year shall be equal to the excess
(if any) of--
``(i) the sum of--
``(I) the funding target for the
plan year,
``(II) the target normal cost for
the plan year, and
``(III) the cushion amount for the
plan year, over
``(ii) the value (determined under section
430(g)(2)) of the assets of the plan which are
held by the plan as of the valuation date for the
plan year.
``(B) Special rule for certain employers.--If
section 430(i) does not apply to a plan for a plan year,
the amount determined under subparagraph (A)(i) for the
plan year shall in no event be less than the sum of--
``(i) the funding target for the plan year
(determined as if section 430(i) applied to the
plan), plus
``(ii) the target normal cost for the plan
year (as so determined).
``(3) Cushion amount.--For purposes of paragraph
(2)(A)(i)(III)--
``(A) In general.--The cushion amount for any plan
year is the sum of--
``(i) 50 percent of the funding target for the
plan year, and
``(ii) the amount by which the funding target
for the plan year would increase if the plan were
to take into account--
``(I) increases in compensation
which are expected to occur in
succeeding plan years, or
``(II) if the plan does not base
benefits for service to date on
compensation, increases in benefits
which are expected to occur in
succeeding plan years (determined on the
basis of the average annual increase in
benefits over the 6 immediately
preceding plan years).
``(B) Limitations.--
[[Page 120 STAT. 994]]
``(i) In general.--
In <<NOTE: Applicability.>> making the computation
under subparagraph (A)(ii), the plan's actuary
shall assume that the limitations under subsection
(l) and section 415(b) shall apply.
``(ii) Expected increases.--In the case of a
plan year during which a plan is covered under
section 4021 of the Employee Retirement Income
Security Act of 1974, the plan's actuary may,
notwithstanding subsection (l), take into account
increases in the limitations which are expected to
occur in succeeding plan years.
``(4) Special rules for plans with 100 or fewer
participants.--
``(A) In general.--For purposes of determining the
amount under paragraph (3) for any plan year, in the
case of a plan which has 100 or fewer participants for
the plan year, the liability of the plan attributable to
benefit increases for highly compensated employees (as
defined in section 414(q)) resulting from a plan
amendment which is made or becomes effective, whichever
is later, within the last 2 years shall not be taken
into account in determining the target liability.
``(B) Rule for determining number of participants.--
For purposes of determining the number of plan
participants, all defined benefit plans maintained by
the same employer (or any member of such employer's
controlled group (within the meaning of section
412(f)(4))) shall be treated as one plan, but only
participants of such member or employer shall be taken
into account.
``(5) Special rule for terminating plans.--In the case of a
plan which, subject to section 4041 of the Employee Retirement
Income Security Act of 1974, terminates during the plan year,
the amount determined under paragraph (2) shall in no event be
less than the amount required to make the plan sufficient for
benefit liabilities (within the meaning of section 4041(d) of
such Act).
``(6) Actuarial assumptions.--Any computation under this
subsection for any plan year shall use the same actuarial
assumptions which are used for the plan year under section 430.
``(7) Definitions.--Any term used in this subsection which
is also used in section 430 shall have the same meaning given
such term by section 430.''.
(b) Exception From Limitation on Deduction Where Combination of
Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of
such Code, as amended by this Act, <<NOTE: 26 USC 404.>> is amended by
adding at the end the following new clause:
``(iv) Guaranteed plans.--In applying this
paragraph, any single-employer plan covered under
section 4021 of the Employee Retirement Income
Security Act of 1974 shall not be taken into
account.''.
(c) Technical and Conforming Amendments.--
(1) The last sentence of section 404(a)(1)(A) of such Code
is amended by striking ``section 412'' each place it appears and
inserting ``section 431''.
(2) Section 404(a)(1)(B) of such Code is amended--
[[Page 120 STAT. 995]]
(A) by striking ``In the case of a plan'' and
inserting ``In the case of a multiemployer plan'',
(B) by striking ``section 412(c)(7)'' each place it
appears and inserting ``section 431(c)(6)'',
(C) by striking ``section 412(c)(7)(B)'' and
inserting ``section 431(c)(6)(A)(ii)'',
(D) by striking ``section 412(c)(7)(A)'' and
inserting ``section 431(c)(6)(A)(i)'', and
(E) by striking ``section 412'' and inserting
``section 431''.
(3) Section 404(a)(7) of such Code, as amended by this
Act, <<NOTE: 26 USC 404.>> is amended--
(A) by adding at the end of subparagraph (A) the
following new sentence: ``In the case of a defined
benefit plan which is a single employer plan, the amount
necessary to satisfy the minimum funding standard
provided by section 412 shall not be less than the
plan's funding shortfall determined under section
430.'', and
(B) by striking subparagraph (D) and inserting:
``(D) Insurance contract plans.--For purposes of
this paragraph, a plan described in section 412(e)(3)
shall be treated as a defined benefit plan.''.
(4) Section 404A(g)(3)(A) of such Code is amended by
striking ``paragraphs (3) and (7) of section 412(c)'' and
inserting ``paragraphs (3) and (6) of section 431(c)''.
(d) Special Rule for 2006 and 2007.--
(1) In general.--Clause <<NOTE: Applicability.>> (i) of
section 404(a)(1)(D) of the Internal Revenue Code of 1986
(relating to special rule in case of certain plans) is amended
by striking ``section 412(l)'' and inserting ``section
412(l)(8)(A), except that section 412(l)(8)(A) shall be applied
for purposes of this clause by substituting `150 percent (140
percent in the case of a multiemployer plan) of current
liability' for `the current liability' in clause (i).''.
(2) Conforming amendment.--Section 404(a)(1) of the Internal
Revenue Code of 1986 is amended by striking subparagraph (F).
(e) <<NOTE: 26 USC 404 note.>> Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to years beginning
after December 31, 2007.
(2) Special rules.--The amendments made by subsection (d)
shall apply to years beginning after December 31, 2005.
SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.
(a) Increase in Deduction.--Section 404(a)(1)(D) of the Internal
Revenue Code of 1986, as amended by this Act, is amended to read as
follows:
``(D) Amount determined on basis of unfunded current
liability.--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)(C),
over
[[Page 120 STAT. 996]]
``(ii) the value of the plan's assets
determined under section 431(c)(2).''.
(b) <<NOTE: 26 USC 404 note.>> Effective Date.--The amendment made
by subsection (a) shall apply to years beginning after December 31,
2007.
SEC. 803. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.
(a) In General.--Subparagraph (C) of section 404(a)(7) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 404.>> (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) Exception From Limitation on Deduction Where Combination of
Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of
such Code, as amended by this Act, is amended by adding at the end the
following new clause:
``(v) Multiemployer plans.--In applying this
paragraph, any multiemployer plan shall not be
taken into account.''.
(c) Conforming Amendment.--Subparagraph (A) of section 4972(c)(6) of
such Code (relating to nondeductible contributions) is amended to read
as follows:
``(A) so much of the contributions to 1 or more
defined contribution plans which are not deductible when
contributed solely because of section 404(a)(7) as does
not exceed the amount of contributions described in
section 401(m)(4)(A), or''.
(d) <<NOTE: 26 USC 404 note.>> Effective Date.--The amendments made
by this section shall apply to contributions for taxable years beginning
after December 31, 2005.
Subtitle B--Certain Pension Provisions Made Permanent
SEC. 811. <<NOTE: 26 USC 1 note.>> 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).
[[Page 120 STAT. 997]]
SEC. 812. SAVER'S CREDIT.
Section 25B of the Internal Revenue Code of 1986 <<NOTE: 26 USC
25B.>> (relating to elective deferrals and IRA contributions by certain
individuals) is amended by striking subsection (h).
Subtitle C--Improvements in Portability, Distribution, and Contribution
Rules
SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE
CREDIT.
(a) In General.--Section 415(n) of the Internal Revenue Code of 1986
(relating to special rules for the purchase of permissive service
credit) is amended--
(1) by striking ``an employee'' in paragraph (1) and
inserting ``a participant'', and
(2) by adding at the end of paragraph (3)(A) the following
new flush sentence:
``Such term may include service credit for periods for
which there is no performance of service, and,
notwithstanding clause (ii), may include service
credited in order to provide an increased benefit for
service credit which a participant is receiving under
the plan.''.
(b) Special Rules for Trustee-to-Trustee Transfers.--Section
415(n)(3) of such Code is amended by adding at the end the following new
subparagraph:
``(D) Special rules for trustee-to-trustee
transfers.--In the case of a trustee-to-trustee transfer
to which section 403(b)(13)(A) or 457(e)(17)(A) applies
(without regard to whether the transfer is made between
plans maintained by the same employer)--
``(i) the limitations of subparagraph (B)
shall not apply in determining whether the
transfer is for the purchase of permissive service
credit, and
``(ii) <<NOTE: Applicability.>> the
distribution rules applicable under this title to
the defined benefit governmental plan to which any
amounts are so transferred shall apply to such
amounts and any benefits attributable to such
amounts.''.
(c) Nonqualified Service.--Section 415(n)(3) of such Code is
amended--
(1) by striking ``permissive service credit attributable to
nonqualified service'' each place it appears in subparagraph (B)
and inserting ``nonqualified service credit'',
(2) by striking so much of subparagraph (C) as precedes
clause (i) and inserting:
``(C) Nonqualified service credit.--For purposes of
subparagraph (B), the term `nonqualified service credit'
means permissive service credit other than that allowed
with respect to--'', and
(3) by striking ``elementary or secondary education (through
grade 12), as determined under State law'' in subparagraph
(C)(ii) and inserting ``elementary or secondary education
(through grade 12), or a comparable level of education, as
determined under the applicable law of the jurisdiction in which
the service was performed''.
[[Page 120 STAT. 998]]
(d) <<NOTE: 26 USC 415 note.>> Effective Dates.--
(1) In general.--The amendments made by subsections (a) and
(c) shall take effect as if included in the amendments made by
section 1526 of the Taxpayer Relief Act of 1997.
(2) Subsection (b).--The amendments made by subsection (b)
shall take effect as if included in the amendments made by
section 647 of the Economic Growth and Tax Relief Reconciliation
Act of 2001.
SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.
(a) In General.--Subparagraph (A) of section <<NOTE: 26 USC
402.>> 402(c)(2) (relating to the maximum amount which may be rolled
over) is amended--
(1) by striking ``which is part of a plan which is a defined
contribution plan and which agrees to separately account'' and
inserting ``or to an annuity contract described in section
403(b) and such trust or contract provides for separate
accounting''; and
(2) by inserting ``(and earnings thereon)'' after ``so
transferred''.
(b) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendment made
by subsection (a) shall apply to taxable years beginning after December
31, 2006.
SEC. 823. <<NOTE: Regulations.>> CLARIFICATION OF MINIMUM DISTRIBUTION
RULES FOR GOVERNMENTAL PLANS.
The Secretary of the Treasury shall issue regulations under which a
governmental plan (as defined in section 414(d) of the Internal Revenue
Code of 1986) shall, for all years to which section 401(a)(9) of such
Code applies to such plan, be treated as having complied with such
section 401(a)(9) if such plan complies with a reasonable good faith
interpretation of such section 401(a)(9).
SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.
(a) In General.--Subsection (e) of section 408A of the Internal
Revenue Code of 1986 (defining qualified rollover contribution) is
amended to read as follows:
``(e) Qualified Rollover Contribution.--For purposes of this
section, the term `qualified rollover contribution' means a rollover
contribution--
``(1) to a Roth IRA from another such account,
``(2) from an eligible retirement plan, but only if--
``(A) in the case of an individual retirement plan,
such rollover contribution meets the requirements of
section 408(d)(3), and
``(B) in the case of any eligible retirement plan
(as defined in section 402(c)(8)(B) other than clauses
(i) and (ii) thereof), such rollover contribution meets
the requirements of section 402(c), 403(b)(8), or
457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall be disregarded any
qualified rollover contribution from an individual retirement plan
(other than a Roth IRA) to a Roth IRA.''.
(b) Conforming Amendments.--
(1) <<NOTE: 26 USC 408A and note.>> Section 408A(c)(3)(B) of
such Code, as in effect before the Tax Increase Prevention and
Reconciliation Act of 2005, is amended--
[[Page 120 STAT. 999]]
(A) in the text by striking ``individual retirement
plan'' and inserting ``an eligible retirement plan (as
defined by section 402(c)(8)(B))'', and
(B) in the heading by striking ``IRA'' the first
place it appears and inserting ``eligible retirement
plan''.
(2) Section 408A(d)(3) of such Code <<NOTE: 26 USC
408A.>> is amended--
(A) in subparagraph (A), by striking ``section
408(d)(3)'' inserting ``sections 402(c), 403(b)(8),
408(d)(3), and 457(e)(16)'',
(B) in subparagraph (B), by striking ``individual
retirement plan'' and inserting ``eligible retirement
plan (as defined by section 402(c)(8)(B))'',
(C) in subparagraph (D), by inserting ``or 6047''
after ``408(i)'',
(D) in subparagraph (D), by striking ``or both'' and
inserting ``persons subject to section 6047(d)(1), or
all of the foregoing persons'', and
(E) in the heading, by striking ``IRA'' the first
place it appears and inserting ``eligible retirement
plan''.
