S.Amdt. 590

1. Adds SEC. ____. INTEREST RATES USED FOR PENSION PLANS; COMMISSION ON DEFINED BENEFIT PLANS at the end of subtitle C of title V

   Adds a section

   In S. 1054 · Placed on Calendar Senate

   (c) Effective Date.--The amendments made by this section shall apply to amounts paid or accrued after the date of enactment of this section in taxable years ending after such date.

   Inserted: SEC. ____. INTEREST RATES USED FOR PENSION PLANS; COMMISSION ON DEFINED BENEFIT PLANS.

   Inserted: (a) Replacement of Interest Rate on 30-year Treasury Securities with Interest Rate on Conservatively-Invested Long-Term Corporate Bonds.--

   Inserted: (1) Internal Revenue Code of 1986.--

   Inserted: (A) In general.--Section 412(b)(5)(B)(ii)(I) of the Internal Revenue Code of 1986 is amended--

   Inserted: (i) by striking "not more than 10 percent above and, not more than 10 percent below," and inserting "not more than 10 percent below"; and

   Inserted: (ii) by striking "the rates of interest on 30-year Treasury securities" and inserting "conservative long-term corporate bond rates".

   Inserted: (B) Conservative long-term corporate bond rates.--Section 412(b)(5) of such Code is amended by adding at the end the following new subparagraph:

   Inserted: "(C) Conservative long-term corporate bond rates.--The Secretary shall, by regulation, prescribe a method for periodically determining the conservative long-term corporate bond rates for purposes of this paragraph. Such rates shall reflect rates of interest on amounts conservatively invested in long-term corporate bonds and shall be based on the use of 1 or more indices."

   Inserted: (C) Amendment reflecting the change in the interest rate calculation.--Section 412(b)(5)(B)(iii)(II) of such Code is amended to read as follows:

   Inserted: "(II) consistent with the annual rate of return with respect to amounts conservatively invested in long-term corporate bonds."

   Inserted: (D) Elimination of corridor.--Section 412(l)(7)(C) of such code is amended by striking clause (i) and inserting the following:

   Inserted: "(i) Interest rate.--The rate of interest used to determine current liability under this subsection shall be the rate of interest used under subsection (b)(5)."

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   Inserted: (E) Determination of present value.--

   Inserted: (i) In general.--Section 417(e)(3)(A)(ii)(II) of such Code is amended to read as follows:

   Inserted: "(II) Applicable interest rate.--The term 'applicable interest rate' means an annual rate of interest equal to the conservative long-term corporate bond rate (as determined under section 412(b)(5)(C)) for the month before the date of distribution or such other time as the Secretary may by regulations prescribe."

   Inserted: (ii) Limitation on certain assumptions.--Section 415(b)(2)(E)(ii) of such Code is amended by striking "the applicable interest rate (as defined in section 417(e)(3))" and inserting "5.5 percent".

   Inserted: (iii) Phase in of interest rate on long-term corporate bonds.--Section 417(e)(3) of such Code is amended by adding at the end the following:

   Inserted: "(C) Rules for phase in of interest rate on long-term corporate bonds.--

   Inserted: "(i) In general.--In the case of a plan year specified in the table in clause (ii), the applicable interest rate under subparagraph (A)(ii)(II) shall be the lower of--

   Inserted: "(I) such applicable interest rate (without regard to this subparagraph); or

   Inserted: "(II) the 30-year Treasury securities rate plus the applicable percentage of the excess of such applicable interest rate (without regard to this subparagraph) over the 30-year Treasury securities rate.

   Inserted: "(ii) Applicable percentage.--For purposes of clause (i), the applicable percentage shall be determined in accordance with the following table:

   Inserted: "Plan year beginning in calendar year: Applicable percentage:

   Inserted: 2004.......................................................0 .

   Inserted: 2005.......................................................0 .

   Inserted: 2006......................................................20 .

   Inserted: 2007......................................................40 .

   Inserted: 2008......................................................60 .

   Inserted: 2009......................................................80..

   Inserted: "(iii) 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 by the date of enactment of this subparagraph, in lieu of the 6 calendar years specified in clause (ii), the years corresponding to the applicable percentages in clause (ii) shall be the first 6 years in which clause (i) applies to employees covered by any such agreement. This clause shall only apply to such employees."

   Inserted: (2) Employee Retirement Income Security Act of 1974.--

   Inserted: (A) In general.--Section 302(b)(5)(B)(ii)(I) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(b)(5)(B)(ii)(I)) is amended--

   Inserted: (i) by striking "not more than 10 percent above and, not more than 10 percent below," and inserting "not more than 10 percent below"; and

   Inserted: (ii) by striking "the rates of interest on 30-year Treasury securities" and inserting "conservative long-term corporate bond rates".

