To pay for the full cost of extending additional unemployment insurance and other Federal programs.

SA 3726. Mr. COBURN proposed an amendment to amendment SA 3721
proposed by Mr. Baucus to the bill H.R. 4851, to provide a temporary
extension of certain programs, and for other purposes; as follows:

At the end of the amendment, insert the following:
TITLE II--OFFSETS FOR THE ACT
Subtitle A--Discretionary Spending

SEC. 211. RESCISSION OF UNSPENT AND UNCOMMITTED FEDERAL
FUNDS.

(a) In General.--Notwithstanding any other provision of
law, of all available unobligated Federal funds, the greater
of $20,000,000,000 or the amount determined necessary under
the Statutory Pay-As-You-Go Act of 2010 (Public Law 111-139;
124 Stat. 8) to offset the budgetary effect of this Act,
excluding this section, in appropriated discretionary
unexpired funds are rescinded.
(b) Implementation.--Not later than 60 days after the date
of enactment of this Act, the Director of the Office of
Management and Budget shall--
(1) identify the accounts and amounts rescinded to
implement subsection (a); and
(2) submit a report to the Secretary of the Treasury and
Congress of the accounts and amounts identified under
paragraph (1) for rescission.
Subtitle B--Revenue Offset Provisions

SEC. 221. AMENDMENT OF 1986 CODE.

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

SEC. 222. INFORMATION REPORTING FOR RENTAL PROPERTY EXPENSE
PAYMENTS.

(a) In General.--Section 6041 is amended by adding at the
end the following new subsection:
``(h) Treatment of Rental Property Expense Payments.--
``(1) In general.--For purposes of subsection (a), a person
receiving rental income from real estate (other than a
qualified residence) shall be considered to be engaged in a
trade or business of renting property.
``(2) Qualified residence.--For purposes of paragraph (1),
the term `qualified residence' means--
``(A) the principal residence (within the meaning of
section 121) of the taxpayer, and
``(B) 1 other residence of the taxpayer which is selected
by the taxpayer for purposes of this subsection for the
taxable year and which is used by the taxpayer as a residence
(within the meaning of section 280A(d)(1)).''.
(b) Effective Date.--The amendment made by this section
shall apply to payments made after December 31, 2010.

SEC. 223. CRUDE TALL OIL INELIGIBLE FOR CELLULOSIC BIOFUEL
PRODUCER CREDIT.

(a) In General.--Section 40(B)(6)(E) is amended by adding
at the end the following new clause:
``(iv) Exclusion of certain processed fuels with a high
acid content.--The term `cellulosic biofuel' shall not
include any processed fuel with an acid number greater than
25. For purposes of the preceding sentence, the term
`processed fuel' means any fuel other than a fuel--

``(I) more than 4 percent of which (determined by weight)
is any combination of water and sediment, or
``(II) the ash content of which is more than 1 percent
(determined by weight).''.

(b) Effective Date.--The amendment made by this section
shall apply to fuels sold or used on or after January 1,
2010.

SEC. 224. ELIMINATION OF ADVANCE REFUNDABILITY OF EARNED
INCOME CREDIT.

(a) In General.--Section 3507, subsection (g) of section
32, and paragraph (7) of section 6051(a) are repealed.
(b) Conforming Amendments.--
(1) Section 6012(a) is amended by striking paragraph (8)
and by redesignating paragraph (9) as paragraph (8).
(2) Section 6302 is amended by striking subsection (i).
(c) Effective Date.--The repeals and amendments made by
this section shall apply to taxable years beginning after
December 31, 2010.

SEC. 225. UNEMPLOYMENT INSURANCE PROGRAM INTEGRITY.

(a) Reporting of First Day of Earnings to Directory of New
Hires.--
(1) In general.--Section 453A(b)(1)(A) of the Social
Security Act (42 U.S.C. 653a(b)(1)(A)) is amended by
inserting ``the date services for remuneration were first
performed by the employee,'' after ``of the employee,''.
(2) Reporting format and method.--Section 453A(c) of the
Social Security Act (42 U.S.C. 653a(c)) is amended by
inserting ``, to the extent practicable,'' after ``Each
report required by subsection (b) shall''.
(3) Effective date.--
(A) In general.--Subject to subparagraph (B), the
amendments made by this subsection shall take effect 6 months
after the date of enactment of this Act.
(B) Compliance transition period.--If the Secretary of
Health and Human Services determines that State legislation
(other than legislation appropriating funds) is required in
order for a State plan under part D of title IV of the Social
Security Act to meet the additional requirements imposed by
the amendment made by paragraph (1), the plan shall not be
regarded as failing to meet such requirements before the
first day of the second calendar quarter beginning after the
close of the first regular session of the State legislature
that begins after the effective date of such amendment. If
the State has a 2-year legislative session, each year of the
session is deemed to be a separate regular session of the
State legislature.
(b) Extension and Modification of Collection of Past-Due
Debt for Erroneous Payment of Unemployment Compensation.--
(1) Permanent extension.--Subsection (f) of section 6402 is
amended by striking paragraph (8).
(2) Collection in all states.--Subsection (f) of section
6402, as amended by paragraph (1), is amended by striking
paragraph (3) and redesignating paragraphs (4) through (7) as
paragraphs (3) through (6), respectively.
(3) Collection for reasons other than fraud.--
(A) In general.--Paragraph (4) of section 6402(f), as
redesignated by paragraph (2), is amended by striking ``due
to fraud'' each place it appears.
(B) Conforming amendments.--Section 6402(f) is amended--

[[Page S2310]]

(i) in paragraph (3), as redesignated by paragraph (2)--

(I) by striking ``or due to fraud'' in subparagraph (B),
and
(II) by striking ``and due to fraud'' in subparagraph (C),
and

(ii) in the heading, by striking ``Resulting From Fraud''.
(4) Effective date.--The amendments made by this subsection
shall apply to refunds payable on or after the date of the
enactment of this Act.

SEC. 226. PARTICIPANTS IN GOVERNMENT SECTION 457 PLANS
ALLOWED TO TREAT ELECTIVE DEFERRALS AS ROTH
CONTRIBUTIONS.

(a) In General.--Section 402A(e)(1) (defining applicable
retirement plan) is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, and'', and by adding at
the end the following:
``(C) an eligible deferred compensation plan (as defined in
section 457(b)) of an eligible employer described in section
457(e)(1)(A).''.
(b) Elective Deferrals.--Section 402A(e)(2) (defining
elective deferral) is amended to read as follows:
``(2) Elective deferral.--The term `elective deferral'
means--
``(A) any elective deferral described in subparagraph (A)
or (C) of section 402(g)(3), and
``(B) any elective deferral of compensation by an
individual under an eligible deferred compensation plan (as
defined in section 457(b)) of an eligible employer described
in section 457(e)(1)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2010.

SEC. 227. INCREASE IN INFORMATION RETURN PENALTIES.