(c) <<NOTE: 26 USC 408A note.>> Effective Date.--The amendments made
by this section shall apply to distributions after December 31, 2007.
SEC. 825. <<NOTE: 26 USC 457 note.>> ELIGIBILITY FOR PARTICIPATION IN
RETIREMENT PLANS.
An individual shall not be precluded from participating in an
eligible deferred compensation plan by reason of having received a
distribution under section 457(e)(9) of the Internal Revenue Code of
1986, as in effect prior to the enactment of the Small Business Job
Protection Act of 1996.
SEC. 826. <<NOTE: 26 USC 401 note.>> MODIFICATIONS OF RULES GOVERNING
HARDSHIPS AND UNFORSEEN FINANCIAL EMERGENCIES.
Within <<NOTE: Deadline.>> 180 days after the date of the enactment
of this Act, the Secretary of the Treasury shall modify the rules for
determining whether a participant has had a hardship for purposes of
section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to
provide that if an event (including the occurrence of a medical expense)
would constitute a hardship under the plan if it occurred with respect
to the participant's spouse or dependent (as defined in section 152 of
such Code), such event shall, to the extent permitted under a plan,
constitute a hardship if it occurs with respect to a person who is a
beneficiary under the plan with respect to the participant. The
Secretary of the Treasury shall issue similar rules for purposes of
determining whether a participant has had--
(1) a hardship for purposes of section 403(b)(11)(B) of such
Code; or
(2) an unforeseen financial emergency for purposes of
sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and
457(d)(1)(A)(iii) of such Code.
SEC. 827. 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.--
[[Page 120 STAT. 1000]]
``(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 December 31, 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 <<NOTE: 26 USC
401.>> 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:
[[Page 120 STAT. 1001]]
``(C) for distributions to which section 72(t)(2)(G)
applies.''.
(c) <<NOTE: 26 USC 72 note.>> 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. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX ON CERTAIN
DISTRIBUTIONS OF PENSION PLANS FOR PUBLIC SAFETY EMPLOYEES.
(a) In General.--Section 72(t) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 72.>> (relating to subsection not to apply to
certain distributions) is amended by adding at the end the following new
paragraph:
``(10) Distributions to qualified public safety employees in
governmental plans.--
``(A) In general.--In the case of a distribution to
a qualified public safety employee from a governmental
plan (within the meaning of section 414(d)) which is a
defined benefit plan, paragraph (2)(A)(v) shall be
applied by substituting `age 50' for `age 55'.
``(B) Qualified public safety employee.--For
purposes of this paragraph, the term `qualified public
safety employee' means any employee of a State or
political subdivision of a State who provides police
protection, firefighting services, or emergency medical
services for any area within the jurisdiction of such
State or political subdivision.''.
(b) <<NOTE: 26 USC 72 note.>> Effective Date.--The amendment made by
this section shall apply to distributions after the date of the
enactment of this Act.
SEC. 829. 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,
[[Page 120 STAT. 1002]]
``(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) <<NOTE: Applicability.>> 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 <<NOTE: 26 USC 403.>> (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) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendments made
by this section shall apply to distributions after December 31, 2006.
SEC. 830. <<NOTE: 26 USC 408 note.>> 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. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN CERTAIN BANKRUPTCY
CASES.
(a) Allowance of Contributions.--Section 219(b)(5) of the Internal
Revenue Code of 1986 (relating to deductible amount) is amended by
redesignating subparagraph (C) as subparagraph (D) and by inserting
after subparagraph (B) the following new subparagraph:
``(C) Catchup contributions for certain
individuals.--
``(i) In general.--In the case of an
applicable individual who elects to make a
qualified retirement contribution in addition to
the deductible amount determined under
subparagraph (A)--
``(I) the deductible amount for any
taxable year shall be increased by an
amount equal to 3 times the applicable
amount determined under subparagraph (B)
for such taxable year, and
``(II) subparagraph (B) shall not
apply.
``(ii) Applicable individual.--For purposes of
this subparagraph, the term `applicable
individual' means, with respect to any taxable
year, any individual who was a qualified
participant in a qualified cash or
[[Page 120 STAT. 1003]]
deferred arrangement (as defined in section
401(k)) of an employer described in clause (iii)
under which the employer matched at least 50
percent of the employee's contributions to such
arrangement with stock of such employer.
``(iii) Employer described.--An employer is
described in this clause if, in any taxable year
preceding the taxable year described in clause
(ii)--
``(I) such employer (or any
controlling corporation of such
employer) was a debtor in a case under
title 11 of the United States Code, or
similar Federal or State law, and
``(II) such employer (or any other
person) was subject to an indictment or
conviction resulting from business
transactions related to such case.
``(iv) Qualified participant.--For purposes of
clause (ii), the term `qualified participant'
means any applicable individual who was a
participant in the cash or deferred arrangement
described in such clause on the date that is 6
months before the filing of the case described in
clause (iii).
``(v) Termination.--This subparagraph shall
not apply to taxable years beginning after
December 31, 2009.''.
(b) <<NOTE: 26 USC 219 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2006.
SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION 415 LIMITS.
(a) In General.--Section 415(b)(3) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 415.>> is amended by striking ``both was an active
participant in the plan and''.
(b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
by this section shall apply to years beginning after December 31, 2005.
SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON CERTAIN
RETIREMENT SAVINGS INCENTIVES.
(a) Saver's Credit.--Subsection (b) of section 25B of the Internal
Revenue Code of 1986 is amended to read as follows:
``(b) Applicable Percentage.--For purposes of this section--
``(1) Joint returns.--In the case of a joint return, the
applicable percentage is--
``(A) if the adjusted gross income of the taxpayer
is not over $30,000, 50 percent,
``(B) if the adjusted gross income of the taxpayer
is over $30,000 but not over $32,500, 20 percent,
``(C) if the adjusted gross income of the taxpayer
is over $32,500 but not over $50,000, 10 percent, and
``(D) if the adjusted gross income of the taxpayer
is over $50,000, zero percent.
``(2) Other returns.--In the case of--
``(A) a head of household, the applicable percentage
shall be determined under paragraph (1) except that such
paragraph shall be applied by substituting for each
dollar amount therein (as adjusted under paragraph (3))
a dollar amount equal to 75 percent of such dollar
amount, and
[[Page 120 STAT. 1004]]
``(B) <<NOTE: Applicability.>> any taxpayer not
described in paragraph (1) or subparagraph (A), the
applicable percentage shall be determined under
paragraph (1) except that such paragraph shall be
applied by substituting for each dollar amount therein
(as adjusted under paragraph (3)) a dollar amount equal
to 50 percent of such dollar amount.
``(3) Inflation adjustment.--In the case of any taxable year
beginning in a calendar year after 2006, each of the dollar
amounts in paragraph (1) shall be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2005' for `calendar year 1992' in
subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $500.''.
(b) Deduction of Retirement Contributions for Active Participants.--
Section 219(g) of such Code <<NOTE: 26 USC 219.>> is amended by adding
at the end the following new paragraph:
``(8) Inflation adjustment.--In the case of any taxable year
beginning in a calendar year after 2006, the dollar amount in
the last row of the table contained in paragraph (3)(B)(i), the
dollar amount in the last row of the table contained in
paragraph (3)(B)(ii), and the dollar amount contained in
paragraph (7)(A), shall each be increased by an amount equal
to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting
`calendar year 2005' for `calendar year 1992' in
subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be
rounded to the nearest multiple of $1,000.''.
(c) Contribution Limitation for Roth IRAs.--Section 408A(c)(3) of
such Code is amended by adding at the end the following new
subparagraph:
``(C) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2006,
the dollar amounts in subclauses (I) and (II) of
subparagraph (C)(ii) shall each be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined
by substituting `calendar year 2005' for `calendar
year 1992' in subparagraph (B) thereof.
Any increase determined under the preceding sentence
shall be rounded to the nearest multiple of $1,000.''.
(d) <<NOTE: 26 USC 25B note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after 2006.
[[Page 120 STAT. 1005]]
Subtitle D--Health and Medical Benefits
SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE HEALTH
BENEFITS AND COLLECTIVELY BARGAINED RETIREE HEALTH BENEFITS.
(a) In General.--Section 420 of the Internal Revenue Code of
1986 <<NOTE: 26 USC 420.>> (relating to transfers of excess pension
assets to retiree health accounts) is amended by adding at the end the
following new subsection:
``(f) Qualified Transfers To Cover Future Retiree Health Costs and
Collectively Bargained Retiree Health Benefits.--
``(1) In general.--An employer maintaining a defined benefit
plan (other than a multiemployer plan) may, in lieu of a
qualified transfer, elect for any taxable year to have the plan
make--
``(A) a qualified future transfer, or
``(B) a collectively bargained transfer.
Except as provided in this subsection, a qualified future
transfer and a collectively bargained transfer shall be treated
for purposes of this title and the Employee Retirement Income
Security Act of 1974 as if it were a qualified transfer.
``(2) Qualified future and collectively bargained
transfers.--For purposes of this subsection--
``(A) In general.--The terms `qualified future
transfer' and `collectively bargained transfer' mean a
transfer which meets all of the requirements for a
qualified transfer, except that--
``(i) the determination of excess pension
assets shall be made under subparagraph (B),
``(ii) the limitation on the amount
transferred shall be determined under subparagraph
(C),
``(iii) the minimum cost requirements of
subsection (c)(3) shall be modified as provided
under subparagraph (D), and
``(iv) in the case of a collectively bargained
transfer, the requirements of subparagraph (E)
shall be met with respect to the transfer.
``(B) Excess pension assets.--
``(i) In general.--In determining excess
pension assets for purposes of this subsection,
subsection (e)(2) shall be applied by substituting
`120 percent' for `125 percent'.
``(ii) Requirement to maintain funded
status.--If, as of any valuation date of any plan
year in the transfer period, the amount determined
under subsection (e)(2)(B) (after application of
clause (i)) exceeds the amount determined under
subsection (e)(2)(A), either--
``(I) the employer maintaining the
plan shall make contributions to the
plan in an amount not less than the
amount required to reduce such excess to
zero as of such date, or
``(II) there is transferred from the
health benefits account to the plan an
amount not less than the amount required
to reduce such excess to zero as of such
date.
[[Page 120 STAT. 1006]]
``(C) Limitation on amount transferred.--
Notwithstanding subsection (b)(3), the amount of the
excess pension assets which may be transferred--
``(i) in the case of a qualified future
transfer shall be equal to the sum of--
``(I) if the transfer period
includes the taxable year of the
transfer, the amount determined under
subsection (b)(3) for such taxable year,
plus
``(II) in the case of all other
taxable years in the transfer period,
the sum of the qualified current retiree
health liabilities which the plan
reasonably estimates, in accordance with
guidance issued by the Secretary, will
be incurred for each of such years, and
``(ii) in the case of a collectively bargained
transfer, shall not exceed the amount which is
reasonably estimated, in accordance with the
provisions of the collective bargaining agreement
and generally accepted accounting principles, to
be the amount the employer maintaining the plan
will pay (whether directly or through
reimbursement) out of such account during the
collectively bargained cost maintenance period for
collectively bargained retiree health liabilities.
``(D) Minimum cost requirements.--
``(i) In general.--The requirements of
subsection (c)(3) shall be treated as met if--
``(I) in the case of a qualified
future transfer, each group health plan
or arrangement under which applicable
health benefits are provided provides
applicable health benefits during the
period beginning with the first year of
the transfer period and ending with the
last day of the 4th year following the
transfer period such that the annual
average amount of such the applicable
employer cost during such period is not
less than the applicable employer cost
determined under subsection (c)(3)(A)
with respect to the transfer, and
``(II) in the case of a collectively
bargained transfer, each collectively
bargained group health plan under which
collectively bargained health benefits
are provided provides that the
collectively bargained employer cost for
each taxable year during the
collectively bargained cost maintenance
period shall not be less than the amount
specified by the collective bargaining
agreement.
``(ii) Election to maintain benefits for
future transfers.--An employer may elect, in lieu
of the requirements of clause (i)(I), to meet the
requirements of subsection (c)(3) by meeting the
requirements of such subsection (as in effect
before the amendments made by section 535 of the
Tax Relief Extension Act of 1999) for each of the
years described in the period under clause (i)(I).
``(iii) Collectively bargained employer
cost.--For purposes of this subparagraph, the term
`collectively bargained employer cost' means the
average cost
[[Page 120 STAT. 1007]]
per covered individual of providing collectively
bargained retiree health benefits as determined in
accordance with the applicable collective
bargaining agreement. Such agreement may provide
for an appropriate reduction in the collectively
bargained employer cost to take into account any
portion of the collectively bargained retiree
health benefits that is provided or financed by a
government program or other source.
