[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1783 Public Print (PP)]
December 22, 2005
Ordered to be printed as passed
109th CONGRESS
1st Session
S. 1783
_______________________________________________________________________
AN ACT
To amend the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 to reform the pension funding rules, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension Security
and Transparency Act of 2005''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title and table of contents.
TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED
BENEFIT PLANS AND RELATED PROVISIONS
Subtitle A--Amendments to Employee Retirement Income Security Act of
1974
Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension
plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Technical and conforming amendments.
Sec. 105. Special rules for multiple employer plans of certain
cooperatives.
Sec. 106. Temporary relief for certain rescued plans.
Subtitle B--Amendments to Internal Revenue Code of 1986
Sec. 111. Modifications of the minimum funding standards.
Sec. 112. Funding rules applicable to single-employer pension plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Increase in deduction limit for single-employer plans.
Sec. 115. Technical and conforming amendments.
Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006
Sec. 121. Extension of replacement of 30-year Treasury rates.
Sec. 122. Deduction limits for plan contributions.
Sec. 123. Updating deduction rules for combination of plans.
TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS AND RELATED PROVISIONS
Subtitle A--Funding Rules
Part I--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. Special rule for certain benefits funded under an agreement
approved by the Pension Benefit Guaranty
Corporation.
Sec. 205. Withdrawal liability reforms.
Part II--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.
Part III--Sunset of Funding Rules
Sec. 216. Sunset of funding rules.
Subtitle B--Deduction and Related Provisions
Sec. 221. Deduction limits for multiemployer plans.
Sec. 222. Transfer of excess pension assets to multiemployer health
plan.
TITLE III--INTEREST RATE ASSUMPTIONS
Sec. 301. Interest rate assumption for determination of lump sum
distributions.
Sec. 302. Interest rate assumption for applying benefit limitations to
lump sum distributions.
Sec. 303. Restrictions on funding of nonqualified deferred compensation
plans by employers maintaining underfunded
or terminated single-employer plans.
Sec. 304. Modification of pension funding requirements for plans
subject to current transition rule.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
Sec. 401. Increases in PBGC premiums.
Sec. 402. Authority to enter alternative funding agreements to prevent
plan terminations.
Sec. 403. Special funding rules for plans maintained by commercial
airlines that are amended to cease future
benefit accruals.
Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 405. Rules relating to bankruptcy of employer.
Sec. 406. PBGC premiums for new plans of small employers.
Sec. 407. PBGC premiums for small and new plans.
Sec. 408. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 409. Rules for substantial owner benefits in terminated plans.
Sec. 410. Acceleration of PBGC computation of benefits attributable to
recoveries from employers.
Sec. 411. Treatment of certain plans where cessation or change in
membership of a controlled group.
Sec. 412. Effect of title.
Sec. 413. Wage requirement for employers.
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. Timing of annual reporting requirements.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information to plan participants.
Sec. 507. Benefit suspension notice.
Sec. 508. Study and report by Government Accountability Office.
TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT
PENSION PLANS
Sec. 601. Prospective application of age discrimination, conversion,
and present value assumption rules.
Sec. 602. Regulations relating to mergers and acquisitions.
TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS
UNDER DEFINED CONTRIBUTION PLANS
Sec. 701. Defined contribution plans required to provide employees with
freedom to invest their plan assets.
Sec. 702. Notice of freedom to divest employer securities or real
property.
Sec. 703. Periodic pension benefit statements.
Sec. 704. Notice to participants or beneficiaries of blackout periods.
Sec. 705. Allowance of, and credit for, additional IRA payments in
certain bankruptcy cases.
Sec. 706. Inapplicability of relief from fiduciary liability during
suspension of ability of participant or
beneficiary to direct investments.
Sec. 707. Increase in maximum bond amount.
TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS
Sec. 801. Defined contribution plans required to provide adequate
investment education to participants.
Sec. 802. Independent investment advice provided to plan participants.
Sec. 803. Treatment of qualified retirement planning services.
Sec. 804. Increase in penalties for coercive interference with exercise
of ERISA rights.
Sec. 805. Administrative provision.
TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION
Sec. 901. Regulations on time and order of issuance of domestic
relations orders.
Sec. 902. Entitlement of divorced spouses to railroad retirement
annuities independent of actual entitlement
of employee.
Sec. 903. Extension of tier II railroad retirement benefits to
surviving former spouses pursuant to
divorce agreements.
Sec. 904. Requirement for additional survivor annuity option.
TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES
Sec. 1001. Clarifications regarding purchase of permissive service
credit.
Sec. 1002. Allow rollover of after-tax amounts in annuity contracts.
Sec. 1003. Clarification of minimum distribution rules for governmental
plans.
Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain
distributions of pension plans for public
safety employees.
Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain
retirement plan distributions.
Sec. 1006. Faster vesting of employer nonelective contributions.
Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAS.
Sec. 1008. Elimination of higher penalty on certain simple plan
distributions.
Sec. 1009. Simple plan portability.