(a) Failure To File Correct Information Returns.--
(1) In general.--Subsections (a)(1), (b)(1)(A), and
(b)(2)(A) of section 6721 are each amended by striking
``$50'' and inserting ``$100''.
(2) Aggregate annual limitation.--Subsections (a)(1),
(d)(1)(A), and (e)(3)(A) of section 6721 are each amended by
striking ``$250,000'' and inserting ``$1,500,000''.
(b) Reduction Where Correction Within 30 Days.--
(1) In general.--Subparagraph (A) of section 6721(b)(1) is
amended by striking ``$15'' and inserting ``$30''.
(2) Aggregate annual limitation.--Subsections (b)(1)(B) and
(d)(1)(B) of section 6721 are each amended by striking
``$75,000'' and inserting ``$250,000''.
(c) Reduction Where Correction on or Before August 1.--
(1) In general.--Subparagraph (A) of section 6721(b)(2) is
amended by striking ``$30'' and inserting ``$60''.
(2) Aggregate annual limitation.--Subsections (b)(2)(B) and
(d)(1)(C) of section 6721 are each amended by striking
``$150,000'' and inserting ``$500,000''.
(d) Aggregate Annual Limitations for Persons With Gross
Receipts of Not More Than $5,000,000.--Paragraph (1) of
section 6721(d) is amended--
(1) by striking ``$100,000'' in subparagraph (A) and
inserting ``$500,000'',
(2) by striking ``$25,000'' in subparagraph (B) and
inserting ``$75,000'', and
(3) by striking ``$50,000'' in subparagraph (C) and
inserting ``$200,000''.
(e) Penalty in Case of Intentional Disregard.--Paragraph
(2) of section 6721(e) is amended by striking ``$100'' and
inserting ``$250''.
(f) Adjustment for Inflation.--Section 6721 is amended by
adding at the end the following new subsection:
``(f) Adjustment for Inflation.--
``(1) In general.--For each fifth calendar year beginning
after 2012, each of the dollar amounts under subsections (a),
(b), (d) (other than paragraph (2)(A) thereof), and (e) shall
be increased by such dollar amount multiplied by the cost-of-
living adjustment determined under section 1(f)(3) determined
by substituting `calendar year 2011' for `calendar year 1992'
in subparagraph (B) thereof.
``(2) Rounding.--If any amount adjusted under paragraph
(1)--
``(A) is not less than $75,000 and is not a multiple of
$500, such amount shall be rounded to the next lowest
multiple of $500, and
``(B) is not described in subparagraph (A) and is not a
multiple of $10, such amount shall be rounded to the next
lowest multiple of $10.''.
(g) Effective Date.--The amendments made by this section
shall apply with respect to information returns required to
be filed on or after January 1, 2011.

SEC. 228. ROLLOVERS FROM ELECTIVE DEFERRAL PLANS TO ROTH
DESIGNATED ACCOUNTS.

(a) In General.--Section 402A(c) is amended by adding at
the end the following new paragraph:
``(4) Taxable rollovers to designated roth accounts.--
``(A) In general.--Notwithstanding sections 402(c),
403(b)(8), and 457(e)(16), in the case of any distribution to
which this paragraph applies--
``(i) there shall be included in gross income any amount
which would be includible were it not part of a qualified
rollover contribution,
``(ii) section 72(t) shall not apply, and
``(iii) unless the taxpayer elects not to have this clause
apply, any amount required to be included in gross income for
any taxable year beginning in 2010 by reason of this
paragraph shall be so included ratably over the 2-taxable-
year period beginning with the first taxable year beginning
in 2011.

Any election under clause (iii) for any distributions during
a taxable year may not be changed after the due date for such
taxable year.
``(B) Distributions to which paragraph applies.--In the
case of an applicable retirement plan which includes a
qualified Roth contribution program, this paragraph shall
apply to a distribution from such plan other than from a
designated Roth account which is contributed in a qualified
rollover contribution to the designated Roth account
maintained under such plan for the benefit of the individual
to whom the distribution is made.
``(C) Other rules.--The rules of subparagraphs (D), (E),
and (F) of section 408A(d)(3) (as in effect for taxable years
beginning after 2009) shall apply for purposes of this
paragraph.''.
(b) Conforming Amendment.--Section 402A(d)(3)(A) is amended
by striking ``A'' and inserting ``Except as provided in
paragraph (4), a''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions in plan years beginning after
December 31, 2009.
Subtitle C--Pension Funding Relief
PART I--SINGLE EMPLOYER PLANS

SEC. 231. EXTENDED PERIOD FOR SINGLE-EMPLOYER DEFINED BENEFIT
PLANS TO AMORTIZE CERTAIN SHORTFALL
AMORTIZATION BASES.

(a) Amendments to ERISA.--
(1) In general.--Paragraph (2) of section 303(c) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1083(c)) is amended by adding at the end the following
subparagraph:
``(D) Special election for eligible plan years.--
``(i) In general.--If a plan sponsor elects to apply this
subparagraph with respect to the shortfall amortization base
of a plan for any eligible plan year (in this subparagraph
and paragraph (7) referred to as an `election year'), then,
notwithstanding subparagraphs (A) and (B)--

``(I) the shortfall amortization installments with respect
to such base shall be determined under clause (ii) or (iii),
whichever is specified in the election, and
``(II) the shortfall amortization installment for any plan
year in the 9-plan-year period described in clause (ii) or
the 15-plan-year period described in clause (iii),
respectively, with respect to such shortfall amortization
base is the annual installment determined under the
applicable clause for that year for that base.

``(ii) 2 plus 7 amortization schedule.--The shortfall
amortization installments determined under this clause are--

``(I) in the case of the first 2 plan years in the 9-plan-
year period beginning with the election year, interest on the
shortfall amortization base of the plan for the election year
(determined using the effective interest rate for the plan
for the election year), and
``(II) in the case of the last 7 plan years in such 9-plan-
year period, the amounts necessary to amortize the remaining
balance of the shortfall amortization base of the plan for
the election year in level annual installments over such last
7 plan years (using the segment rates under subparagraph (C)
for the election year).

``(iii) 15-year amortization.--The shortfall amortization
installments determined under this subparagraph are the
amounts necessary to amortize the shortfall amortization base
of the plan for the election year in level annual
installments over the 15-plan-year period beginning with the
election year (using the segment rates under subparagraph (C)
for the election year).
``(iv) Election.--

``(I) In general.--The plan sponsor of a plan may elect to
have this subparagraph apply to not more than 2 eligible plan
years with respect to the plan, except that in the case of a
plan described in section 106 of the Pension Protection Act
of 2006, the plan sponsor may only elect to have this
subparagraph apply to a plan year beginning in 2011.
``(II) Amortization schedule.--Such election shall specify
whether the amortization schedule under clause (ii) or (iii)
shall apply to an election year, except that if a plan
sponsor elects to have this subparagraph apply to 2 eligible
plan years, the plan sponsor must elect the same schedule for
both years.
``(III) Other rules.--Such election shall be made at such
time, and in such form and manner, as shall be prescribed by
the Secretary of the Treasury, and may be revoked only with
the consent of the Secretary of the Treasury. The Secretary
of the Treasury shall, before granting a revocation request,
provide the Pension Benefit Guaranty Corporation an
opportunity to comment on the conditions applicable to the
treatment of any portion of the election year shortfall
amortization base that remains unamortized as of the
revocation date.

``(v) Eligible plan year.--For purposes of this
subparagraph, the term `eligible plan year' means any plan
year beginning in 2008, 2009, 2010, or 2011, except that a
plan year shall only be treated as an eligible plan year if
the due date under subsection (j)(1) for the payment of the
minimum required contribution for such plan year occurs on or
after the date of the enactment of this subparagraph.

[[Page S2311]]

``(vi) Reporting.--A plan sponsor of a plan who makes an
election under clause (i) shall--

``(I) give notice of the election to participants and
beneficiaries of the plan, and
``(II) inform the Pension Benefit Guaranty Corporation of
such election in such form and manner as the Director of the
Pension Benefit Guaranty Corporation may prescribe.