``(E) Special rules for collectively bargained
transfers.--
``(i) In general.--A collectively bargained
transfer shall only include a transfer which--
``(I) is made in accordance with a
collective bargaining agreement,
``(II) before the transfer, the
employer designates, in a written notice
delivered to each employee organization
that is a party to the collective
bargaining agreement, as a collectively
bargained transfer in accordance with
this section, and
``(III) involves a plan maintained
by an employer which, in its taxable
year ending in 2005, provided health
benefits or coverage to retirees and
their spouses and dependents under all
of the benefit plans maintained by the
employer, but only if the aggregate cost
(including administrative expenses) of
such benefits or coverage which would
have been allowable as a deduction to
the employer (if such benefits or
coverage had been provided directly by
the employer and the employer used the
cash receipts and disbursements method
of accounting) is at least 5 percent of
the gross receipts of the employer
(determined in accordance with the last
sentence of subsection
(c)(2)(E)(ii)(II)) for such taxable
year, or a plan maintained by a
successor to such employer.
``(ii) Use of assets.--Any assets transferred
to a health benefits account in a collectively
bargained transfer (and any income allocable
thereto) shall be used only to pay collectively
bargained retiree health liabilities (other than
liabilities of key employees not taken into
account under paragraph (6)(B)(iii)) for the
taxable year of the transfer or for any subsequent
taxable year during the collectively bargained
cost maintenance period (whether directly or
through reimbursement).
``(3) Coordination with other transfers.--In applying
subsection (b)(3) to any subsequent transfer during a taxable
year in a transfer period or collectively bargained cost
maintenance period, qualified current retiree health liabilities
shall be reduced by any such liabilities taken into account with
respect to the qualified future transfer or collectively
bargained transfer to which such period relates.
``(4) Special deduction rules for collectively bargained
transfers.--In the case of a collectively bargained transfer--
[[Page 120 STAT. 1008]]
``(A) the limitation under subsection (d)(1)(C)
shall not apply, and
``(B) notwithstanding subsection (d)(2), an employer
may contribute an amount to a health benefits account or
welfare benefit fund (as defined in section 419(e)(1))
with respect to collectively bargained retiree health
liabilities for which transferred assets are required to
be used under subsection (c)(1)(B), and the
deductibility of any such contribution shall be governed
by the limits applicable to the deductibility of
contributions to a welfare benefit fund under a
collective bargaining agreement (as determined under
section 419A(f)(5)(A)) without regard to whether such
contributions are made to a health benefits account or
welfare benefit fund and without regard to the
provisions of section 404 or the other provisions of
this section.
The <<NOTE: Rules.>> Secretary shall provide rules to ensure
that the application of this paragraph does not result in a
deduction being allowed more than once for the same contribution
or for 2 or more contributions or expenditures relating to the
same collectively bargained retiree health liabilities.
``(5) Transfer period.--For purposes of this subsection, the
term `transfer period' means, with respect to any transfer, a
period of consecutive taxable years (not less than 2) specified
in the election under paragraph (1) which begins and ends during
the 10-taxable-year period beginning with the taxable year of
the transfer.
``(6) Terms relating to collectively bargained transfers.--
For purposes of this subsection--
``(A) Collectively bargained cost maintenance
period.--The term `collectively bargained cost
maintenance period' means, with respect to each covered
retiree and his covered spouse and dependents, the
shorter of--
``(i) the remaining lifetime of such covered
retiree and his covered spouse and dependents, or
``(ii) the period of coverage provided by the
collectively bargained health plan (determined as
of the date of the collectively bargained
transfer) with respect to such covered retiree and
his covered spouse and dependents.
``(B) Collectively bargained retiree health
liabilities.--
``(i) In general.--The term `collectively
bargained retiree health liabilities' means the
present value, as of the beginning of a taxable
year and determined in accordance with the
applicable collective bargaining agreement, of all
collectively bargained health benefits (including
administrative expenses) for such taxable year and
all subsequent taxable years during the
collectively bargained cost maintenance period.
``(ii) Reduction for amounts previously set
aside.--The amount determined under clause (i)
shall be reduced by the value (as of the close of
the plan year preceding the year of the
collectively bargained transfer) of the assets in
all health benefits accounts or welfare benefit
funds (as defined in section 419(e)(1))
[[Page 120 STAT. 1009]]
set aside to pay for the collectively bargained
retiree health liabilities.
``(iii) Key employees excluded.--If an
employee is a key employee (within the meaning of
section 416(I)(1)) with respect to any plan year
ending in a taxable year, such employee shall not
be taken into account in computing collectively
bargained retiree health liabilities for such
taxable year or in calculating collectively
bargained employer cost under subsection
(c)(3)(C).
``(C) Collectively bargained health benefits.--The
term `collectively bargained health benefits' means
health benefits or coverage which are provided to--
``(i) retired employees who, immediately
before the collectively bargained transfer, are
entitled to receive such benefits upon retirement
and who are entitled to pension benefits under the
plan, and their spouses and dependents, and
``(ii) if specified by the provisions of the
collective bargaining agreement governing the
collectively bargained transfer, active employees
who, following their retirement, are entitled to
receive such benefits and who are entitled to
pension benefits under the plan, and their spouses
and dependents.
``(D) Collectively bargained health plan.--The term
`collectively bargained health plan' means a group
health plan or arrangement for retired employees and
their spouses and dependents that is maintained pursuant
to 1 or more collective bargaining agreements.''.
(b) <<NOTE: 26 USC 420 note.>> Effective Date.--The amendments made
by this section shall apply to transfers after the date of the enactment
of this Act.
SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER HEALTH
PLAN.
(a) In General.--Section 420 of the Internal Revenue Code of
1986 <<NOTE: 26 USC 420.>> is amended--
(1) by striking ``(other than a multiemployer plan)'' in
subsection (a), and
(2) by adding at the end of subsection (e) the following new
paragraph:
``(5) Application to multiemployer plans.--In the case of a
multiemployer plan, this section shall be applied to any such
plan--
``(A) by treating any reference in this section to
an employer as a reference to all employers maintaining
the plan (or, if appropriate, the plan sponsor), and
``(B) in accordance with such modifications of this
section (and the provisions of this title relating to
this section) as the Secretary determines appropriate to
reflect the fact the plan is not maintained by a single
employer.''.
(b) <<NOTE: 26 USC 420 note.>> Effective Date.--The amendment made
by this section shall apply to transfers made in taxable years beginning
after December 31, 2006.
[[Page 120 STAT. 1010]]
SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS SPONSORED
BY BONA FIDE ASSOCIATIONS.
(a) In General.--Section 419A(c) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 419A.>> (relating to account limit) is amended by
adding at the end the following new paragraph:
``(6) Additional reserve for medical benefits of bona fide
association plans.--
``(A) In general.--An applicable account limit for
any taxable year may include a reserve in an amount not
to exceed 35 percent of the sum of--
``(i) the qualified direct costs, and
``(ii) the change in claims incurred but
unpaid,
for such taxable year with respect to medical benefits
(other than post-retirement medical benefits).
``(B) Applicable account limit.--For purposes of
this subsection, the term `applicable account limit'
means an account limit for a qualified asset account
with respect to medical benefits provided through a plan
maintained by a bona fide association (as defined in
section 2791(d)(3) of the Public Health Service Act (42
U.S.C. 300gg-91(d)(3)).''.
(b) <<NOTE: 26 USC 419A note.>> Effective Date.--The amendment made
by this section shall apply to taxable years beginning after December
31, 2006.
SEC. 844. 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
[[Page 120 STAT. 1011]]
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 <<NOTE: 26 USC
1035.>> Code (relating to certain exchanges of insurance
policies) is amended--
(A) in paragraph (1) by inserting ``or for a
qualified long-term care insurance contract'' before the
semicolon at the end,
(B) in paragraph (2) by inserting ``, or (C) for a
qualified long-term care insurance contract'' before the
semicolon at the end, and
(C) in paragraph (3) by inserting ``or for a
qualified long-term care insurance contract'' before the
period at the end.
(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) <<NOTE: Regulations.>> Treatment of Coverage Provided as Part
of a Life Insurance or Annuity 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--
``(1) In general.--This <<NOTE: Applicability.>> 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 surrender
value of a life insurance contract or the cash value of an
annuity contract.
``(3) 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.
``(4) 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),
[[Page 120 STAT. 1012]]
``(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. <<NOTE: 26 USC 6050U.>> CHARGES OR PAYMENTS FOR QUALIFIED
LONG-TERM CARE INSURANCE CONTRACTS UNDER COMBINED
ARRANGEMENTS.
``(a) <<NOTE: Regulations.>> 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 <<NOTE: Deadline.>> 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) Penalty for failure to file.--
(A) Return.--Subparagraph (B) of section 6724(d)(1)
of such Code <<NOTE: 26 USC 6724.>> is amended by
striking ``or'' at the end of clause (xvii), by striking
``and'' at the end of clause (xviii) and inserting
``or'', and by adding at the end the following new
clause:
``(xix) section 6050U (relating to charges or
payments for qualified long-term care insurance
contracts under combined arrangements), and''.
[[Page 120 STAT. 1013]]
(B) Statement.--Paragraph (2) of section 6724(d) of
such Code <<NOTE: 26 USC 6724.>> is amended by striking
``or'' at the end of subparagraph (AA), by striking the
period at the end of subparagraph (BB), and by inserting
after subparagraph (BB) the following new subparagraph:
``(CC) section 6050U (relating to charges or
payments for qualified long-term care insurance
contracts under combined arrangements).''.
(3) 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) Technical Amendment.--Paragraph (1) of section 7702B(e) of such
Code (as in effect before amendment by subsection (c)) is amended by
striking ``section'' and inserting ``title''.
(g) <<NOTE: Applicability. 26 USC 72 note.>> Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
contracts issued after December 31, 1996, but only with respect
to taxable years beginning after December 31, 2009.
(2) Tax-free exchanges.--The amendments made by subsection
(b) shall apply with respect to exchanges occurring after
December 31, 2009.
(3) Information reporting.--The amendments made by
subsection (d) shall apply to charges made after December 31,
2009.
(4) Policy acquisition expenses.--The amendment made by
subsection (e) shall apply to specified policy acquisition
expenses determined for taxable years beginning after December
31, 2009.
(5) Technical amendment.--The amendment made by subsection
(f) shall take effect as if included in section 321(a) of the
Health Insurance Portability and Accountability Act of 1996.
SEC. 845. 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
[[Page 120 STAT. 1014]]
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 $3,000.
``(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(9)(A) of the Omnibus Crime Control
and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(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
[[Page 120 STAT. 1015]]
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 <<NOTE: 26 USC
403.>> (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) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendments made
by this section shall apply to distributions in taxable years beginning
after December 31, 2006.
[[Page 120 STAT. 1016]]
Subtitle E--United States Tax Court Modernization
SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR
ANNUITIES.
(a) In General.--Subsection (s) of section 7448 of the Internal
Revenue Code of 1986 <<NOTE: 26 USC 7448.>> (relating to annuities to
surviving spouses and dependent children of judges) is amended to read
as follows:
``(s) Increases in Survivor Annuities.--Each time that an increase
is made under section 8340(b) of title 5, United States Code, in
annuities payable under subchapter III of chapter 83 of that title, each
annuity payable from the survivors annuity fund under this section shall
be increased at the same time by the same percentage by which annuities
are increased under such section 8340(b).''.
(b) <<NOTE: 26 USC 7448 note.>> Effective Date.--The amendment made
by this section shall apply with respect to increases made under section
8340(b) of title 5, United States Code, in annuities payable under
subchapter III of chapter 83 of that title, taking effect after the date
of the enactment of this Act.
SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65 OR
OVER.
Section 7472 of the Internal Revenue Code of 1986 (relating to
expenditures) is amended by inserting after the first sentence the
following new sentence: ``Notwithstanding any other provision of law,
the Tax Court is authorized to pay on behalf of its judges, age 65 or
over, any increase in the cost of Federal Employees' Group Life
Insurance imposed after the date of the enactment of the Pension
Protection Act of 2006, including any expenses generated by such
payments, as authorized by the chief judge in a manner consistent with
such payments authorized by the Judicial Conference of the United States
pursuant to section 604(a)(5) of title 28, United States Code.''.
SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS PLAN.
(a) In General.--Section 7447 of the Internal Revenue Code of 1986
(relating to retirement of judges) is amended by adding at the end the
following new subsection:
``(j) Thrift Savings Plan.--
``(1) Election to contribute.--
``(A) In general.--A judge of the Tax Court may
elect to contribute to the Thrift Savings Fund
established by section 8437 of title 5, United States
Code.
``(B) Period of election.--An election may be made
under this paragraph only during a period provided under
section 8432(b) of title 5, United States Code, for
individuals subject to chapter 84 of such title.
``(2) Applicability of title 5 provisions.--Except as
otherwise provided in this subsection, the provisions of
subchapters III and VII of chapter 84 of title 5, United States
Code, shall apply with respect to a judge who makes an election
under paragraph (1).
``(3) Special rules.--
[[Page 120 STAT. 1017]]
``(A) Amount contributed.--The amount contributed by
a judge to the Thrift Savings Fund in any pay period
shall not exceed the maximum percentage of such judge's
basic pay for such period as allowable under section
8440f of title 5, United States Code. Basic pay does not
include any retired pay paid pursuant to this section.
``(B) Contributions for benefit of judge.--No
contributions may be made for the benefit of a judge
under section 8432(c) of title 5, United States Code.