   Inserted: (B) Conservative long-term corporate bond rates.--Section 302(b)(5) of such Act (29 U.S.C. 1082(b)(5)) is amended by adding at the end the following new subparagraph:

   Inserted: "(C) Conservative long-term corporate bond rate.--The Secretary of the Treasury shall, by regulation, prescribe a method for periodically determining conservative long-term corporate bond rates for purposes of this paragraph. Such rates shall reflect rates of interest on amounts conservatively invested in long-term corporate bonds and shall be based on the use of 1 or more indices."

   Inserted: (C) Amendment reflecting the change in the interest rate calculation.--Section 302(b)(5)(B)(iii)(II) of such Act (29 U.S.C. 1082(b)(5)(B)(iii)(II)) is amended to read as follows:

   Inserted: "(II) consistent with the annual rate of return with respect to amounts conservatively invested in long-term corporate bonds."

   Inserted: (D) Elimination of corridor.--Section 302(d)(7)(C) of such Act is amended by striking clause (i) and inserting the following:

   Inserted: "(i) Interest rate.--The rate of interest used to determine current liability under this subsection shall be the rate of interest used under subsection (b)(5)."

   Inserted: (E) Determination of present value.--

   Inserted: (i) In general.--Section 205(g)(3)(A)(ii)(II) of such Act (29 U.S.C. 1055(g)(3)(A)(ii)(II)) is amended to read as follows:

   Inserted: "(II) Applicable interest rate.--The term 'applicable interest rate' means an annual rate of interest equal to the conservative long-term corporate bond rate (as determined under section 302(b)(5)(C)) for the month before the date of distribution or such other time as the Secretary may by regulations prescribe."

   Inserted: (ii) Phase in of interest rate on long-term corporate bonds.--Section 205(g)(3) of such Act (29 U.S.C. 1055(g)(3)) is amended by adding at the end the following:

   Inserted: "(C) Rules for phase in of interest rate on long-term corporate bonds.--

   Inserted: "(i) In general.--In the case of a plan year specified in the table in clause (ii), the applicable interest rate under subparagraph (A)(ii)(II) shall be the lower of--

   Inserted: "(I) such applicable interest rate (without regard to this subparagraph); or

   Inserted: "(II) the 30-year Treasury securities rate plus the applicable percentage of the excess of such applicable interest rate (without regard to this subparagraph) over the 30-year Treasury securities rate.

   Inserted: "(ii) Applicable percentage.--For purposes of clause (i), the applicable percentage shall be determined in accordance with the following table:

   Inserted: "Plan year beginning in calendar year: Applicable percentage:

   Inserted: 2004.......................................................0 .

   Inserted: 2005.......................................................0 .

   Inserted: 2006......................................................20 .

   Inserted: 2007......................................................40 .

   Inserted: 2008......................................................60 .

   Inserted: 2009......................................................80..

   Inserted: "(iii) 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 by the date of enactment of this subparagraph, in lieu of the 6 calendar years specified in clause (ii), the years corresponding to the applicable percentages in clause (ii) shall be the first 6 years in which clause (i) applies to employees covered by any such agreement. This clause shall only apply to such employees."

   Inserted: (C) PBGC premium rates.--The first sentence of section 4006(a)(3)(E)(iii)(II) of such Act (29 U.S.C. 1306(a)(3)(E)(iii)(II)) is amended by striking "the annual yield on 30-year Treasury securities" and inserting "the annual rate of interest equal to the long-term corporate bond rate (as determined under section 302(b)(5)(C)".

   Inserted: (b) Commission.--

   Inserted: (1) Establishment of the commission.--

   Inserted: (A) Establishment.--There is established the Commission on Defined Benefit Pension Plans (in this Act referred to as the "Commission").

   Inserted: (B) Membership.--

   Inserted: (i) Composition.--The Commission shall be composed of 13 members of whom--

   Inserted: (I) 1 shall be the Secretary of Labor or their designee;

   Inserted: (II) 1 shall be the Secretary of the Treasury or their designee;

   Inserted: (III) 1 shall be the Executive Director of the Pension Benefit Guaranty Corporation;

   Inserted: (IV) 2 shall be appointed by the President from among members of the general public;

   Inserted: (V) 1 shall be appointed by the chairman of the Committee on Health, Education, Labor, and Pensions of the Senate;

   Inserted: (VI) 1 shall be appointed by the ranking minority member of the Committee on Health, Education, Labor, and Pensions of the Senate;

   Inserted: (VII) 1 shall be appointed by the chairman of the Committee on Finance of the Senate;

   Inserted: (VIII) 1 shall be appointed by the ranking minority member of the Committee on Finance of the Senate;

   Inserted: (IX) 1 shall be appointed by the chairman of the Committee on Education and the Workforce of the House of Representatives;

   Inserted: (X) 1 shall be appointed by the ranking minority member of the Committee on Education and the Workforce of the House of Representatives;

   Inserted: (XI) 1 shall be appointed by the chairman of the Committee on Ways and Means of the House of Representatives; and

   Inserted: (XII) 1 shall be appointed by the ranking minority member of the Committee on Ways and Means of the House of Representatives.