``(vii) Increases in required installments in certain
cases.--For increases in required contributions in cases of
excess compensation or extraordinary dividends or stock
redemptions, see paragraph (7).''.
(2) Increases in required installments in certain cases.--
Section 303(c) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1083(c)) is amended by adding at the end
the following paragraph:
``(7) Increases in alternate required installments in cases
of excess compensation or extraordinary dividends or stock
redemptions.--
``(A) In general.--If there is an installment acceleration
amount with respect to a plan for any plan year in the
restriction period with respect to an election year under
paragraph (2)(D), then the shortfall amortization installment
otherwise determined and payable under such paragraph for
such plan year shall, subject to the limitation under
subparagraph (B), be increased by such amount.
``(B) Total installments limited to shortfall base.--
Subject to rules prescribed by the Secretary of the Treasury,
if a shortfall amortization installment with respect to any
shortfall amortization base for an election year is required
to be increased for any plan year under subparagraph (A)--
``(i) such increase shall not result in the amount of such
installment exceeding the present value of such installment
and all succeeding installments with respect to such base
(determined without regard to such increase but after
application of clause (ii)), and
``(ii) subsequent shortfall amortization installments with
respect to such base shall, in reverse order of the otherwise
required installments, be reduced to the extent necessary to
limit the present value of such subsequent shortfall
amortization installments (after application of this
paragraph) to the present value of the remaining unamortized
shortfall amortization base.
``(C) Installment acceleration amount.--For purposes of
this paragraph--
``(i) In general.--The term `installment acceleration
amount' means, with respect to any plan year in a restriction
period with respect to an election year, the sum of--

``(I) the aggregate amount of excess employee compensation
determined under subparagraph (D) with respect to all
employees for the plan year, plus
``(II) the aggregate amount of extraordinary dividends and
redemptions determined under subparagraph (E) for the plan
year.

``(ii) Annual limitation.--The installment acceleration
amount for any plan year shall not exceed the excess (if any)
of--

``(I) the sum of the shortfall amortization installments
for the plan year and all preceding plan years in the
amortization period elected under paragraph (2)(D) with
respect to the shortfall amortization base with respect to an
election year, determined without regard to paragraph (2)(D)
and this paragraph, over
``(II) the sum of the shortfall amortization installments
for such plan year and all such preceding plan years,
determined after application of paragraph (2)(D) (and in the
case of any preceding plan year, after application of this
paragraph).

``(iii) Carryover of excess installment acceleration
amounts.--

``(I) In general.--If the installment acceleration amount
for any plan year (determined without regard to clause (ii))
exceeds the limitation under clause (ii), then, subject to
subclause (II), such excess shall be treated as an
installment acceleration amount with respect to the
succeeding plan year.
``(II) Cap to apply.--If any amount treated as an
installment acceleration amount under subclause (I) or this
subclause with respect any succeeding plan year, when added
to other installment acceleration amounts (determined without
regard to clause (ii)) with respect to the plan year, exceeds
the limitation under clause (ii), the portion of such amount
representing such excess shall be treated as an installment
acceleration amount with respect to the next succeeding plan
year.
``(III) Limitation on years to which amounts carried for.--
No amount shall be carried under subclause (I) or (II) to a
plan year which begins after the first plan year following
the last plan year in the restriction period (or after the
second plan year following such last plan year in the case of
an election year with respect to which 15-year amortization
was elected under paragraph (2)(D)).
``(IV) Ordering rules.--For purposes of applying subclause
(II), installment acceleration amounts for the plan year
(determined without regard to any carryover under this
clause) shall be applied first against the limitation under
clause (ii) and then carryovers to such plan year shall be
applied against such limitation on a first-in, first-out
basis.

``(D) Excess employee compensation.--For purposes of this
paragraph--
``(i) In general.--The term `excess employee compensation'
means, with respect to any employee for any plan year, the
excess (if any) of--

``(I) the aggregate amount includible in income under
chapter 1 of the Internal Revenue Code of 1986 for
remuneration during the calendar year in which such plan year
begins for services performed by the employee for the plan
sponsor (whether or not performed during such calendar year),
over
``(II) $1,000,000.

``(ii) Amounts set aside for nonqualified deferred
compensation.--If during any calendar year assets are set
aside or reserved (directly or indirectly) in a trust (or
other arrangement as determined by the Secretary of the
Treasury), or transferred to such a trust or other
arrangement, by a plan sponsor for purposes of paying
deferred compensation of an employee under a nonqualified
deferred compensation plan (as defined in section 409A of
such Code) of the plan sponsor, then, for purposes of clause
(i), the amount of such assets shall be treated as
remuneration of the employee includible in income for the
calendar year unless such amount is otherwise includible in
income for such year. An amount to which the preceding
sentence applies shall not be taken into account under this
paragraph for any subsequent calendar year.
``(iii) Only remuneration for certain post-2009 services
counted.--Remuneration shall be taken into account under
clause (i) only to the extent attributable to services
performed by the employee for the plan sponsor after February
28, 2010.
``(iv) Exception for certain equity payments.--

``(I) In general.--There shall not be taken into account
under clause (i)(I) any amount includible in income with
respect to the granting after February 28, 2010, of service
recipient stock (within the meaning of section 409A of the
Internal Revenue Code of 1986) that, upon such grant, is
subject to a substantial risk of forfeiture (as defined under
section 83(c)(1) of such Code) for at least 5 years from the
date of such grant.
``(II) Secretarial authority.--The Secretary of the
Treasury may by regulation provide for the application of
this clause in the case of a person other than a corporation.

``(v) Other exceptions.--The following amounts includible
in income shall not be taken into account under clause
(i)(I):

``(I) Commissions.--Any remuneration payable on a
commission basis solely on account of income directly
generated by the individual performance of the individual to
whom such remuneration is payable.
``(II) Certain payments under existing contracts.--Any
remuneration consisting of nonqualified deferred
compensation, restricted stock, stock options, or stock
appreciation rights payable or granted under a written
binding contract that was in effect on March 1, 2010, and
which was not modified in any material respect before such
remuneration is paid.

``(vi) Self-employed individual treated as employee.--The
term `employee' includes, with respect to a calendar year, a
self-employed individual who is treated as an employee under
section 401(c) of such Code for the taxable year ending
during such calendar year, and the term `compensation' shall
include earned income of such individual with respect to such
self-employment.
``(vii) Indexing of amount.--In the case of any calendar
year beginning after 2010, the dollar amount under clause
(i)(II) shall 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) of such Code for the calendar year,
determined by substituting `calendar year 2009' for `calendar
year 1992' in subparagraph (B) thereof.

If the amount of any increase under clause (i) is not a
multiple of $1,000, such increase shall be rounded to the
next lowest multiple of $1,000.
``(E) Extraordinary dividends and redemptions.--
``(i) In general.--The amount determined under this
subparagraph for any plan year is the excess (if any) of the
sum of the dividends declared during the plan year by the
plan sponsor plus the aggregate amount paid for the
redemption of stock of the plan sponsor redeemed during the
plan year over the greater of--

``(I) the adjusted net income (within the meaning of
section 4043) of the plan sponsor for the preceding plan
year, determined without regard to any reduction by reason of
interest, taxes, depreciation, or amortization, or
``(II) in the case of a plan sponsor that determined and
declared dividends in the same manner for at least 5
consecutive years immediately preceding such plan year, the
aggregate amount of dividends determined and declared for
such plan year using such manner.