``(C) Applicability of section 8433(b) of title 5
whether or not judge retires.--Section 8433(b) of title
5, United States Code, applies with respect to a judge
who makes an election under paragraph (1) and who
either--
``(i) retires under subsection (b), or
``(ii) ceases to serve as a judge of the Tax
Court but does not retire under subsection (b).
Retirement under subsection (b) is a separation from
service for purposes of subchapters III and VII of
chapter 84 of that title.
``(D) Applicability of section 8351(b)(5) of title
5.--The provisions of section 8351(b)(5) of title 5,
United States Code, shall apply with respect to a judge
who makes an election under paragraph (1).
``(E) <<NOTE: Regulations.>> Exception.--
Notwithstanding subparagraph (C), if any judge retires
under this section, or resigns without having met the
age and service requirements set forth under subsection
(b)(2), and such judge's nonforfeitable account balance
is less than an amount that the Executive Director of
the Federal Retirement Thrift Investment Board
prescribes by regulation, the Executive Director shall
pay the nonforfeitable account balance to the
participant in a single payment.''.
(b) <<NOTE: 26 USC 7447 note.>> Effective Date.--The amendment made
by this section shall take effect on the date of the enactment of this
Act, except that United States Tax Court judges may only begin to
participate in the Thrift Savings Plan at the next open season beginning
after such date.
SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF
SPECIAL TRIAL JUDGES OF THE TAX COURT.
(a) Definitions.--Section 7448(a) of the Internal Revenue Code of
1986 (relating to definitions), as amended by this Act, is amended by
redesignating paragraphs (5), (6), (7), and (8) as paragraphs (7), (8),
(9), and (10), respectively, and by inserting after paragraph (4) the
following new paragraphs:
``(5) The term `special trial judge' means a judicial
officer appointed pursuant to section 7443A, including any
individual receiving an annuity under chapter 83 or 84 of title
5, United States Code, whether or not performing judicial duties
under section 7443B.
``(6) The term `special trial judge's salary' means the
salary of a special trial judge received under section 7443A(d),
any amount received as an annuity under chapter 83 or 84 of
title 5, United States Code, and compensation received under
section 7443B.''.
[[Page 120 STAT. 1018]]
(b) Election.--Subsection (b) of section 7448 of such <<NOTE: 26 USC
7448.>> Code (relating to annuities to surviving spouses and dependent
children of judges) is amended--
(1) by striking the subsection heading and inserting the
following:
``(b) Election.--
``(1) Judges.--'',
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new paragraph:
``(2) Special trial judges.--Any special trial judge may by
written election filed with the chief judge bring himself or
herself within the purview of this
section. <<NOTE: Deadline.>> Such election shall be filed not
later than the later of 6 months after--
``(A) 6 months after the date of the enactment of
this paragraph,
``(B) the date the judge takes office, or
``(C) the date the judge marries.''.
(c) Conforming Amendments.--
(1) The heading of section 7448 of such Code is amended by
inserting ``and special trial judges'' after ``judges''.
(2) The item relating to section 7448 in the table of
sections for part I of subchapter C of chapter 76 of such Code
is amended by inserting ``and special trial judges'' after
``judges''.
(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n),
and (u) of section 7448 of such Code, as amended by this Act,
are each amended--
(A) by inserting ``or special trial judge'' after
``judge'' each place it appears other than in the phrase
``chief judge'', and
(B) by inserting ``or special trial judge's'' after
``judge's'' each place it appears.
(4) Section 7448(c) of such Code is amended--
(A) in paragraph (1), by striking ``Tax Court
judges'' and inserting ``Tax Court judicial officers'',
and
(B) in paragraph (2)--
(i) in subparagraph (A), by inserting ``and
section 7443A(d)'' after ``(a)(4)'', and
(ii) in subparagraph (B), by striking
``subsection (a)(4)'' and inserting ``subsection
(a)(4) and (a)(6)''.
(5) Section 7448(j)(1) of such Code is amended--
(A) in subparagraph (A), by striking ``service or
retired'' and inserting ``service, retired'', and by
inserting ``, or receiving any annuity under chapter 83
or 84 of title 5, United States Code,'' after ``section
7447'', and
(B) in the last sentence, by striking ``subsections
(a) (6) and (7)'' and inserting ``paragraphs (8) and (9)
of subsection (a)''.
(6) Section 7448(m)(1) of such Code, as amended by this Act,
is amended by inserting ``or any annuity under chapter 83 or 84
of title 5, United States Code'' after ``7447(d)''.
(7) Section 7448(n) of such Code is amended by inserting
``his years of service pursuant to any appointment under section
7443A,'' after ``of the Tax Court,''.
(8) Section 3121(b)(5)(E) of such Code is amended by
inserting ``or special trial judge'' before ``of the United
States Tax Court''.
[[Page 120 STAT. 1019]]
(9) Section 210(a)(5)(E) of the Social Security
Act <<NOTE: 42 USC 410.>> is amended by inserting ``or special
trial judge'' before ``of the United States Tax Court''.
SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.
(a) In General.--Paragraph (1) of section 6330(d) of the Internal
Revenue Code of 1986 (relating to proceeding after hearing) is amended
to read as follows:
``(1) Judicial review of determination.--
The <<NOTE: Deadline.>> person may, within 30 days of a
determination under this section, appeal such determination to
the Tax Court (and the Tax Court shall have jurisdiction with
respect to such matter).''.
(b) Effective Date.--The amendment made by this section shall apply
to determinations made after the date which is 60 days after the date of
the enactment of this Act.
SEC. 856. PROVISIONS FOR RECALL.
(a) In General.--Part I of subchapter C of chapter 76 of the
Internal Revenue Code of 1986 is amended by inserting after section
7443A the following new section:
``SEC. 7443B. <<NOTE: 26 USC 7443B.>> RECALL OF SPECIAL TRIAL JUDGES OF
THE TAX COURT.
``(a) Recalling of Retired Special Trial Judges.--Any individual who
has retired pursuant to the applicable provisions of title 5, United
States Code, upon reaching the age and service requirements established
therein, may at or after retirement be called upon by the chief judge of
the Tax Court to perform such judicial duties with the Tax Court as may
be requested of such individual for any period or periods specified by
the chief judge; except that in the case of any such individual--
``(1) the aggregate of such periods in any 1 calendar year
shall not (without such individual's consent) exceed 90 calendar
days, and
``(2) such individual shall be relieved of performing such
duties during any period in which illness or disability
precludes the performance of such duties.
Any act, or failure to act, by an individual performing judicial duties
pursuant to this subsection shall have the same force and effect as if
it were the act (or failure to act) of a special trial judge of the Tax
Court.
``(b) Compensation.--For the year in which a period of recall
occurs, the special trial judge shall receive, in addition to the
annuity provided under the applicable provisions of title 5, United
States Code, an amount equal to the difference between that annuity and
the current salary of the office to which the special trial judge is
recalled.
``(c) Rulemaking Authority.--The provisions of this section may be
implemented under such rules as may be promulgated by the Tax Court.''.
(b) Conforming Amendment.--The table of sections for part I of
subchapter C of chapter 76 of such Code is amended by inserting after
the item relating to section 7443A the following new item:
``Sec. 7443B. Recall of special trial judges of the Tax Court.''.
[[Page 120 STAT. 1020]]
SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND DECIDE CERTAIN
EMPLOYMENT STATUS CASES.
(a) In General.--Section 7443A(b) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 7443A.>> (relating to proceedings which may be
assigned to special trial judges) is amended by striking ``and'' at the
end of paragraph (4), by redesignating paragraph (5) as paragraph (6),
and by inserting after paragraph (4) the following new paragraph:
``(5) any proceeding under section 7436(c), and''.
(b) Conforming Amendment.--Section 7443A(c) of such Code is amended
by striking ``or (4)'' and inserting ``(4), or (5)''.
(c) <<NOTE: 26 USC 7443A.>> Effective Date.--The amendments made by
this section shall apply to any proceeding under section 7436(c) of the
Internal Revenue Code of 1986 with respect to which a decision has not
become final (as determined under section 7481 of such Code) before the
date of the enactment of this Act.
SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF
EQUITABLE RECOUPMENT.
(a) Confirmation of Authority of Tax Court To Apply Doctrine of
Equitable Recoupment.--Section 6214(b) of the Internal Revenue Code of
1986 (relating to jurisdiction over other years and quarters) is amended
by adding at the end the following new sentence: ``Notwithstanding the
preceding sentence, the Tax Court may apply the doctrine of equitable
recoupment to the same extent that it is available in civil tax cases
before the district courts of the United States and the United States
Court of Federal Claims.''.
(b) <<NOTE: 26 USC 6214 note.>> Effective Date.--The amendment made
by this section shall apply to any action or proceeding in the United
States Tax Court with respect to which a decision has not become final
(as determined under section 7481 of the Internal Revenue Code of 1986)
as of the date of the enactment of this Act.
SEC. 859. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING
PETITION.
(a) In General.--Section 7451 of the Internal Revenue Code of 1986
(relating to fee for filing a Tax Court petition) is amended by striking
all that follows ``petition'' and inserting a period.
(b) <<NOTE: 26 USC 7451 note.>> Effective Date.--The amendment made
by this section shall take effect on the date of the enactment of this
Act.
SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE TAXPAYERS.
(a) In General.--Section 7475(b) of the Internal Revenue Code of
1986 (relating to use of fees) is amended by inserting before the period
at the end ``and to provide services to pro se taxpayers''.
(b) <<NOTE: 26 USC 7475 note.>> Effective Date.--The amendment made
by this section shall take effect on the date of the enactment of this
Act.
Subtitle F--Other Provisions
SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO
STATE AND LOCAL PLANS.
(a) In General.--
[[Page 120 STAT. 1021]]
(1) Subparagraph (G) of section 401(a)(5) and subparagraph
(G) of section 401(a)(26) of the Internal Revenue Code
of <<NOTE: 26 USC 401.>> 1986 are each amended by striking
``section 414(d))'' and all that follows and inserting ``section
414(d)).''.
(2) Subparagraph (G) of section 401(k)(3) of such Code and
paragraph (2) of section 1505(d) of the Taxpayer Relief Act of
1997 (Public Law 105-34; 111 Stat. 1063) <<NOTE: 26 USC 401 and
note.>> are each amended by striking ``maintained by a State or
local government or political subdivision thereof (or agency or
instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The heading of subparagraph (G) of section 401(a)(5) of
the Internal Revenue Code of 1986 is amended by striking ``State
and local governmental'' and inserting ``Governmental''.
(2) The heading of subparagraph (G) of section 401(a)(26) of
such Code is amended by striking ``Exception for state and
local'' and inserting ``Exception for''.
(3) Section 401(k)(3)(G) of such Code is amended by
inserting ``Governmental plan.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section shall apply
to any year beginning after the date of the enactment of this Act.
SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE OF EXCESS FUNDS FROM
BLACK LUNG DISABILITY TRUSTS.
(a) In General.--So much of section 501(c)(21)(C) of the Internal
Revenue Code of 1986 (relating to black lung disability trusts) as
precedes the last sentence is amended to read as follows:
``(C) Payments described in subparagraph (A)(i)(IV)
may be made from such trust during a taxable year only
to the extent that the aggregate amount of such payments
during such taxable year does not exceed the excess (if
any), as of the close of the preceding taxable year,
of--
``(i) the fair market value of the assets of
the trust, over
``(ii) 110 percent of the present value of the
liability described in subparagraph (A)(i)(I) of
such person.''.
(b) <<NOTE: 26 USC 501 note.>> Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2006.
SEC. 863. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED LIFE
INSURANCE.
(a) In General.--Section 101 of the Internal Revenue Code of 1986
(relating to certain death benefits) is amended by adding at the end the
following new subsection:
``(j) Treatment of Certain Employer-Owned Life Insurance
Contracts.--
``(1) General rule.--In the case of an employer-owned life
insurance contract, the amount excluded from gross income of an
applicable policyholder by reason of paragraph (1) of subsection
(a) shall not exceed an amount equal to the sum of the premiums
and other amounts paid by the policyholder for the contract.
``(2) Exceptions.--In the case of an employer-owned life
insurance contract with respect to which the notice and consent
requirements of paragraph (4) are met, paragraph (1) shall not
apply to any of the following:
[[Page 120 STAT. 1022]]
``(A) Exceptions based on insured's status.--Any
amount received by reason of the death of an insured
who, with respect to an applicable policyholder--
``(i) was an employee at any time during the
12-month period before the insured's death, or
``(ii) is, at the time the contract is
issued--
``(I) a director,
``(II) a highly compensated employee
within the meaning of section 414(q)
(without regard to paragraph (1)(B)(ii)
thereof), or
``(III) a highly compensated
individual within the meaning of section
105(h)(5), except that `35 percent'
shall be substituted for `25 percent' in
subparagraph (C) thereof.
``(B) Exception for amounts paid to insured's
heirs.--Any amount received by reason of the death of an
insured to the extent--
``(i) the amount is paid to a member of the
family (within the meaning of section 267(c)(4))
of the insured, any individual who is the
designated beneficiary of the insured under the
contract (other than the applicable policyholder),
a trust established for the benefit of any such
member of the family or designated beneficiary, or
the estate of the insured, or
``(ii) the amount is used to purchase an
equity (or capital or profits) interest in the
applicable policyholder from any person described
in clause (i).