Sec. 1010. Eligibility for participation in retirement plans.
Sec. 1011. Transfers to the PBGC.
Sec. 1012. Missing participants.
Sec. 1013. Modifications of rules governing hardships and unforseen
financial emergencies.
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. Withholding on distributions from governmental section 457
plans.
Sec. 1107. Treatment of defined benefit plan as governmental plan.
Sec. 1108. Increasing participation in cash or deferred plans through
automatic contribution arrangements.
Sec. 1109. Treatment of investment of assets by plan where participant
fails to exercise investment election.
Sec. 1110. Clarification of fiduciary rules.
TITLE XII--UNITED STATES TAX COURT MODERNIZATION
Sec. 1200. Amendment of 1986 Code.
Sec. 1201. Annuities for survivors of Tax Court judges who are
assassinated.
Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor
annuities.
Sec. 1203. Life insurance coverage for Tax Court judges.
Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65
or over.
Sec. 1205. Modification of timing of lump-sum payment of judges'
accrued annual leave.
Sec. 1206. Participation of Tax Court judges in the Thrift Savings
Plan.
Sec. 1207. Exemption of teaching compensation of retired judges from
limitation on outside earned income.
Sec. 1208. General provisions relating to Magistrate Judges of the Tax
Court.
Sec. 1209. Annuities to surviving spouses and dependent children of
Magistrate Judges of the Tax Court.
Sec. 1210. Retirement and annuity program.
Sec. 1211. Incumbent Magistrate Judges of the Tax Court.
Sec. 1212. Provisions for recall.
Sec. 1213. Effective date.
TITLE XIII--OTHER PROVISIONS
Subtitle A--Administrative Provision
Sec. 1301. Provisions relating to plan amendments.
Sec. 1302. Authority to the Secretary of Labor, Secretary of the
Treasury, and the Pension Benefit Guaranty
Corporation to postpone certain deadlines.
Subtitle B--Governmental Pension Plan Equalization
Sec. 1311. Definition of governmental plan.
Sec. 1312. Extension to all governmental plans of current moratorium on
application of certain nondiscrimination
rules applicable to State and local plans.
Sec. 1313. Clarification that Tribal governments are subject to the
same defined benefit plan rules and
regulations applied to State and other
local governments, their police and
firefighters.
Sec. 1314. Effective date.
Subtitle C--Miscellaneous Provisions
Sec. 1321. Transfer of excess funds from black lung disability trusts
to United Mine Workers of America Combined
Benefit Fund.
Sec. 1322. Treatment of death benefits from corporate-owned life
insurance.
Subtitle D--Other Related Pension Provisions
Part I--Health and Medical Benefits
Sec. 1331. Use of excess pension assets for future retiree health
benefits.
Sec. 1332. Special rules for funding of collectively bargained retiree
health benefits.
Sec. 1333. Allowance of reserve for medical benefits of plans sponsored
by bona fide associations.
Part II--Cash or Deferred Arrangements
Sec. 1336. Treatment of eligible combined defined benefit plans and
qualified cash or deferred arrangements.
Sec. 1337. State and local governments eligible to maintain section
401(k) plans.
Part III--Excess Contributions
Sec. 1339. Excess contributions.
Part IV--Other Provisions
Sec. 1341. Amendments relating to prohibited transactions.
Sec. 1342. Federal Task Force on Older Workers.
Sec. 1343. Technical corrections to Saver Act.
TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED
BENEFIT PLANS AND RELATED PROVISIONS
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:
``minimum funding standards
``Sec. 302. (a) Requirement To Meet Minimum Funding Standard.--
``(1) In general.--A plan to which this part applies shall
satisfy the minimum funding standard applicable to the plan for
any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum funding
standard for a plan year if--
``(A) in the case of a defined benefit plan which
is a single-employer plan, the employer makes
contributions to or under the plan for the plan year
which, in the aggregate, are not less than the minimum
required contribution determined under section 303 for
the plan for the plan year,
``(B) in the case of a money purchase plan which is
a single-employer plan, the employer makes
contributions to or under the plan for the plan year
which are required under the terms of the plan, and
``(C) in the case of a multiemployer plan, the
employers make contributions to or under the plan for
any plan year which, in the aggregate, are sufficient
to ensure that the plan does not have an accumulated
funding deficiency under section 304 as of the end of
the plan year.
``(b) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section (including
any required installments under 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 are) unable to satisfy the minimum
funding standard for a plan year without
temporary substantial business hardship
(substantial business hardship in the case of a
multiemployer plan), and
``(ii) application of the standard would be
adverse to the interests of plan participants
in the aggregate,
the Secretary of the Treasury may, subject to
subparagraph (C), waive the requirements of subsection
(a) for such year with respect to all or any portion of
the minimum funding standard. The Secretary of the
Treasury shall not waive the minimum funding standard
with respect to a plan for more than 3 of any 15 (5 of
any 15 in the case of a multiemployer plan) consecutive
plan years.