``(ii) Only certain post-2009 dividends and redemptions
counted.--For purposes of clause (i), there shall only be
taken into account dividends declared, and redemptions
occurring, after February 28, 2010.
``(iii) Exception for intra-group dividends.--Dividends
paid by one member of a controlled group (as defined in
section 302(d)(3)) to another member of such group shall not
be taken into account under clause (i).
``(iv) Exception for certain redemptions.--Redemptions that
are made pursuant to a plan maintained with respect to
employees, or that are made on account of the

[[Page S2312]]

death, disability, or termination of employment of an
employee or shareholder, shall not be taken into account
under clause (i).
``(v) Exception for certain preferred stock.--

``(I) In general.--Dividends and redemptions with respect
to applicable preferred stock shall not be taken into account
under clause (i) to the extent that dividends accrue with
respect to such stock at a specified rate in all events and
without regard to the plan sponsor's income, and interest
accrues on any unpaid dividends with respect to such stock.
``(II) Applicable preferred stock.--For purposes of
subclause (I), the term `applicable preferred stock' means
preferred stock which was issued before March 1, 2010 (or
which was issued after such date and is held by an employee
benefit plan subject to the provisions of this title).

``(F) Other definitions and rules.--For purposes of this
paragraph--
``(i) Plan sponsor.--The term ` plan sponsor' includes any
member of the plan sponsor's controlled group (as defined in
section 302(d)(3)).
``(ii) Restriction period.--The term `restriction period'
means, with respect to any election year--

``(I) except as provided in subclause (II), the 3-year
period beginning with the election year (or, if later, the
first plan year beginning after December 31, 2009), and
``(II) if the plan sponsor elects 15-year amortization for
the shortfall amortization base for the election year, the 5-
year period beginning with the election year (or, if later,
the first plan year beginning after December 31, 2009).

``(iii) Elections for multiple plans.--If a plan sponsor
makes elections under paragraph (2)(D) with respect to 2 or
more plans, the Secretary of the Treasury shall provide rules
for the application of this paragraph to such plans,
including rules for the ratable allocation of any installment
acceleration amount among such plans on the basis of each
plan's relative reduction in the plan's shortfall
amortization installment for the first plan year in the
amortization period described in subparagraph (A) (determined
without regard to this paragraph).
``(iv) Mergers and acquisitions.--The Secretary of the
Treasury shall prescribe rules for the application of
paragraph (2)(D) and this paragraph in any case where there
is a merger or acquisition involving a plan sponsor making
the election under paragraph (2)(D).''.
(3) Conforming amendments.--Section 303 of such Act (29
U.S.C. 1083) is amended--
(A) in subsection (c)(1), by striking ``the shortfall
amortization bases for such plan year and each of the 6
preceding plan years'' and inserting ``any shortfall
amortization base which has not been fully amortized under
this subsection'', and
(B) in subsection (j)(3), by adding at the end the
following:
``(F) Quarterly contributions not to include certain
increased contributions.--Subparagraph (D) shall be applied
without regard to any increase under subsection (c)(7).''.
(b) Amendments to Internal Revenue Code of 1986.--
(1) In general.--Paragraph (2) of section 430(c) is amended
by adding at the end the following subparagraph:
``(D) Special election for eligible plan years.--
``(i) In general.--If a plan sponsor elects to apply this
subparagraph with respect to the shortfall amortization base
of a plan for any eligible plan year (in this subparagraph
and paragraph (7) referred to as an `election year'), then,
notwithstanding subparagraphs (A) and (B)--

``(I) the shortfall amortization installments with respect
to such base shall be determined under clause (ii) or (iii),
whichever is specified in the election, and
``(II) the shortfall amortization installment for any plan
year in the 9-plan-year period described in clause (ii) or
the 15-plan-year period described in clause (iii),
respectively, with respect to such shortfall amortization
base is the annual installment determined under the
applicable clause for that year for that base.

``(ii) 2 plus 7 amortization schedule.--The shortfall
amortization installments determined under this clause are--

``(I) in the case of the first 2 plan years in the 9-plan-
year period beginning with the election year, interest on the
shortfall amortization base of the plan for the election year
(determined using the effective interest rate for the plan
for the election year), and
``(II) in the case of the last 7 plan years in such 9-plan-
year period, the amounts necessary to amortize the remaining
balance of the shortfall amortization base of the plan for
the election year in level annual installments over such last
7 plan years (using the segment rates under subparagraph (C)
for the election year).

``(iii) 15-year amortization.--The shortfall amortization
installments determined under this subparagraph are the
amounts necessary to amortize the shortfall amortization base
of the plan for the election year in level annual
installments over the 15-plan-year period beginning with the
election year (using the segment rates under subparagraph (C)
for the election year).
``(iv) Election.--

``(I) In general.--The plan sponsor of a plan may elect to
have this subparagraph apply to not more than 2 eligible plan
years with respect to the plan, except that in the case of a
plan described in section 106 of the Pension Protection Act
of 2006, the plan sponsor may only elect to have this
subparagraph apply to a plan year beginning in 2011.
``(II) Amortization schedule.--Such election shall specify
whether the amortization schedule under clause (ii) or (iii)
shall apply to an election year, except that if a plan
sponsor elects to have this subparagraph apply to 2 eligible
plan years, the plan sponsor must elect the same schedule for
both years.
``(III) Other rules.--Such election shall be made at such
time, and in such form and manner, as shall be prescribed by
the Secretary, and may be revoked only with the consent of
the Secretary. The Secretary shall, before granting a
revocation request, provide the Pension Benefit Guaranty
Corporation an opportunity to comment on the conditions
applicable to the treatment of any portion of the election
year shortfall amortization base that remains unamortized as
of the revocation date.

``(v) Eligible plan year.--For purposes of this
subparagraph, the term `eligible plan year' means any plan
year beginning in 2008, 2009, 2010, or 2011, except that a
plan year shall only be treated as an eligible plan year if
the due date under subsection (j)(1) for the payment of the
minimum required contribution for such plan year occurs on or
after the date of the enactment of this subparagraph.
``(vi) Reporting.--A plan sponsor of a plan who makes an
election under clause (i) shall--

``(I) give notice of the election to participants and
beneficiaries of the plan, and
``(II) inform the Pension Benefit Guaranty Corporation of
such election in such form and manner as the Director of the
Pension Benefit Guaranty Corporation may prescribe.

``(vii) Increases in required installments in certain
cases.--For increases in required contributions in cases of
excess compensation or extraordinary dividends or stock
redemptions, see paragraph (7).''.
(2) Increases in required contributions if excess
compensation paid.--Section 430(c) is amended by adding at
the end the following paragraph:
``(7) Increases in alternate required installments in cases
of excess compensation or extraordinary dividends or stock
redemptions.--
``(A) In general.--If there is an installment acceleration
amount with respect to a plan for any plan year in the
restriction period with respect to an election year under
paragraph (2)(D), then the shortfall amortization installment
otherwise determined and payable under such paragraph for
such plan year shall, subject to the limitation under
subparagraph (B), be increased by such amount.
``(B) Total installments limited to shortfall base.--
Subject to rules prescribed by the Secretary, if a shortfall
amortization installment with respect to any shortfall
amortization base for an election year is required to be
increased for any plan year under subparagraph (A)--
``(i) such increase shall not result in the amount of such
installment exceeding the present value of such installment
and all succeeding installments with respect to such base
(determined without regard to such increase but after
application of clause (ii)), and
``(ii) subsequent shortfall amortization installments with
respect to such base shall, in reverse order of the otherwise
required installments, be reduced to the extent necessary to
limit the present value of such subsequent shortfall
amortization installments (after application of this
paragraph) to the present value of the remaining unamortized
shortfall amortization base.
``(C) Installment acceleration amount.--For purposes of
this paragraph--
``(i) In general.--The term `installment acceleration
amount' means, with respect to any plan year in a restriction
period with respect to an election year, the sum of--

``(I) the aggregate amount of excess employee compensation
determined under subparagraph (D) with respect to all
employees for the plan year, plus
``(II) the aggregate amount of extraordinary dividends and
redemptions determined under subparagraph (E) for the plan
year.