``(3) Employer-owned life insurance contract.--
``(A) In general.--For purposes of this subsection,
the term `employer-owned life insurance contract' means
a life insurance contract which--
``(i) is owned by a person engaged in a trade
or business and under which such person (or a
related person described in subparagraph (B)(ii))
is directly or indirectly a beneficiary under the
contract, and
``(ii) covers the life of an insured who is an
employee with respect to the trade or business of
the applicable policyholder on the date the
contract is issued.
For purposes of the preceding sentence, if coverage for
each insured under a master contract is treated as a
separate contract for purposes of sections 817(h), 7702,
and 7702A, coverage for each such insured shall be
treated as a separate contract.
``(B) Applicable policyholder.--For purposes of this
subsection--
``(i) In general.--The term `applicable
policyholder' means, with respect to any employer-
owned life insurance contract, the person
described in subparagraph (A)(i) which owns the
contract.
``(ii) Related persons.--The term `applicable
policyholder' includes any person which--
``(I) bears a relationship to the
person described in clause (i) which is
specified in section 267(b) or
707(b)(1), or
``(II) is engaged in trades or
businesses with such person which are
under common control
[[Page 120 STAT. 1023]]
(within the meaning of subsection (a) or
(b) of section 52).
``(4) Notice and consent requirements.--The notice and
consent requirements of this paragraph are met if, before the
issuance of the contract, the employee--
``(A) is notified in writing that the applicable
policyholder intends to insure the employee's life and
the maximum face amount for which the employee could be
insured at the time the contract was issued,
``(B) provides written consent to being insured
under the contract and that such coverage may continue
after the insured terminates employment, and
``(C) is informed in writing that an applicable
policyholder will be a beneficiary of any proceeds
payable upon the death of the employee.
``(5) Definitions.--For purposes of this subsection--
``(A) Employee.--The term `employee' includes an
officer, director, and highly compensated employee
(within the meaning of section 414(q)).
``(B) Insured.--The term `insured' means, with
respect to an employer-owned life insurance contract, an
individual covered by the contract who is a United
States citizen or resident. In the case of a contract
covering the joint lives of 2 individuals, references to
an insured include both of the individuals.''.
(b) Reporting Requirements.--Subpart A of part III of subchapter A
of chapter 61 of the Internal Revenue Code of 1986 (relating to
information concerning persons subject to special provisions) is amended
by inserting after section 6039H the following new section:
``SEC. 6039I. <<NOTE: 26 USC 6039I.>> RETURNS AND RECORDS WITH RESPECT
TO EMPLOYER-OWNED LIFE INSURANCE CONTRACTS.
``(a) <<NOTE: Regulations.>> In General.--Every applicable
policyholder owning 1 or more employer-owned life insurance contracts
issued after the date of the enactment of this section shall file a
return (at such time and in such manner as the Secretary shall by
regulations prescribe) showing for each year such contracts are owned--
``(1) the number of employees of the applicable policyholder
at the end of the year,
``(2) the number of such employees insured under such
contracts at the end of the year,
``(3) the total amount of insurance in force at the end of
the year under such contracts,
``(4) the name, address, and taxpayer identification number
of the applicable policyholder and the type of business in which
the policyholder is engaged, and
``(5) that the applicable policyholder has a valid consent
for each insured employee (or, if all such consents are not
obtained, the number of insured employees for whom such consent
was not obtained).
``(b) Recordkeeping Requirement.--Each applicable policyholder
owning 1 or more employer-owned life insurance contracts during any year
shall keep such records as may be necessary for purposes of determining
whether the requirements of this section and section 101(j) are met.
[[Page 120 STAT. 1024]]
``(c) Definitions.--Any term used in this section which is used in
section 101(j) shall have the same meaning given such term by section
101(j).''.
(c) Conforming Amendments.--
(1) Paragraph (1) of section 101(a) of the Internal Revenue
Code of 1986 <<NOTE: 26 USC 101.>> is amended by striking ``and
subsection (f)'' and inserting ``subsection (f), and subsection
(j)''.
(2) The table of sections for subpart A of part III of
subchapter A of chapter 61 of such Code is amended by inserting
after the item relating to section 6039H the following new item:
``Sec. 6039I. Returns and records with respect to employer-owned life
insurance contracts.''.
(d) <<NOTE: Applicability. 26 USC 101 note.>> Effective Date.--The
amendments made by this section shall apply to life insurance contracts
issued after the date of the enactment of this Act, except for a
contract issued after such date pursuant to an exchange described in
section 1035 of the Internal Revenue Code of 1986 for a contract issued
on or prior to that date. For purposes of the preceding sentence, any
material increase in the death benefit or other material change shall
cause the contract to be treated as a new contract except that, in the
case of a master contract (within the meaning of section 264(f)(4)(E) of
such Code), the addition of covered lives shall be treated as a new
contract only with respect to such additional covered lives.
SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS WHO ASSIST IN
THE ADMINISTRATION OF COLLEGE ENTRANCE AND PLACEMENT EXAMS.
(a) In General.--Section 530 of the Revenue Reconciliation Act of
1978 <<NOTE: 26 USC 3401 note.>> is amended by adding at the end the
following new subsection:
``(f) Treatment of Test Room Supervisors and Proctors Who Assist in
the Administration of College Entrance and Placement Exams.--
``(1) <<NOTE: Applicability.>> In general.--In the case of
an individual described in paragraph (2) who is providing
services as a test proctor or room supervisor by assisting in
the administration of college entrance or placement
examinations, this section shall be applied to such services
performed after December 31, 2006 (and remuneration paid for
such services) without regard to subsection (a)(3) thereof.
``(2) Applicability.--An individual is described in this
paragraph if the individual--
``(A) is providing the services described in
subsection (a) to an organization described in section
501(c), and exempt from tax under section 501(a), of the
Internal Revenue Code of 1986, and
``(B) is not otherwise treated as an employee of
such organization for purposes of subtitle C of such
Code (relating to employment taxes).''.
(b) <<NOTE: 26 USC 3401 note.>> Effective Date.--The amendment made
by this section shall apply to remuneration for services performed after
December 31, 2006.
[[Page 120 STAT. 1025]]
SEC. 865. <<NOTE: 26 USC 401 note.>> GRANDFATHER RULE FOR CHURCH PLANS
WHICH SELF-ANNUITIZE.
(a) In General.--In the case of any plan year ending after the date
of the enactment of this Act, annuity payments provided with respect to
any account maintained for a participant or beneficiary under a
qualified church plan shall not fail to satisfy the requirements of
section 401(a)(9) of the Internal Revenue Code of 1986 merely because
the payments are not made under an annuity contract purchased from an
insurance company if such payments would not fail such requirements if
provided with respect to a retirement income account described in
section 403(b)(9) of such Code.
(b) Qualified Church Plan.--For purposes of this section, the term
``qualified church plan'' means any money purchase pension plan
described in section 401(a) of such Code which--
(1) is a church plan (as defined in section 414(e) of such
Code) with respect to which the election provided by section
410(d) of such Code has not been made, and
(2) was in existence on April 17, 2002.
SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED REAL ESTATE HELD BY CHURCH
PLANS.
(a) In General.--Section 514(c)(9)(C) of the Internal Revenue Code
of 1986 <<NOTE: 26 USC 514.>> is amended by striking ``or'' after clause
(ii), by striking the period at the end of clause (iii) and inserting
``; or'', and by inserting after clause (iii) the following:
``(iv) a retirement income account described
in section 403(b)(9).''.
(b) <<NOTE: 26 USC 514 note.>> Effective Date.--The amendment made
by subsection (a) shall apply to taxable years beginning on or after the
date of enactment of this Act.
SEC. 867. CHURCH PLAN RULE.
(a) In General.--Paragraph (11) of section 415(b) of the Internal
Revenue Code of 1986 is amended by adding at the end the following:
``Subparagraph (B) of paragraph (1) shall not apply to a plan maintained
by an organization described in section 3121(w)(3)(A) except with
respect to highly compensated benefits. For purposes of this paragraph,
the term `highly compensated benefits' means any benefits accrued for an
employee in any year on or after the first year in which such employee
is a highly compensated employee (as defined in section 414(q)) of the
organization described in section 3121(w)(3)(A). For purposes of
applying paragraph (1)(B) to highly compensated benefits, all benefits
of the employee otherwise taken into account (without regard to this
paragraph) shall be taken into account.''.
(b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
by this section shall apply to years beginning after December 31, 2006.
SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EMPLOYEES.
(a) In General.--Subparagraph (E) of section 664(g)(3) of the
Internal Revenue Code of 1986 is amended by inserting ``(determined on
the basis of fair market value of securities when allocated to
participants)'' after ``paragraph (7)''.
(b) <<NOTE: 26 USC 664 note.>> Effective Date.--The amendment made
by this section shall take effect on the date of the enactment of this
Act.
[[Page 120 STAT. 1026]]
TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND
OTHER PENSION PROVISIONS
SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE EMPLOYEES WITH
FREEDOM TO INVEST THEIR PLAN ASSETS.
(a) Amendments of Internal Revenue Code.--
(1) Qualification requirement.--Section 401(a) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 401.>> (relating to
qualified pension, profit-sharing, and stock bonus plans) is
amended by inserting after paragraph (34) the following new
paragraph:
``(35) Diversification requirements for certain defined
contribution plans.--
``(A) In general.--A trust which is part of an
applicable defined contribution plan shall not be
treated as a qualified trust unless the plan meets the
diversification requirements of subparagraphs (B), (C),
and (D).
``(B) Employee contributions and elective deferrals
invested in employer securities.--In the case of the
portion of an applicable individual's account
attributable to employee contributions and elective
deferrals which is invested in employer securities, a
plan meets the requirements of this subparagraph if the
applicable individual may elect to direct the plan to
divest any such securities and to reinvest an equivalent
amount in other investment options meeting the
requirements of subparagraph (D).
``(C) Employer contributions invested in employer
securities.--In the case of the portion of the account
attributable to employer contributions other than
elective deferrals which is invested in employer
securities, a plan meets the requirements of this
subparagraph if each applicable individual who--
``(i) is a participant who has completed at
least 3 years of service, or
``(ii) is a beneficiary of a participant
described in clause (i) or of a deceased
participant,
may elect to direct the plan to divest any such
securities and to reinvest an equivalent amount in other
investment options meeting the requirements of
subparagraph (D).
``(D) Investment options.--
``(i) In general.--The requirements of this
subparagraph are met if the plan offers not less
than 3 investment options, other than employer
securities, to which an applicable individual may
direct the proceeds from the divestment of
employer securities pursuant to this paragraph,
each of which is diversified and has materially
different risk and return characteristics.
``(ii) Treatment of certain restrictions and
conditions.--
[[Page 120 STAT. 1027]]
``(I) Time for making investment
choices.--A plan shall not be treated as
failing to meet the requirements of this
subparagraph merely because the plan
limits the time for divestment and
reinvestment to periodic, reasonable
opportunities occurring no less
frequently than quarterly.
``(II) Certain restrictions and
conditions not allowed.--Except as
provided in regulations, a plan shall
not meet the requirements of this
subparagraph if the plan imposes
restrictions or conditions with respect
to the investment of employer securities
which are not imposed on the investment
of other assets of the plan. This
subclause shall not apply to any
restrictions or conditions imposed by
reason of the application of securities
laws.
``(E) Applicable defined contribution plan.--For
purposes of this paragraph--
``(i) In general.--The term `applicable
defined contribution plan' means any defined
contribution plan which holds any publicly traded
employer securities.
``(ii) Exception for certain esops.--Such term
does not include an employee stock ownership plan
if--
``(I) there are no contributions to
such plan (or earnings thereunder) which
are held within such plan and are
subject to subsection (k) or (m), and
``(II) such plan is a separate plan
for purposes of section 414(l) with
respect to any other defined benefit
plan or defined contribution plan
maintained by the same employer or
employers.
``(iii) Exception for one participant plans.--
Such term does not include a one-participant
retirement plan.
``(iv) One-participant retirement plan.--For
purposes of clause (iii), the term `one-
participant retirement plan' means a retirement
plan that--
``(I) on the first day of the plan
year covered only one individual (or the
individual and the individual's spouse)
and the individual owned 100 percent of
the plan sponsor (whether or not
incorporated), or covered only one or
more partners (or partners and their
spouses) in the plan sponsor,
``(II) meets the minimum coverage
requirements of section 410(b) without
being combined with any other plan of
the business that covers the employees
of the business,
``(III) does not provide benefits to
anyone except the individual (and the
individual's spouse) or the partners
(and their spouses),
``(IV) does not cover a business
that is a member of an affiliated
service group, a controlled group of
corporations, or a group of businesses
under common control, and
[[Page 120 STAT. 1028]]
``(V) does not cover a business that
uses the services of leased employees
(within the meaning of section 414(n)).
For purposes of this clause, the term `partner'
includes a 2-percent shareholder (as defined in
section 1372(b)) of an S corporation.