   Inserted: (C) Period of appointment; vacancies.--Members shall be appointed for the life of the Commission. Any vacancy in the Commission shall not affect its powers, but shall be filled in the same manner as the original appointment.

   Inserted: (D) Quorum.--A majority of the members of the Commission shall constitute a quorum, but a lesser number of members may hold hearings.

   Inserted: (E) Chairperson and vice chairperson.--The Commission shall select a Chairperson and Vice Chairperson from among its members.

   Inserted: (2) Duties of the commission.--

   Inserted: (A) Study and recommendations.--The Commission shall conduct a thorough study of, and shall develop recommendations on the following issues relating to defined benefit pension plans:

   Inserted: (i) The most appropriate interest rate for funding standards.

   Inserted: (ii) Methods for valuating liabilities, including the private yield curve approach.

   Inserted: (iii) Funding rules.

   Inserted: (iv) Mandatory actuarial assumptions, including mortality tables.

   Inserted: (v) Appropriate transition rules.

   Inserted: (vi) Other reforms to remove impediments or to create incentives for the creation and expansion of defined benefit plans.

   Inserted: (B) Report.--Not later than 6 months after the date of the appointment of the last member of the Commission, the Commission shall submit a report to the appropriate committees of Congress containing a detailed statement of the findings and conclusions of the Commission, together with its recommendations for such legislation as it considers appropriate.

   Inserted: (3) Powers of the commission.--

   Inserted: (A) Hearings.--The Commission may hold such hearings, sit and act at such times and places, take such testimony, and receive such evidence as the Commission considers advisable to carry out this Act. The Commission shall, to the maximum extent possible, use existing data and research prior to holding such hearings.

   Inserted: (B) Information from federal agencies.--The Commission may secure directly from any Federal department or agency such information as the Commission considers necessary to carry out this Act. Upon request of the Chairperson of the Commission, the head of such department or agency shall furnish such information to the Commission.

   Inserted: (C) Postal services.--The Commission may use the United States mails in the same manner and under the same conditions as other departments and agencies of the Federal Government.

   Inserted: (4) Commission personnel matters.--

   Inserted: (A) Compensation; travel expenses.--Each member of the Commission shall serve without compensation but shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business in the performance of services for the Commission.

   Inserted: (B) Staff and equipment.--The Department of the Treasury shall provide all financial, administrative, and staffing requirements for the Commission including--

   Inserted: (i) office space;

   Inserted: (ii) furnishings; and

   Inserted: (iii) equipment.

   Inserted: (5) Termination of the commission.--The Commission shall terminate 90 days after the date on which the Commission submits its report under paragraph (2)(B).

   Inserted: (c) Effective Dates.--

   Inserted: (1) In general.--Except as provided in paragraphs (2), (3), (4), and (5), the amendments made by this section shall apply to years beginning after December 31, 2003.

   Inserted: (2) Survivor annuities.--Except as provided in paragraphs (3) and (4), in the case of amendments made by this section to section 417(e)(3) of the Internal Revenue Code of 1986 and to section 205(g)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3)), and for purposes of section 411(a)(11)(B) of the Internal Revenue Code of 1986 and section 203(e)(2) of the Employee Retirement Income Security Act of 1974 (29 (U.S.C. 1053(e)(2)), such amendments shall apply to years beginning after December 31, 2005.

   Inserted: (3) Lookback rules.--For purposes of applying all applicable lookback rules in years beginning on or after the otherwise applicable effective date determined under paragraph (1), (2), or (4), the amendments made by this section may be applied as if such amendments had been in effect for all years beginning before such effective date. For purposes of this paragraph, a lookback rule is a rule that uses data from a prior year in determining requirements applicable to the current year.

   Inserted: (4) Collective bargaining agreements.--Except as provided in paragraph (3), in the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified by the date of the enactment of this Act, the amendments described in paragraph (2) shall not apply to employees covered by any such agreement for plan years beginning before the earlier of--

   Inserted: (A) the later of--

   Inserted: (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

   Inserted: (ii) January 1, 2006; or

   Inserted: (B) January 1, 2008.

   Inserted: (5) No reduction required.--In the case of any participant or beneficiary, the amount payable under any form of benefit subject to section 417(e)(3) of the Internal Revenue Code of 1986 shall not be required to be reduced below the amount determined as of the last day of the last plan year beginning before January 1, 2004, merely because of the amendments made by subsection (a)(2)(A).

   Inserted: (d) Termination Date.--None of the amendments made by this section shall apply to plan years beginning after December 31, 2008.

   Original wording

   At the end of subtitle C of title V, insert the following:

Read automatically from the Congressional Record. Check the original before relying on it.

As printed