``(ii) Annual limitation.--The installment acceleration
amount for any plan year shall not exceed the excess (if any)
of--

``(I) the sum of the shortfall amortization installments
for the plan year and all preceding plan years in the
amortization period elected under paragraph (2)(D) with
respect to the shortfall amortization base with respect to an
election year, determined without regard to paragraph (2)(D)
and this paragraph, over
``(II) the sum of the shortfall amortization installments
for such plan year and all such preceding plan years,
determined after application of paragraph (2)(D) (and in the
case of any preceding plan year, after application of this
paragraph).

``(iii) Carryover of excess installment acceleration
amounts.--

``(I) In general.--If the installment acceleration amount
for any plan year (determined without regard to clause (ii))
exceeds the limitation under clause (ii), then, subject to
subclause (II), such excess shall be treated as an
installment acceleration amount with respect to the
succeeding plan year.
``(II) Cap to apply.--If any amount treated as an
installment acceleration amount under

[[Page S2313]]

subclause (I) or this subclause with respect any succeeding
plan year, when added to other installment acceleration
amounts (determined without regard to clause (ii)) with
respect to the plan year, exceeds the limitation under clause
(ii), the portion of such amount representing such excess
shall be treated as an installment acceleration amount with
respect to the next succeeding plan year.
``(III) Limitation on years to which amounts carried for.--
No amount shall be carried under subclause (I) or (II) to a
plan year which begins after the first plan year following
the last plan year in the restriction period (or after the
second plan year following such last plan year in the case of
an election year with respect to which 15-year amortization
was elected under paragraph (2)(D)).
``(IV) Ordering rules.--For purposes of applying subclause
(II), installment acceleration amounts for the plan year
(determined without regard to any carryover under this
clause) shall be applied first against the limitation under
clause (ii) and then carryovers to such plan year shall be
applied against such limitation on a first-in, first-out
basis.

``(D) Excess employee compensation.--For purposes of this
paragraph--
``(i) In general.--The term `excess employee compensation'
means, with respect to any employee for any plan year, the
excess (if any) of--

``(I) the aggregate amount includible in income under this
chapter for remuneration during the calendar year in which
such plan year begins for services performed by the employee
for the plan sponsor (whether or not performed during such
calendar year), over
``(II) $1,000,000.

``(ii) Amounts set aside for non-qualified deferred
compensation.--If during any calendar year assets are set
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, by a plan
sponsor for purposes of paying deferred compensation of an
employee under a nonqualified deferred compensation plan (as
defined in section 409A) of the plan sponsor, then, for
purposes of clause (i), the amount of such assets shall be
treated as remuneration of the employee includible in income
for the calendar year unless such amount is otherwise
includible in income for such year. An amount to which the
preceding sentence applies shall not be taken into account
under this paragraph for any subsequent calendar year.
``(iii) Only remuneration for certain post-2009 services
counted.--Remuneration shall be taken into account under
clause (i) only to the extent attributable to services
performed by the employee for the plan sponsor after February
28, 2010.
``(iv) Exception for certain equity payments.--

``(I) In general.--There shall not be taken into account
under clause (i)(I) any amount includible in income with
respect to the granting after February 28, 2010, of service
recipient stock (within the meaning of section 409A) that,
upon such grant, is subject to a substantial risk of
forfeiture (as defined under section 83(c)(1)) for at least 5
years from the date of such grant.
``(II) Secretarial authority.--The Secretary may by
regulation provide for the application of this clause in the
case of a person other than a corporation.

``(v) Other exceptions.--The following amounts includible
in income shall not be taken into account under clause
(i)(I):

``(I) Commissions.--Any remuneration payable on a
commission basis solely on account of income directly
generated by the individual performance of the individual to
whom such remuneration is payable.
``(II) Certain payments under existing contracts.--Any
remuneration consisting of nonqualified deferred
compensation, restricted stock, stock options, or stock
appreciation rights payable or granted under a written
binding contract that was in effect on March 1, 2010, and
which was not modified in any material respect before such
remuneration is paid.

``(vi) Self-employed individual treated as employee.--The
term `employee' includes, with respect to a calendar year, a
self-employed individual who is treated as an employee under
section 401(c) for the taxable year ending during such
calendar year, and the term `compensation' shall include
earned income of such individual with respect to such self-
employment.
``(vii) Indexing of amount.--In the case of any calendar
year beginning after 2010, the dollar amount under clause
(i)(II) shall 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, determined by
substituting `calendar year 2009' for `calendar year 1992' in
subparagraph (B) thereof.

If the amount of any increase under clause (i) is not a
multiple of $1,000, such increase shall be rounded to the
next lowest multiple of $1,000.
``(E) Extraordinary dividends and redemptions.--
``(i) In general.--The amount determined under this
subparagraph for any plan year is the excess (if any) of the
sum of the dividends declared during the plan year by the
plan sponsor plus the aggregate amount paid for the
redemption of stock of the plan sponsor redeemed during the
plan year over the greater of--

``(I) the adjusted net income (within the meaning of
section 4043 of the Employee Retirement Income Security Act
of 1974) of the plan sponsor for the preceding plan year,
determined without regard to any reduction by reason of
interest, taxes, depreciation, or amortization, or
``(II) in the case of a plan sponsor that determined and
declared dividends in the same manner for at least 5
consecutive years immediately preceding such plan year, the
aggregate amount of dividends determined and declared for
such plan year using such manner.

``(ii) Only certain post-2009 dividends and redemptions
counted.--For purposes of clause (i), there shall only be
taken into account dividends declared, and redemptions
occurring, after February 28, 2010.
``(iii) Exception for intra-group dividends.--Dividends
paid by one member of a controlled group (as defined in
section 412(d)(3)) to another member of such group shall not
be taken into account under clause (i).
``(iv) Exception for certain redemptions.--Redemptions that
are made pursuant to a plan maintained with respect to
employees, or that are made on account of the death,
disability, or termination of employment of an employee or
shareholder, shall not be taken into account under clause
(i).
``(v) Exception for certain preferred stock.--

``(I) In general.--Dividends and redemptions with respect
to applicable preferred stock shall not be taken into account
under clause (i) to the extent that dividends accrue with
respect to such stock at a specified rate in all events and
without regard to the plan sponsor's income, and interest
accrues on any unpaid dividends with respect to such stock.
``(II) Applicable preferred stock.--For purposes of
subclause (I), the term `applicable preferred stock' means
preferred stock which was issued before March 1, 2010 (or
which was issued after such date and is held by an employee
benefit plan subject to the provisions of title I of Employee
Retirement Income Security Act of 1974).

``(F) Other definitions and rules.--For purposes of this
paragraph--
``(i) Plan sponsor.--The term ` plan sponsor' includes any
member of the plan sponsor's controlled group (as defined in
section 412(d)(3)).
``(ii) Restriction period.--The term `restriction period'
means, with respect to any election year--

``(I) except as provided in subclause (II), the 3-year
period beginning with the election year (or, if later, the
first plan year beginning after December 31, 2009), and
``(II) if the plan sponsor elects 15-year amortization for
the shortfall amortization base for the election year, the 5-
year period beginning with the election year (or, if later,
the first plan year beginning after December 31, 2009).