``(F) Certain plans treated as holding publicly
traded employer securities.--
``(i) In general.--Except as provided in
regulations or in clause (ii), a plan holding
employer securities which are not publicly traded
employer securities shall be treated as holding
publicly traded employer securities if any
employer corporation, or any member of a
controlled group of corporations which includes
such employer corporation, has issued a class of
stock which is a publicly traded employer
security.
``(ii) Exception for certain controlled groups
with publicly traded securities.--Clause (i) shall
not apply to a plan if--
``(I) no employer corporation, or
parent corporation of an employer
corporation, has issued any publicly
traded employer security, and
``(II) no employer corporation, or
parent corporation of an employer
corporation, has issued any special
class of stock which grants particular
rights to, or bears particular risks
for, the holder or issuer with respect
to any corporation described in clause
(i) which has issued any publicly traded
employer security.
``(iii) Definitions.--For purposes of this
subparagraph, the term--
``(I) `controlled group of
corporations' has the meaning given such
term by section 1563(a), except that `50
percent' shall be substituted for `80
percent' each place it appears,
``(II) `employer corporation' means
a corporation which is an employer
maintaining the plan, and
``(III) `parent corporation' has the
meaning given such term by section
424(e).
``(G) Other definitions.--For purposes of this para-
graph--
``(i) Applicable individual.--The term
`applicable individual' means--
``(I) any participant in the plan,
and
``(II) any beneficiary who has an
account under the plan with respect to
which the beneficiary is entitled to
exercise the rights of a participant.
``(ii) Elective deferral.--The term `elective
deferral' means an employer contribution described
in section 402(g)(3)(A).
``(iii) Employer security.--The term `employer
security' has the meaning given such term by
section 407(d)(1) of the Employee Retirement
Income Security Act of 1974.
[[Page 120 STAT. 1029]]
``(iv) Employee stock ownership plan.--The
term `employee stock ownership plan' has the
meaning given such term by section 4975(e)(7).
``(v) Publicly traded employer securities.--
The term `publicly traded employer securities'
means employer securities which are readily
tradable on an established securities market.
``(vi) Year of service.--The term `year of
service' has the meaning given such term by
section 411(a)(5).
``(H) Transition rule for securities attributable to
employer contributions.--
``(i) Rules phased in over 3 years.--
``(I) <<NOTE: Applicability.>> In
general.--In the case of the portion of
an account to which subparagraph (C)
applies and which consists of employer
securities acquired in a plan year
beginning before January 1, 2007,
subparagraph (C) shall only apply to the
applicable percentage of such
securities. This subparagraph shall be
applied separately with respect to each
class of securities.
``(II) Exception for certain
participants aged 55 or over.--Subclause
(I) shall not apply to an applicable
individual who is a participant who has
attained age 55 and completed at least 3
years of service before the first plan
year beginning after December 31, 2005.
``(ii) Applicable percentage.--For purposes of
clause (i), the applicable percentage shall be
determined as follows:
``Plan year to wThe applicable............................
subparagraph (percentage is:............................
applies:
1st......................................... 33
2d.......................................... 66
3d and following...........................100.''.
(2) Conforming amendments.--
(A) Section 401(a)(28)(B) of such Code <<NOTE: 26
USC 401.>> (relating to additional requirements relating
to employee stock ownership plans) is amended by adding
at the end the following new clause:
``(v) Exception.--This subparagraph shall not
apply to an applicable defined contribution plan
(as defined in paragraph (35)(E)).''.
(B) Section 409(h)(7) of such Code is amended by
inserting ``or subparagraph (B) or (C) of section
401(a)(35)'' before the period at the end.
(C) Section 4980(c)(3)(A) of such Code is amended by
striking ``if--'' and all that follows and inserting
``if the requirements of subparagraphs (B), (C), and (D)
are met.''.
(b) Amendments of ERISA.--
(1) In general.--Section 204 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054) is amended by
redesignating subsection (j) as subsection (k) and by inserting
after subsection (i) the following new subsection:
``(j) Diversification Requirements for Certain Individual Account
Plans.--
[[Page 120 STAT. 1030]]
``(1) In general.--An applicable individual account plan
shall meet the diversification requirements of paragraphs (2),
(3), and (4).
``(2) Employee contributions and elective deferrals invested
in employer securities.--In the case of the portion of an
applicable individual's account attributable to employee
contributions and elective deferrals which is invested in
employer securities, a plan meets the requirements of this
paragraph if the applicable individual may elect to direct the
plan to divest any such securities and to reinvest an equivalent
amount in other investment options meeting the requirements of
paragraph (4).
``(3) Employer contributions invested in employer
securities.--In the case of the portion of the account
attributable to employer contributions other than elective
deferrals which is invested in employer securities, a plan meets
the requirements of this paragraph if each applicable individual
who--
``(A) is a participant who has completed at least 3
years of service, or
``(B) is a beneficiary of a participant described in
subparagraph (A) or of a deceased participant,
may elect to direct the plan to divest any such securities and
to reinvest an equivalent amount in other investment options
meeting the requirements of paragraph (4).
``(4) Investment options.--
``(A) In general.--The requirements of this
paragraph are met if the plan offers not less than 3
investment options, other than employer securities, to
which an applicable individual may direct the proceeds
from the divestment of employer securities pursuant to
this subsection, each of which is diversified and has
materially different risk and return characteristics.
``(B) Treatment of certain restrictions and
conditions.--
``(i) Time for making investment choices.--A
plan shall not be treated as failing to meet the
requirements of this paragraph merely because the
plan limits the time for divestment and
reinvestment to periodic, reasonable opportunities
occurring no less frequently than quarterly.
``(ii) Certain restrictions and conditions not
allowed.--Except as provided in regulations, a
plan shall not meet the requirements of this
paragraph if the plan imposes restrictions or
conditions with respect to the investment of
employer securities which are not imposed on the
investment of other assets of the plan. This
subparagraph shall not apply to any restrictions
or conditions imposed by reason of the application
of securities laws.
``(5) Applicable individual account plan.--For purposes of
this subsection--
``(A) In general.--The term `applicable individual
account plan' means any individual account plan (as
defined in section 3(34)) which holds any publicly
traded employer securities.
[[Page 120 STAT. 1031]]
``(B) Exception for certain esops.--Such term does
not include an employee stock ownership plan if--
``(i) there are no contributions to such plan
(or earnings thereunder) which are held within
such plan and are subject to subsection (k) or (m)
of section 401 of the Internal Revenue Code of
1986, and
``(ii) such plan is a separate plan (for
purposes of section 414(l) of such Code) with
respect to any other defined benefit plan or
individual account plan maintained by the same
employer or employers.
``(C) Exception for one participant plans.--Such
term shall not include a one-participant retirement plan
(as defined in section 101(i)(8)(B)).
``(D) Certain plans treated as holding publicly
traded employer securities.--
``(i) In general.--Except as provided in
regulations or in clause (ii), a plan holding
employer securities which are not publicly traded
employer securities shall be treated as holding
publicly traded employer securities if any
employer corporation, or any member of a
controlled group of corporations which includes
such employer corporation, has issued a class of
stock which is a publicly traded employer
security.
``(ii) Exception for certain controlled groups
with publicly traded securities.--Clause (i) shall
not apply to a plan if--
``(I) no employer corporation, or
parent corporation of an employer
corporation, has issued any publicly
traded employer security, and
``(II) no employer corporation, or
parent corporation of an employer
corporation, has issued any special
class of stock which grants particular
rights to, or bears particular risks
for, the holder or issuer with respect
to any corporation described in clause
(i) which has issued any publicly traded
employer security.
``(iii) Definitions.--For purposes of this
subparagraph, the term--
``(I) `controlled group of
corporations' has the meaning given such
term by section 1563(a) of the Internal
Revenue Code of 1986, except that `50
percent' shall be substituted for `80
percent' each place it appears,
``(II) `employer corporation' means
a corporation which is an employer
maintaining the plan, and
``(III) `parent corporation' has the
meaning given such term by section
424(e) of such Code.
``(6) Other definitions.--For purposes of this paragraph--
``(A) Applicable individual.--The term `applicable
individual' means--
``(i) any participant in the plan, and
``(ii) any beneficiary who has an account
under the plan with respect to which the
beneficiary is entitled to exercise the rights of
a participant.
[[Page 120 STAT. 1032]]
``(B) Elective deferral.--The term `elective
deferral' means an employer contribution described in
section 402(g)(3)(A) of the Internal Revenue Code of
1986.
``(C) Employer security.--The term `employer
security' has the meaning given such term by section
407(d)(1).
``(D) Employee stock ownership plan.--The term
`employee stock ownership plan' has the meaning given
such term by section 4975(e)(7) of such Code.
``(E) Publicly traded employer securities.--The term
`publicly traded employer securities' means employer
securities which are readily tradable on an established
securities market.
``(F) Year of service.--The term `year of service'
has the meaning given such term by section 203(b)(2).
``(7) Transition rule for securities attributable to
employer contributions.--
``(A) Rules phased in over 3 years.--
``(i) <<NOTE: Applicability.>> In general.--In
the case of the portion of an account to which
paragraph (3) applies and which consists of
employer securities acquired in a plan year
beginning before January 1, 2007, paragraph (3)
shall only apply to the applicable percentage of
such securities. This subparagraph shall be
applied separately with respect to each class of
securities.
``(ii) Exception for certain participants aged
55 or over.--Clause (i) shall not apply to an
applicable individual who is a participant who has
attained age 55 and completed at least 3 years of
service before the first plan year beginning after
December 31, 2005.
``(B) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage shall be
determined as follows:
``Plan year to whichThe applicable............................
paragraph (3) applpercentage is:............................
1st............................................. 33
2d.............................................. 66
3d.............................................100.''.
(2) Conforming amendment.--Section 407(b)(3) of such Act (29
U.S.C. 1107(b)(3)) is amended by adding at the end the
following:
``(D) For diversification requirements for qualifying
employer securities held in certain individual account plans,
see section 204(j).''.
(c) <<NOTE: 26 USC 401 note.>> Effective Dates.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall apply to plan
years beginning after December 31, 2006.
(2) <<NOTE: Applicability.>> Special rule for collectively
bargained agreements.--In the case of a plan maintained pursuant
to 1 or more collective bargaining agreements between employee
representatives and 1 or more employers ratified on or before
the date of the enactment of this Act, paragraph (1) shall be
applied to benefits pursuant to, and individuals covered by, any
such agreement by substituting for ``December 31, 2006'' the
earlier of--
(A) the later of--
[[Page 120 STAT. 1033]]
(i) December 31, 2007, or
(ii) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof after such date of enactment), or
(B) December 31, 2008.
(3) Special rule for certain employer securities held in an
esop.--
(A) In general.--In the case of employer securities
to which this paragraph applies, the amendments made by
this section shall apply to plan years beginning after
the earlier of--
(i) December 31, 2007, or
(ii) the first date on which the fair market
value of such securities exceeds the guaranteed
minimum value described in subparagraph (B)(ii).
(B) Applicable securities.--This paragraph shall
apply to employer securities which are attributable to
employer contributions other than elective deferrals,
and which, on September 17, 2003--
(i) consist of preferred stock, and
(ii) are within an employee stock ownership
plan (as defined in section 4975(e)(7) of the
Internal Revenue Code of 1986), the terms of which
provide that the value of the securities cannot be
less than the guaranteed minimum value specified
by the plan on such date.
(C) Coordination with transition rule.--In applying
section 401(a)(35)(H) of the Internal Revenue Code of
1986 and section 204(j)(7) of the Employee Retirement
Income Security Act of 1974 (as added by this section)
to employer securities to which this paragraph applies,
the applicable percentage shall be determined without
regard to this paragraph.
SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION
ARRANGEMENTS.
(a) In General.--Section 401(k) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 401.>> (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 (E).
``(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.
[[Page 120 STAT. 1034]]
``(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) may be applied
without taking into account any employee who--
``(I) 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), and
``(II) had an election in effect on
such date either to participate in the
arrangement or to not participate in the
arrangement.
``(D) 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 the sum of 100 percent of the
elective contributions of the employee
to the extent that such contributions do
not exceed 1 percent of compensation
plus 50 percent of so much of such
compensation as exceeds 1 percent but
does 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
[[Page 120 STAT. 1035]]
arrangement in an amount equal to at
least 3 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).
``(E) 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 <<NOTE: 26 USC
401.>> Code (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by redesignating
paragraph
[[Page 120 STAT. 1036]]
(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 <<NOTE: 26 USC 416.>> 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) Treatment of Withdrawals of Contributions During First 90
Days.--
(1) In general.--Section 414 of the Internal Revenue Code of
1986 is amended by adding at the end the following new
subsection:
``(w) Special Rules for Certain Withdrawals From Eligible Automatic
Contribution Arrangements.--
``(1) In general.--If an eligible automatic contribution
arrangement allows an employee to elect to make permissible
withdrawals--
``(A) the amount of any such withdrawal shall be
includible in the gross income of the employee for the
taxable year of the employee in which the distribution
is made,
``(B) no tax shall be imposed under section 72(t)
with respect to the distribution, and
``(C) the arrangement shall not be treated as
violating any restriction on distributions under this
title solely by reason of allowing the withdrawal.