``(iii) Elections for multiple plans.--If a plan sponsor
makes elections under paragraph (2)(D) with respect to 2 or
more plans, the Secretary shall provide rules for the
application of this paragraph to such plans, including rules
for the ratable allocation of any installment acceleration
amount among such plans on the basis of each plan's relative
reduction in the plan's shortfall amortization installment
for the first plan year in the amortization period described
in subparagraph (A) (determined without regard to this
paragraph).
``(iv) Mergers and acquisitions.--The Secretary shall
prescribe rules for the application of paragraph (2)(D) and
this paragraph in any case where there is a merger or
acquisition involving a plan sponsor making the election
under paragraph (2)(D).''.
(3) Conforming amendments.--Section 430 is amended--
(A) in subsection (c)(1), by striking ``the shortfall
amortization bases for such plan year and each of the 6
preceding plan years'' and inserting ``any shortfall
amortization base which has not been fully amortized under
this subsection'', and
(B) in subsection (j)(3), by adding at the end the
following:
``(F) Quarterly contributions not to include certain
increased contributions.--Subparagraph (D) shall be applied
without regard to any increase under subsection (c)(7).''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2007.

SEC. 232. APPLICATION OF EXTENDED AMORTIZATION PERIOD TO
PLANS SUBJECT TO PRIOR LAW FUNDING RULES.

(a) In General.--Title I of the Pension Protection Act of
2006 is amended by redesignating section 107 as section 108
and by inserting the following after section 106:

``SEC. 107. APPLICATION OF EXTENDED AMORTIZATION PERIODS TO
PLANS WITH DELAYED EFFECTIVE DATE.

``(a) In General.--If the plan sponsor of a plan to which
section 104, 105, or 106 of this Act applies elects to have
this section apply for any eligible plan year (in this
section referred to as an `election year'), section 302 of
the Employee Retirement Income Security Act of 1974 and
section 412 of the Internal Revenue Code of 1986 (as in
effect before the amendments made by this subtitle and
subtitle B) shall apply to such year in the manner described
in subsection (b) or (c), whichever is specified in the
election. All references in this section to `such Act' or
`such Code' shall be to such Act or such Code as in

[[Page S2314]]

effect before the amendments made by this subtitle and
subtitle B.
``(b) Application of 2 and 7 Rule.--In the case of an
election year to which this subsection applies--
``(1) 2-year lookback for determining deficit reduction
contributions for certain plans.--For purposes of applying
section 302(d)(9) of such Act and section 412(l)(9) of such
Code, the funded current liability percentage (as defined in
subparagraph (C) thereof) for such plan for such plan year
shall be such funded current liability percentage of such
plan for the second plan year preceding the first election
year of such plan.
``(2) Calculation of deficit reduction contribution.--For
purposes of applying section 302(d) of such Act and section
412(l) of such Code to a plan to which such sections apply
(after taking into account paragraph (1))--
``(A) in the case of the increased unfunded new liability
of the plan, the applicable percentage described in section
302(d)(4)(C) of such Act and section 412(l)(4)(C) of such
Code shall be the third segment rate described in sections
104(b), 105(b), and 106(b) of this Act, and
``(B) in the case of the excess of the unfunded new
liability over the increased unfunded new liability, such
applicable percentage shall be determined without regard to
this section.
``(c) Application of 15-Year Amortization.--In the case of
an election year to which this subsection applies, for
purposes of applying section 302(d) of such Act and section
412(l) of such Code--
``(1) in the case of the increased unfunded new liability
of the plan, the applicable percentage described in section
302(d)(4)(C) of such Act and section 412(l)(4)(C) of such
Code for any pre-effective date plan year beginning with or
after the first election year shall be the ratio of--
``(A) the annual installments payable in each year if the
increased unfunded new liability for such plan year were
amortized over 15 years, using an interest rate equal to the
third segment rate described in sections 104(b), 105(b), and
106(b) of this Act, to
``(B) the increased unfunded new liability for such plan
year, and
``(2) in the case of the excess of the unfunded new
liability over the increased unfunded new liability, such
applicable percentage shall be determined without regard to
this section.
``(d) Election.--
``(1) In general.--The plan sponsor of a plan may elect to
have this section apply to not more than 2 eligible plan
years with respect to the plan, except that in the case of a
plan to which section 106 of this Act applies, the plan
sponsor may only elect to have this section apply to 1
eligible plan year.
``(2) Amortization schedule.--Such election shall specify
whether the rules under subsection (b) or (c) shall apply to
an election year, except that if a plan sponsor elects to
have this section apply to 2 eligible plan years, the plan
sponsor must elect the same rule for both years.
``(3) Other rules.--Such election shall be made at such
time, and in such form and manner, as shall be prescribed by
the Secretary of the Treasury, and may be revoked only with
the consent of the Secretary of the Treasury.
``(e) Definitions.--For purposes of this section--
``(1) Eligible plan year.--For purposes of this
subparagraph, the term `eligible plan year' means any plan
year beginning in 2008, 2009, 2010, or 2011, except that a
plan year beginning in 2008 shall only be treated as an
eligible plan year if the due date for the payment of the
minimum required contribution for such plan year occurs on or
after the date of the enactment of this clause.
``(2) Pre-effective date plan year.--The term `pre-
effective date plan year' means, with respect to a plan, any
plan year prior to the first year in which the amendments
made by this subtitle and subtitle B apply to the plan.
``(3) Increased unfunded new liability.--The term
`increased unfunded new liability' means, with respect to a
year, the excess (if any) of the unfunded new liability over
the amount of unfunded new liability determined as if the
value of the plan's assets determined under subsection
302(c)(2) of such Act and section 412(c)(2) of such Code
equaled the product of the current liability of the plan for
the year multiplied by the funded current liability
percentage (as defined in section 302(d)(8)(B) of such Act
and 412(l)(8)(B) of such Code) of the plan for the second
plan year preceding the first election year of such plan.
``(4) Other definitions.--The terms `unfunded new
liability' and `current liability' shall have the meanings
set forth in section 302(d) of such Act and section 412(l) of
such Code.''.
(b) Eligible Charity Plans.--Section 104 of the Pension
Protection Act of 2006 is amended--
(1) by striking ``eligible cooperative plan'' wherever it
appears in subsections (a) and (b) and inserting ``eligible
cooperative plan or an eligible charity plan'', and
(2) by adding at the end the following new subsection:
``(d) Eligible Charity Plan Defined.--For purposes of this
section, a plan shall be treated as an eligible charity plan
for a plan year if the plan is maintained by more than one
employer (determined without regard to section 414(c) of the
Internal Revenue Code) and 100 percent of the employers are
described in section 501(c)(3) of such Code.''.
(c) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
take effect as if included in the Pension Protection Act of
2006.
(2) Eligible charity plan.--The amendments made by
subsection (b) shall apply to plan years beginning after
December 31, 2007, except that a plan sponsor may elect to
apply such amendments to plan years beginning after December
31, 2008. Any such election shall be made at such time, and
in such form and manner, as shall be prescribed by the
Secretary of the Treasury, and may be revoked only with the
consent of the Secretary of the Treasury.

SEC. 233. LOOKBACK FOR CERTAIN BENEFIT RESTRICTIONS.