In the case of any distribution to an employee by reason of an
election under this paragraph, employer matching contributions
shall be forfeited or subject to such other treatment as the
Secretary may prescribe.
``(2) Permissible withdrawal.--For purposes of this sub-
section--
``(A) In general.--The term `permissible withdrawal'
means any withdrawal from an eligible automatic
contribution arrangement meeting the requirements of
this paragraph which--
``(i) is made pursuant to an election by an
employee, and
``(ii) consists of elective contributions
described in paragraph (3)(B) (and earnings
attributable thereto).
``(B) Time for making election.--Subparagraph (A)
shall not apply to an election by an employee unless the
election is made no later than the date which is 90 days
after the date of the first elective contribution with
respect to the employee under the arrangement.
``(C) Amount of distribution.--Subparagraph (A)
shall not apply to any election by an employee unless
the amount of any distribution by reason of the election
[[Page 120 STAT. 1037]]
is equal to the amount of elective contributions made
with respect to the first payroll period to which the
eligible automatic contribution arrangement applies to
the employee and any succeeding payroll period beginning
before the effective date of the election (and earnings
attributable thereto).
``(3) Eligible automatic contribution arrangement.--For
purposes of this subsection, the term `eligible automatic
contribution arrangement' means an arrangement under an
applicable employer plan--
``(A) under which a participant may elect to have
the employer make payments as contributions under the
plan on behalf of the participant, or to the participant
directly in cash,
``(B) under which the participant is treated as
having elected to have the employer make such
contributions in an amount equal to a uniform percentage
of compensation provided under the plan until the
participant specifically elects not to have such
contributions made (or specifically elects to have such
contributions made at a different percentage),
``(C) under which, in the absence of an investment
election by the participant, contributions described in
subparagraph (B) are invested in accordance with
regulations prescribed by the Secretary of Labor under
section 404(c)(5) of the Employee Retirement Income
Security Act of 1974, and
``(D) which meets the requirements of paragraph (4).
``(4) Notice requirements.--
``(A) In general.--The administrator of a plan
containing an arrangement described in paragraph (3)
shall, within a reasonable period before each plan year,
give to each employee to whom an arrangement described
in paragraph (3) applies for such plan year notice of
the employee's rights and obligations under the
arrangement which--
``(i) is sufficiently accurate and
comprehensive to apprise the employee of such
rights and obligations, and
``(ii) is written in a manner calculated to be
understood by the average employee to whom the
arrangement applies.
``(B) Time and form of notice.--A notice shall not
be treated as meeting the requirements of subparagraph
(A) with respect to an employee unless--
``(i) the notice includes an explanation of
the employee's right under the arrangement to
elect not to have elective contributions made on
the employee's behalf (or to elect to have such
contributions made at a different percentage),
``(ii) the employee has a reasonable period of
time after receipt of the notice described in
clause (i) and before the first elective
contribution is made to make such election, and
``(iii) the notice explains how contributions
made under the arrangement will be invested in the
absence of any investment election by the
employee.
[[Page 120 STAT. 1038]]
``(5) 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).
``(6) Special rule.--A withdrawal described in paragraph (1)
(subject to the limitation of paragraph (2)(C)) 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 <<NOTE: 26 USC
411.>> 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) Excess Contributions.--
(1) Expansion of corrective distribution period for
automatic contribution arrangements.--Subsection (f) of section
4979 of the Internal Revenue Code of 1986 is amended--
(A) by inserting ``(6 months in the case of an
excess contribution or excess aggregate contribution to
an eligible automatic contribution arrangement (as
defined in section 414(w)(3)))'' after ``2\1/2\ months''
in paragraph (1), and
(B) by striking ``2\1/2\ Months of'' in the heading
and inserting ``Specified Period After''.
(2) Year of inclusion.--Paragraph (2) of section 4979(f) of
such Code is amended to read as follows:
``(2) Year of inclusion.--Any amount distributed as provided
in paragraph (1) shall be treated as earned and received by the
recipient in the recipient's taxable year in which such
distributions were made.''.
(3) Simplification of allocable earnings.--
(A) Section 4979.--Paragraph (1) of section 4979(f)
of such Code is amended by adding ``through the end of
the plan year for which the contribution was made''
after ``thereto''.
(B) Section 401(k) and 401(m).--
(i) Clause (i) of section 401(k)(8)(A) of such
Code is amended by adding ``through the end of
such year'' after ``such contributions''.
[[Page 120 STAT. 1039]]
(ii) Subparagraph (A) of section 401(m)(6) of
such Code <<NOTE: 26 USC 401.>> is amended by
adding ``through the end of such year'' after ``to
such contributions''.
(f) Preemption of Conflicting State Regulation.--
(1) In general.--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) For purposes of this subsection, the term `automatic
contribution arrangement' means an arrangement--
``(A) 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,
``(B) 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
``(C) under which such contributions are invested in
accordance with regulations prescribed by the Secretary under
section 404(c)(5).
``(3)(A) The plan administrator of an automatic contribution
arrangement shall, within a reasonable period before such plan year,
provide 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.''.
(2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
1132(c)(4)) is amended by striking ``or section
302(b)(7)(F)(vi)'' inserting ``, section 302(b)(7)(F)(vi), or
section 514(e)(3)''.
(g) <<NOTE: 26 USC 401 note.>> Effective Date.--The amendments made
by this section shall apply to plan years beginning after December 31,
2007, except that the amendments made by subsection (f) shall take
effect on the date of the enactment of this Act.
[[Page 120 STAT. 1040]]
SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND
QUALIFIED CASH OR DEFERRED ARRANGEMENTS.
(a) Amendments of Internal Revenue Code.--Section 414 of the
Internal Revenue Code of 1986, as amended by this <<NOTE: 26 USC
414.>> Act, is amended by adding at the end the following new
subsection:
``(x) Special Rules for Eligible Combined Defined Benefit Plans and
Qualified Cash or Deferred Arrangements.--
``(1) <<NOTE: Applicability.>> General rule.--Except as
provided in this subsection, the requirements of this title
shall be applied to any defined benefit plan or applicable
defined contribution plan which are part of an eligible combined
plan in the same manner as if each such plan were not a part of
the eligible combined plan.
``(2) Eligible combined plan.--For purposes of this sub-
section--
``(A) In general.--The term `eligible combined plan'
means a plan--
``(i) which is maintained by an employer
which, at the time the plan is established, is a
small employer,
``(ii) which consists of a defined benefit
plan and an applicable defined contribution plan,
``(iii) the assets of which are held in a
single trust forming part of the plan and are
clearly identified and allocated to the defined
benefit plan and the applicable defined
contribution plan to the extent necessary for the
separate application of this title under paragraph
(1), and
``(iv) with respect to which the benefit,
contribution, vesting, and nondiscrimination
requirements of subparagraphs (B), (C), (D), (E),
and (F) are met.
For purposes of this subparagraph, the term `small
employer' has the meaning given such term by section
4980D(d)(2), except that such section shall be applied
by substituting `500' for `50' each place it appears.
``(B) Benefit requirements.--
``(i) In general.--The benefit requirements of
this subparagraph are met with respect to the
defined benefit plan forming part of the eligible
combined plan if the accrued benefit of each
participant derived from employer contributions,
when expressed as an annual retirement benefit, is
not less than the applicable percentage of the
participant's final average pay. For purposes of
this clause, final average pay shall be determined
using the period of consecutive years (not
exceeding 5) during which the participant had the
greatest aggregate compensation from the employer.
``(ii) Applicable percentage.--For purposes of
clause (i), the applicable percentage is the
lesser of--
``(I) 1 percent multiplied by the
number of years of service with the
employer, or
``(II) 20 percent.
``(iii) Special rule for applicable defined
benefit plans.--If the defined benefit plan under
clause (i) is an applicable defined benefit plan
as defined in section 411(a)(13)(B) which meets
the interest credit requirements of section
411(b)(5)(B)(i), the plan shall
[[Page 120 STAT. 1041]]
be treated as meeting the requirements of clause
(i) with respect to any plan year if each
participant receives a pay credit for the year
which is not less than the percentage of
compensation determined in accordance with the
following table:
``If the partici .........................................
as of the
beginning of t The percentage is--......................
is--
30 or less.................................. 2
Over 30 but less than 40.................... 4
40 or over but less than 50................. 6
50 or over.................................. 8.
``(iv) Years of service.--For purposes of this
subparagraph, years of service shall be determined
under the rules of paragraphs (4), (5), and (6) of
section 411(a), except that the plan may not
disregard any year of service because of a
participant making, or failing to make, any
elective deferral with respect to the qualified
cash or deferred arrangement to which subparagraph
(C) applies.
``(C) Contribution requirements.--
``(i) In general.--The contribution
requirements of this subparagraph with respect to
any applicable defined contribution plan forming
part of an eligible combined plan are met if--
``(I) the qualified cash or deferred
arrangement included in such plan
constitutes an automatic contribution
arrangement, and
``(II) the employer is required to
make matching contributions on behalf of
each employee eligible to participate in
the arrangement in an amount equal to 50
percent of the elective contributions of
the employee to the extent such elective
contributions do not exceed 4 percent of
compensation.
Rules <<NOTE: Applicability.>> similar to the
rules of clauses (ii) and (iii) of section
401(k)(12)(B) shall apply for purposes of this
clause.
``(ii) Nonelective contributions.--An
applicable defined contribution plan shall not be
treated as failing to meet the requirements of
clause (i) because the employer makes nonelective
contributions under the plan but such
contributions shall not be taken into account in
determining whether the requirements of clause
(i)(II) are met.
``(D) Vesting requirements.--The vesting
requirements of this subparagraph are met if--
``(i) in the case of a defined benefit plan
forming part of an eligible combined plan an
employee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee's accrued benefit under the plan
derived from employer contributions, and
``(ii) in the case of an applicable defined
contribution plan forming part of eligible
combined plan--
``(I) an employee has a
nonforfeitable right to any matching
contribution made under the
[[Page 120 STAT. 1042]]
qualified cash or deferred arrangement
included in such plan by an employer
with respect to any elective
contribution, including matching
contributions in excess of the
contributions required under
subparagraph (C)(i)(II), and
``(II) an employee who has completed
at least 3 years of service has a
nonforfeitable right to 100 percent of
the employee's accrued benefit derived
under the arrangement from nonelective
contributions of the employer.
For <<NOTE: Applicability.>> purposes of this
subparagraph, the rules of section 411 shall apply
to the extent not inconsistent with this
subparagraph.
``(E) Uniform provision of contributions and
benefits.--In the case of a defined benefit plan or
applicable defined contribution plan forming part of an
eligible combined plan, the requirements of this
subparagraph are met if all contributions and benefits
under each such plan, and all rights and features under
each such plan, must be provided uniformly to all
participants.
``(F) Requirements must be met without taking into
account social security and similar contributions and
benefits or other plans.--
``(i) In general.--The requirements of this
subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
``(ii) Social security and similar
contributions.--The requirements of this clause
are met if--
``(I) the requirements of
subparagraphs (B) and (C) are met
without regard to section 401(l), and
``(II) the requirements of sections
401(a)(4) and 410(b) are met with
respect to both the applicable defined
contribution plan and defined benefit
plan forming part of an eligible
combined plan without regard to section
401(l).
``(iii) Other plans and arrangements.--The
requirements of this clause are met if the
applicable defined contribution plan and defined
benefit plan forming part of an eligible combined
plan meet the requirements of sections 401(a)(4)
and 410(b) without being combined with any other
plan.
``(3) Nondiscrimination requirements for qualified cash or
deferred arrangement.--
``(A) In general.--A qualified cash or deferred
arrangement which is included in an applicable defined
contribution plan forming part of an eligible combined
plan shall be treated as meeting the requirements of
section 401(k)(3)(A)(ii) if the requirements of
paragraph (2)(C) are met with respect to such
arrangement.
``(B) Matching contributions.--In applying section
401(m)(11) to any matching contribution with respect to
a contribution to which paragraph (2)(C) applies, the
contribution requirement of paragraph (2)(C) and the
notice requirements of paragraph (5)(B) shall be
substituted for the requirements otherwise applicable
under clauses (i) and (ii) of section 401(m)(11)(A).
[[Page 120 STAT. 1043]]
``(4) Satisfaction of top-heavy rules.--A defined benefit
plan and applicable defined contribution plan forming part of an
eligible combined plan for any plan year shall be treated as
meeting the requirements of section 416 for the plan year.
``(5) Automatic contribution arrangement.--For purposes of
this subsection--
``(A) In general.--A qualified cash or deferred
arrangement shall be treated as an automatic
contribution arrangement if the arrangement--
``(i) provides that each employee eligible to
participate in the arrangement is treated as
having elected to have the employer make elective
contributions in an amount equal to 4 percent of
the employee's compensation unless the employee
specifically elects not to have such contributions
made or to have such contributions made at a
different rate, and
``(ii) meets the notice requirements under
subparagraph (B).