(a) In General.--
(1) Amendment to erisa.--Section 206(g)(9) of the Employee
Retirement Income Security Act of 1974 is amended by adding
at the end the following:
``(D) Special rule for certain years.--Solely for purposes
of any applicable provision--
``(i) In general.--For plan years beginning on or after
October 1, 2008, and before October 1, 2010, the adjusted
funding target attainment percentage of a plan shall be the
greater of--

``(I) such percentage, as determined without regard to this
subparagraph, or
``(II) the adjusted funding target attainment percentage
for such plan for the plan year beginning after October 1,
2007, and before October 1, 2008, as determined under rules
prescribed by the Secretary of the Treasury.

``(ii) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year--

``(I) clause (i) shall apply to plan years beginning after
December 31, 2007, and before January 1, 2010, and
``(II) clause (i)(II) shall apply based on the last plan
year beginning before November 1, 2007, as determined under
rules prescribed by the Secretary of the Treasury.

``(iii) Applicable provision.--For purposes of this
subparagraph, the term `applicable provision' means--

``(I) paragraph (3), but only for purposes of applying such
paragraph to a payment which, as determined under rules
prescribed by the Secretary of the Treasury, is a payment
under a social security leveling option which accelerates
payments under the plan before, and reduces payments after, a
participant starts receiving social security benefits in
order to provide substantially similar aggregate payments
both before and after such benefits are received, and
``(II) paragraph (4).''.

(2) Amendment to internal revenue code of 1986.--Section
436(j) of the Internal Revenue Code of 1986 is amended by
adding at the end the following:
``(3) Special rule for certain years.--Solely for purposes
of any applicable provision--
``(A) In general.--For plan years beginning on or after
October 1, 2008, and before October 1, 2010, the adjusted
funding target attainment percentage of a plan shall be the
greater of--
``(i) such percentage, as determined without regard to this
paragraph, or
``(ii) the adjusted funding target attainment percentage
for such plan for the plan year beginning after October 1,
2007, and before October 1, 2008, as determined under rules
prescribed by the Secretary.
``(B) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year--
``(i) subparagraph (A) shall apply to plan years beginning
after December 31, 2007, and before January 1, 2010, and
``(ii) subparagraph (A)(ii) shall apply based on the last
plan year beginning before November 1, 2007, as determined
under rules prescribed by the Secretary.
``(C) Applicable provision.--For purposes of this
paragraph, the term `applicable provision' means--
``(i) subsection (d), but only for purposes of applying
such paragraph to a payment which, as determined under rules
prescribed by the Secretary, is a payment under a social
security leveling option which accelerates payments under the
plan before, and reduces payments after, a participant starts
receiving social security benefits in order to provide
substantially similar aggregate payments both before and
after such benefits are received, and
``(ii) subsection (e).''.
(b) Interaction With Wrera Rule.--Section 203 of the
Worker, Retiree, and Employer Recovery Act of 2008 shall
apply to a plan for any plan year in lieu of the amendments
made by this section applying to sections 206(g)(4) of the
Employee Retirement Income Security Act of 1974 and 436(e) of
the Internal Revenue Code of 1986 only to the extent that
such section produces a higher adjusted funding target
attainment percentage for such plan for such year.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan years
beginning on or after October 1, 2008.
(2) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year, the
amendments made by this section shall apply to plan years
beginning after December 31, 2007.

[[Page S2315]]

SEC. 234. LOOKBACK FOR CREDIT BALANCE RULE FOR PLANS
MAINTAINED BY CHARITIES.

(a) Amendment to Erisa.--Paragraph (3) of section 303(f) of
the Employee Retirement Income Security Act of 1974 is
amended by adding the following at the end thereof:
``(D) Special rule for certain years of plans maintained by
charities.--
``(i) In general.--For purposes of applying subparagraph
(C) for plan years beginning after August 31, 2009, and
before September 1, 2011, the ratio determined under such
subparagraph for the preceding plan year shall be the greater
of--

``(I) such ratio, as determined without regard to this
subparagraph, or
``(II) the ratio for such plan for the plan year beginning
after August 31, 2007, and before September 1, 2008, as
determined under rules prescribed by the Secretary of the
Treasury.

``(ii) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year--

``(I) clause (i) shall apply to plan years beginning after
December 31, 2008, and before January 1, 2011, and
``(II) clause (i)(II) shall apply based on the last plan
year beginning before September 1, 2007, as determined under
rules prescribed by the Secretary of the Treasury.

``(iii) Limitation to charities.--This subparagraph shall
not apply to any plan unless such plan is maintained
exclusively by one or more organizations described in section
501(c)(3) of the Internal Revenue Code of 1986.''.
(b) Amendment to Internal Revenue Code of 1986.--Paragraph
(3) of section 430(f) of the Internal Revenue Code of 1986 is
amended by adding the following at the end thereof:
``(D) Special rule for certain years of plans maintained by
charities.--
``(i) In general.--For purposes of applying subparagraph
(C) for plan years beginning after August 31, 2009, and
before September 1, 2011, the ratio determined under such
subparagraph for the preceding plan year of a plan shall be
the greater of--

``(I) such ratio, as determined without regard to this
subsection, or
``(II) the ratio for such plan for the plan year beginning
after August 31, 2007 and before September 1, 2008, as
determined under rules prescribed by the Secretary.

``(ii) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year--

``(I) clause (i) shall apply to plan years beginning after
December 31, 2007, and before January 1, 2010, and
``(II) clause (i)(II) shall apply based on the last plan
year beginning before September 1, 2007, as determined under
rules prescribed by the Secretary.

``(iii) Limitation to charities.--This subparagraph shall
not apply to any plan unless such plan is maintained
exclusively by one or more organizations described in section
501(c)(3).''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan years
beginning after August 31, 2009.
(2) Special rule.--In the case of a plan for which the
valuation date is not the first day of the plan year, the
amendments made by this section shall apply to plan years
beginning after December 31, 2008.

PART II--MULTIEMPLOYER PLANS

SEC. 241. ADJUSTMENTS TO FUNDING STANDARD ACCOUNT RULES.

(a) Adjustments.--
(1) Amendment to erisa.--Section 304(b) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1084(b)) is
amended by adding at the end the following new paragraph:
``(8) Special relief rules.--Notwithstanding any other
provision of this subsection--
``(A) Amortization of net investment losses.--
``(i) In general.--A multiemployer plan with respect to
which the solvency test under subparagraph (C) is met may
treat the portion of any experience loss or gain attributable
to net investment losses incurred in either or both of the
first two plan years ending after August 31, 2008, as an item
separate from other experience losses, to be amortized in
equal annual installments (until fully amortized) over the
period--

``(I) beginning with the plan year in which such portion is
first recognized in the actuarial value of assets, and
``(II) ending with the last plan year in the 30-plan year
period beginning with the plan year in which such net
investment loss was incurred.

``(ii) Coordination with extensions.--If this subparagraph
applies for any plan year--

``(I) no extension of the amortization period under clause
(i) shall be allowed under subsection (d), and
``(II) if an extension was granted under subsection (d) for
any plan year before the election to have this subparagraph
apply to the plan year, such extension shall not result in
such amortization period exceeding 30 years.

``(iii) Net investment losses.--For purposes of this
subparagraph--

``(I) In general.--Net investment losses shall be
determined in the manner prescribed by the Secretary of the
Treasury on the basis of the difference between actual and
expected returns (including any difference attributable to
any criminally fraudulent investment arrangement).
``(II) Criminally fraudulent investment arrangements.--The
determination as to whether an arrangement is a criminally
fraudulent investment arrangement shall be made under rules
substantially similar to the rules prescribed by the
Secretary of the Treasury for purposes of section 165 of the
Internal Revenue Code of 1986.

``(B) Expanded smoothing period.--
``(i) In general.--A multiemployer plan with respect to
which the solvency test under subparagraph (C) is met may
change its asset valuation method in a manner which--

``(I) spreads the difference between expected and actual
returns for either or both of the first 2 plan years ending
after August 31, 2008, over a period of not more than 10
years,
``(II) provides that for either or both of the first 2 plan
years beginning after August 31, 2008, the value of plan
assets at any time shall not be less than 80 percent or
greater than 130 percent of the fair market value of such
assets at such time, or
``(III) makes both changes described in subclauses (I) and
(II) to such method.

``(ii) Asset valuation methods.--If this subparagraph
applies for any plan year--

``(I) the Secretary of the Treasury shall not treat the
asset valuation method of the plan as unreasonable solely
because of the changes in such method described in clause
(i), and
``(II) such changes shall be deemed approved by such
Secretary under section 302(d)(1) and section 412(d)(1) of
such Code.

``(iii) Amortization of reduction in unfunded accrued
liability.--If this subparagraph and subparagraph (A) both
apply for any plan year, the plan shall treat any reduction
in unfunded accrued liability resulting from the application
of this subparagraph as a separate experience amortization
base, to be amortized in equal annual installments (until
fully amortized) over a period of 30 plan years rather than
the period such liability would otherwise be amortized over.
``(C) Solvency test.--The solvency test under this
paragraph is met only if the plan actuary certifies that the
plan is projected to have sufficient assets to timely pay
expected benefits and anticipated expenditures over the
amortization period, taking into account the changes in the
funding standard account under this paragraph.
``(D) Restriction on benefit increases.--If subparagraph
(A) or (B) apply to a multiemployer plan for any plan year,
then, in addition to any other applicable restrictions on
benefit increases, a plan amendment increasing benefits may
not go into effect during either of the 2 plan years
immediately following such plan year unless--
``(i) the plan actuary certifies that--

``(I) any such increase is paid for out of additional
contributions not allocated to the plan immediately before
the application of this paragraph to the plan, and
``(II) the plan's funded percentage and projected credit
balances for such 2 plan years are reasonably expected to be
at least as high as such percentage and balances would have
been if the benefit increase had not been adopted, or

``(ii) 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.
``(E) Reporting.--A plan sponsor of a plan to which this
paragraph applies shall--
``(i) give notice of such application to participants and
beneficiaries of the plan, and
``(ii) inform the Pension Benefit Guaranty Corporation of
such application in such form and manner as the Director of
the Pension Benefit Guaranty Corporation may prescribe.''.
(2) Amendment to internal revenue code of 1986.--Section
431(b) is amended by adding at the end the following new
paragraph:
``(8) Special relief rules.--Notwithstanding any other
provision of this subsection--
``(A) Amortization of net investment losses.--
``(i) In general.--A multiemployer plan with respect to
which the solvency test under subparagraph (C) is met may
treat the portion of any experience loss or gain attributable
to net investment losses incurred in either or both of the
first two plan years ending after August 31, 2008, as an item
separate from other experience losses, to be amortized in
equal annual installments (until fully amortized) over the
period--

``(I) beginning with the plan year in which such portion is
first recognized in the actuarial value of assets, and
``(II) ending with the last plan year in the 30-plan year
period beginning with the plan year in which such net
investment loss was incurred.

``(ii) Coordination with extensions.--If this subparagraph
applies for any plan year--

``(I) no extension of the amortization period under clause
(i) shall be allowed under subsection (d), and
``(II) if an extension was granted under subsection (d) for
any plan year before the election to have this subparagraph
apply to the plan year, such extension shall not result in
such amortization period exceeding 30 years.

``(iii) Net investment losses.--For purposes of this
subparagraph--

``(I) In general.--Net investment losses shall be
determined in the manner prescribed by the Secretary on the
basis of the difference between actual and expected returns

[[Page S2316]]

(including any difference attributable to any criminally
fraudulent investment arrangement).
``(II) Criminally fraudulent investment arrangements.--The
determination as to whether an arrangement is a criminally
fraudulent investment arrangement shall be made under rules
substantially similar to the rules prescribed by the
Secretary for purposes of section 165.

``(B) Expanded smoothing period.--
``(i) In general.--A multiemployer plan with respect to
which the solvency test under subparagraph (C) is met may
change its asset valuation method in a manner which--

``(I) spreads the difference between expected and actual
returns for either or both of the first 2 plan years ending
after August 31, 2008, over a period of not more than 10
years,
``(II) provides that for either or both of the first 2 plan
years beginning after August 31, 2008, the value of plan
assets at any time shall not be less than 80 percent or
greater than 130 percent of the fair market value of such
assets at such time, or
``(III) makes both changes described in subclauses (I) and
(II) to such method.

``(ii) Asset valuation methods.--If this subparagraph
applies for any plan year--

``(I) the Secretary shall not treat the asset valuation
method of the plan as unreasonable solely because of the
changes in such method described in clause (i), and
``(II) such changes shall be deemed approved by the
Secretary under section 302(d)(1) of the Employee Retirement
Income Security Act of 1974 and section 412(d)(1).

``(iii) Amortization of reduction in unfunded accrued
liability.--If this subparagraph and subparagraph (A) both
apply for any plan year, the plan shall treat any reduction
in unfunded accrued liability resulting from the application
of this subparagraph as a separate experience amortization
base, to be amortized in equal annual installments (until
fully amortized) over a period of 30 plan years rather than
the period such liability would otherwise be amortized over.
``(C) Solvency test.--The solvency test under this
paragraph is met only if the plan actuary certifies that the
plan is projected to have sufficient assets to timely pay
expected benefits and anticipated expenditures over the
amortization period, taking into account the changes in the
funding standard account under this paragraph.
``(D) Restriction on benefit increases.--If subparagraph
(A) or (B) apply to a multiemployer plan for any plan year,
then, in addition to any other applicable restrictions on
benefit increases, a plan amendment increasing benefits may
not go into effect during either of the 2 plan years
immediately following such plan year unless--
``(i) the plan actuary certifies that--

``(I) any such increase is paid for out of additional
contributions not allocated to the plan immediately before
the application of this paragraph to the plan, and
``(II) the plan's funded percentage and projected credit
balances for such 2 plan years are reasonably expected to be
at least as high as such percentage and balances would have
been if the benefit increase had not been adopted, or

``(ii) the amendment is required as a condition of
qualification under part I of subchapter D or to comply with
other applicable law.
``(E) Reporting.--A plan sponsor of a plan to which this
paragraph applies shall--
``(i) give notice of such application to participants and
beneficiaries of the plan, and
``(ii) inform the Pension Benefit Guaranty Corporation of
such application in such form and manner as the Director of
the Pension Benefit Guaranty Corporation may prescribe.''.
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
take effect as of the first day of the first plan year ending
after August 31, 2008, except that any election a plan makes
pursuant to this section that affects the plan's funding
standard account for the first plan year beginning after
August 31, 2008, shall be disregarded for purposes of
applying the provisions of section 305 of the Employee
Retirement Income Security Act of 1974 and section 432 of the
Internal Revenue Code of 1986 to such plan year.
(2) Restrictions on benefit increases.--Notwithstanding
paragraph (1), the restrictions on plan amendments increasing
benefits in sections 304(b)(8)(D) of such Act and
431(b)(8)(D) of such Code, as added by this section, shall
take effect on the date of enactment of this Act.
______