``(B) Notice requirements.--
``(i) In general.--The requirements of this
subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
``(ii) Reasonable period to make election.--
The requirements of this clause are met if each
employee to whom subparagraph (A)(i) applies--
``(I) receives a notice explaining
the employee's right under the
arrangement to elect not to have
elective contributions made on the
employee's behalf or to have the
contributions made at a different rate,
and
``(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution
is made to make such election.
``(iii) Annual notice of rights and
obligations.--The requirements of this clause are
met if each employee eligible to participate in
the arrangement is, within a reasonable period
before any year, given notice of the employee's
rights and obligations under the arrangement.
The requirements of clauses (i) and (ii) of section
401(k)(12)(D) shall be met with respect to the notices
described in clauses (ii) and (iii) of this
subparagraph.
``(6) Coordination with other requirements.--
``(A) Treatment of separate plans.--Section 414(k)
shall not apply to an eligible combined plan.
``(B) Reporting.--An eligible combined plan shall be
treated as a single plan for purposes of sections 6058
and 6059.
``(7) Applicable defined contribution plan.--For purposes of
this subsection--
``(A) In general.--The term `applicable defined
contribution plan' means a defined contribution plan
which includes a qualified cash or deferred arrangement.
``(B) Qualified cash or deferred arrangement.--The
term `qualified cash or deferred arrangement' has the
meaning given such term by section 401(k)(2).''.
[[Page 120 STAT. 1044]]
(b) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) In general.--Section 210 of the Employee Retirement
Income Security Act of 1974 <<NOTE: 29 USC 1060.>> is amended by
adding at the end the following new subsection:
``(e) Special Rules for Eligible Combined Defined Benefit Plans and
Qualified Cash or Deferred Arrangements.--
``(1) <<NOTE: Applicability.>> General rule.--Except as
provided in this subsection, this Act shall be applied to any
defined benefit plan or applicable individual account plan which
are part of an eligible combined plan in the same manner as if
each such plan were not a part of the eligible combined plan.
``(2) Eligible combined plan.--For purposes of this sub-
section--
``(A) In general.--The term `eligible combined plan'
means a plan--
``(i) which is maintained by an employer
which, at the time the plan is established, is a
small employer,
``(ii) which consists of a defined benefit
plan and an applicable individual account plan
each of which qualifies under section 401(a) of
the Internal Revenue Code of 1986,
``(iii) the assets of which are held in a
single trust forming part of the plan and are
clearly identified and allocated to the defined
benefit plan and the applicable individual account
plan to the extent necessary for the separate
application of this Act under paragraph (1), and
``(iv) with respect to which the benefit,
contribution, vesting, and nondiscrimination
requirements of subparagraphs (B), (C), (D), (E),
and (F) are met.
For <<NOTE: Applicability.>> purposes of this
subparagraph, the term `small employer' has the meaning
given such term by section 4980D(d)(2) of the Internal
Revenue Code of 1986, except that such section shall be
applied by substituting `500' for `50' each place it
appears.
``(B) Benefit requirements.--
``(i) In general.--The benefit requirements of
this subparagraph are met with respect to the
defined benefit plan forming part of the eligible
combined plan if the accrued benefit of each
participant derived from employer contributions,
when expressed as an annual retirement benefit, is
not less than the applicable percentage of the
participant's final average pay. For purposes of
this clause, final average pay shall be determined
using the period of consecutive years (not
exceeding 5) during which the participant had the
greatest aggregate compensation from the employer.
``(ii) Applicable percentage.--For purposes of
clause (i), the applicable percentage is the
lesser of--
``(I) 1 percent multiplied by the
number of years of service with the
employer, or
``(II) 20 percent.
``(iii) Special rule for applicable defined
benefit plans.--If the defined benefit plan under
clause (i) is an applicable defined benefit plan
as defined in section 203(f)(3)(B) which meets the
interest credit
[[Page 120 STAT. 1045]]
requirements of section 204(b)(5)(B)(i), the plan
shall be treated as meeting the requirements of
clause (i) with respect to any plan year if each
participant receives pay credit for the year which
is not less than the percentage of compensation
determined in accordance with the following table:
``If the partici .........................................
as of the
beginning of tThe percentage is--.......................
is--
30 or less.................................. 2
Over 30 but less than 40.................... 4
40 or over but less than 50................. 6
50 or over.................................. 8.
``(iv) Years of service.--For purposes of this
subparagraph, years of service shall be determined
under the rules of paragraphs (1), (2), and (3) of
section 203(b), except that the plan may not
disregard any year of service because of a
participant making, or failing to make, any
elective deferral with respect to the qualified
cash or deferred arrangement to which subparagraph
(C) applies.
``(C) Contribution requirements.--
``(i) In general.--The contribution
requirements of this subparagraph with respect to
any applicable individual account plan forming
part of an eligible combined plan are met if--
``(I) the qualified cash or deferred
arrangement included in such plan
constitutes an automatic contribution
arrangement, and
``(II) the employer is required to
make matching contributions on behalf of
each employee eligible to participate in
the arrangement in an amount equal to 50
percent of the elective contributions of
the employee to the extent such elective
contributions do not exceed 4 percent of
compensation.
Rules <<NOTE: Applicability.>> similar to the
rules of clauses (ii) and (iii) of section
401(k)(12)(B) of the Internal Revenue Code of 1986
shall apply for purposes of this clause.
``(ii) Nonelective contributions.--An
applicable individual account plan shall not be
treated as failing to meet the requirements of
clause (i) because the employer makes nonelective
contributions under the plan but such
contributions shall not be taken into account in
determining whether the requirements of clause
(i)(II) are met.
``(D) Vesting requirements.--The vesting
requirements of this subparagraph are met if--
``(i) in the case of a defined benefit plan
forming part of an eligible combined plan an
employee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee's accrued benefit under the plan
derived from employer contributions, and
``(ii) in the case of an applicable individual
account plan forming part of eligible combined
plan--
[[Page 120 STAT. 1046]]
``(I) an employee has a
nonforfeitable right to any matching
contribution made under the qualified
cash or deferred arrangement included in
such plan by an employer with respect to
any elective contribution, including
matching contributions in excess of the
contributions required under
subparagraph (C)(i)(II), and
``(II) an employee who has completed
at least 3 years of service has a
nonforfeitable right to 100 percent of
the employee's accrued benefit derived
under the arrangement from nonelective
contributions of the employer.
For <<NOTE: Applicability.>> purposes of this
subparagraph, the rules of section 203 shall apply
to the extent not inconsistent with this
subparagraph.
``(E) Uniform provision of contributions and
benefits.--In the case of a defined benefit plan or
applicable individual account plan forming part of an
eligible combined plan, the requirements of this
subparagraph are met if all contributions and benefits
under each such plan, and all rights and features under
each such plan, must be provided uniformly to all
participants.
``(F) Requirements must be met without taking into
account social security and similar contributions and
benefits or other plans.--
``(i) In general.--The requirements of this
subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
``(ii) Social security and similar
contributions.--The requirements of this clause
are met if--
``(I) the requirements of
subparagraphs (B) and (C) are met
without regard to section 401(l) of the
Internal Revenue Code of 1986, and
``(II) the requirements of sections
401(a)(4) and 410(b) of the Internal
Revenue Code of 1986 are met with
respect to both the applicable defined
contribution plan and defined benefit
plan forming part of an eligible
combined plan without regard to section
401(l) of the Internal Revenue Code of
1986.
``(iii) Other plans and arrangements.--The
requirements of this clause are met if the
applicable defined contribution plan and defined
benefit plan forming part of an eligible combined
plan meet the requirements of sections 401(a)(4)
and 410(b) of the Internal Revenue Code of 1986
without being combined with any other plan.
``(3) Nondiscrimination requirements for qualified cash or
deferred arrangement.--
``(A) In general.--A qualified cash or deferred
arrangement which is included in an applicable
individual account plan forming part of an eligible
combined plan shall be treated as meeting the
requirements of section 401(k)(3)(A)(ii) of the Internal
Revenue Code of 1986 if the requirements of paragraph
(2) are met with respect to such arrangement.
[[Page 120 STAT. 1047]]
``(B) Matching contributions.--In applying section
401(m)(11) of such Code to any matching contribution
with respect to a contribution to which paragraph (2)(C)
applies, the contribution requirement of paragraph
(2)(C) and the notice requirements of paragraph (5)(B)
shall be substituted for the requirements otherwise
applicable under clauses (i) and (ii) of section
401(m)(11)(A) of such Code.
``(4) Automatic contribution arrangement.--For purposes of
this subsection--
``(A) In general.--A qualified cash or deferred
arrangement shall be treated as an automatic
contribution arrangement if the arrangement--
``(i) provides that each employee eligible to
participate in the arrangement is treated as
having elected to have the employer make elective
contributions in an amount equal to 4 percent of
the employee's compensation unless the employee
specifically elects not to have such contributions
made or to have such contributions made at a
different rate, and
``(ii) meets the notice requirements under
subparagraph (B).
``(B) Notice requirements.--
``(i) In general.--The requirements of this
subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
``(ii) Reasonable period to make election.--
The requirements of this clause are met if each
employee to whom subparagraph (A)(i) applies--
``(I) receives a notice explaining
the employee's right under the
arrangement to elect not to have
elective contributions made on the
employee's behalf or to have the
contributions made at a different rate,
and
``(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution
is made to make such election.
``(iii) Annual notice of rights and
obligations.--The requirements of this clause are
met if each employee eligible to participate in
the arrangement is, within a reasonable period
before any year, given notice of the employee's
rights and obligations under the arrangement.
The requirements of this subparagraph shall not be
treated as met unless the requirements of clauses (i)
and (ii) of section 401(k)(12)(D) of the Internal
Revenue Code of 1986 are met with respect to the notices
described in clauses (ii) and (iii) of this
subparagraph.
``(5) Coordination with other requirements.--
``(A) Treatment of separate plans.--The except
clause in section 3(35) shall not apply to an eligible
combined plan.
``(B) Reporting.--An eligible combined plan shall be
treated as a single plan for purposes of section 103.
``(6) Applicable individual account plan.--For purposes of
this subsection--
[[Page 120 STAT. 1048]]
``(A) In general.--The term `applicable individual
account plan' means an individual account plan which
includes a qualified cash or deferred arrangement.
``(B) Qualified cash or deferred arrangement.--The
term `qualified cash or deferred arrangement' has the
meaning given such term by section 401(k)(2) of the
Internal Revenue Code of 1986.''.
(2) Conforming changes.--
(A) The heading for section 210 of such
Act <<NOTE: 29 USC 1060.>> is amended to read as
follows:
``SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL RULES.''.
(B) The table of contents in section 1 of such Act
is amended by striking the item relating to section 210
and inserting the following new item:
``Sec. 210. Multiple employer plans and other special rules.''.
(c) <<NOTE: 26 USC 414 note.>> Effective Date.--The amendments made
by this section shall apply to plan years beginning after December 31,
2009.
SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Paragraph (2) of section 411(a) of the
Internal Revenue Code of 1986 <<NOTE: 26 USC 411.>> (relating to
employer contributions) is amended to read as follows:
``(2) Employer contributions.--
``(A) Defined benefit plans.--
``(i) In general.--In the case of a defined
benefit plan, a plan satisfies the requirements of
this paragraph if it satisfies the requirements of
clause (ii) or (iii).
``(ii) 5-year vesting.--A plan satisfies the
requirements of this clause if an employee who has
completed at least 5 years of service has a
nonforfeitable right to 100 percent of the
employee's accrued benefit derived from employer
contributions.
``(iii) 3 to 7 year vesting.--A plan satisfies
the requirements of this clause if an employee has
a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer
contributions determined under the following
table:
``Years of serviThe nonforfeitable........................
percentage is:............................
3........................................... 20
4........................................... 40
5........................................... 60
6........................................... 80
7 or more................................... 100.
``(B) Defined contribution plans.--
``(i) In general.--In the case of a defined
contribution plan, a plan satisfies the
requirements of this paragraph if it satisfies the
requirements of clause (ii) or (iii).
``(ii) 3-year vesting.--A plan satisfies the
requirements of this clause if an employee who has
completed at least 3 years of service has a
nonforfeitable right
[[Page 120 STAT. 1049]]
to 100 percent of the employee's accrued benefit
derived from employer contributions.
``(iii) 2 to 6 year vesting.--A plan satisfies
the requirements of this clause if an employee has
a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer
contributions determined under the following
table:
``Years of serviThe nonforfeitable .......................
percentage is:...........................
2........................................... 20
3........................................... 40
4........................................... 60
5........................................... 80
6 or more..................................100.''.
(2) Conforming amendment.--Section 411(a) of such Code
(relating to general rule for minimum vesting standards) is
amended by striking paragraph (12).
(b) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) In general.--Paragraph (2) of section 203(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(2)) is amended to read as follows:
``(2)(A)(i) In the case of a defined benefit plan, a plan
satisfies the requirements of this paragraph if it satisfies the
requirements of clause (ii) or (iii).
``(ii) A plan satisfies the requirements of this clause if
an employee who has completed at least 5 years of service has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from employer contributions.
``(iii) A plan satisfies the requirements of this clause if