``(B) Effects of waiver.--If a waiver is granted
under subparagraph (A) for any plan year--
``(i) in the case of a single-employer
plan, the minimum required contribution under
section 303 for the plan year shall be reduced
by the amount of the waived funding deficiency
and such amount shall be amortized as required
under section 303(e), and
``(ii) in the case of a multiemployer plan,
the funding standard account shall be credited
under section 304(b)(3)(C) with the amount of
the waived funding deficiency and such amount
shall be amortized as required under section
304(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary of the Treasury may not waive under
subparagraph (A) any portion of the minimum funding
standard under subsection (a) for a plan year which is
attributable to any waived funding deficiency for any
preceding plan year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in determining
temporary substantial business hardship (substantial business
hardship in the case of a multiemployer plan) shall include
(but shall not be limited to) whether or not--
``(A) the employer is operating at an economic
loss,
``(B) there is substantial unemployment or
underemployment in the trade or business and in the
industry concerned,
``(C) the sales and profits of the industry
concerned are depressed or declining, and
``(D) it is reasonable to expect that the plan will
be continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
part, the term `waived funding deficiency' means the portion of
the minimum funding standard under subsection (a) (determined
without regard to the waiver) for a plan year waived by the
Secretary of the Treasury and not satisfied by employer
contributions.
``(4) Security for waivers for single-employer plans,
consultations.--
``(A) Security may be required.--
``(i) In general.--Except as provided in
subparagraph (C), the Secretary of the Treasury
may require an employer maintaining a defined
benefit plan which is a single-employer plan
(within the meaning of section 4001(a)(15)) to
provide security to such plan as a condition
for granting or modifying a waiver under
paragraph (1).
``(ii) Special rules.--Any security
provided under clause (i) may be perfected and
enforced only by the Pension Benefit Guaranty
Corporation, or, at the direction of the
Corporation, by a contributing sponsor (within
the meaning of section 4001(a)(13)) or a member
of such sponsor's controlled group (within the
meaning of section 4001(a)(14)).
``(B) Consultation with the pension benefit
guaranty corporation.--Except as provided in
subparagraph (C), the Secretary of the Treasury shall,
before granting or modifying a waiver under this
subsection with respect to a plan described in
subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty
Corporation with--
``(I) notice of the completed
application for any waiver or
modification, and
``(II) an opportunity to comment on
such application within 30 days after
receipt of such notice, and
``(ii) consider--
``(I) any comments of the
Corporation under clause (i)(II), and
``(II) any views of any employee
organization (within the meaning of
section 3(4)) representing participants
in the plan which are submitted in
writing to the Secretary of the
Treasury in connection with such
application.
Information provided to the Corporation under this
subparagraph shall be considered tax return information
and subject to the safeguarding and reporting
requirements of section 6103(p) of the Internal Revenue
Code of 1986.
``(C) Exception for certain waivers.--
``(i) In general.--The preceding provisions
of this paragraph shall not apply to any plan
with respect to which the sum of--
``(I) the aggregate unpaid minimum
required 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 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 the Secretary of the Treasury
determines such analysis is not necessary because the
taking into account of such member would not
significantly affect the determination under this
paragraph.
``(6) Advance notice.--
``(A) In general.--The Secretary of the Treasury
shall, before granting a waiver under this subsection,
require each applicant to provide evidence satisfactory
to such Secretary that the applicant has provided
notice of the filing of the application for such waiver
to each affected party (as defined in section
4001(a)(21)) other than the Pension Benefit Guaranty
Corporation and in the case of a multiemployer plan, to
each employer required to contribute to the plan under
subsection (b)(1). 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 24 months. 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(d) of such Code.
``(d) Miscellaneous Rules.--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary of
the Treasury.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year
but no later than 2\1/2\ months after the close of the
plan year (or, in the case of a multiemployer plan, no
later than 2 years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first
plan year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption
except to the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed to
have been made on the first day of such plan year. No amendment
described in this paragraph which reduces the accrued benefits
of any participant shall take effect unless the plan
administrator files a notice with the Secretary of the Treasury
notifying him of such amendment and such Secretary has approved
such amendment, or within 90 days after the date on which such
notice was filed, failed to disapprove such amendment. No
amendment described in this subsection shall be approved by the
Secretary of the Treasury unless such Secretary determines that
such amendment is necessary because of a 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 amendments made by this section shall
apply to plan years beginning after 2006.
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION
PLANS.
(a) In General.--Part 3 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (as amended by section 101 of
this Act) is amended by inserting after section 302 the following new
section:
``minimum funding standards for single-employer defined benefit pension
plans
``Sec. 303. (a) Minimum Required Contribution.--For purposes of
this section and section 302(a)(2)(A), except as provided in subsection
(f), the term `minimum required contribution' means, with respect to
any plan year of a defined benefit plan which is a single employer
plan--
``(1) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)) 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)) 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 any 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 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 the excess (if any) of--
``(A) the funding shortfall of such plan for such
plan year, over
``(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.--
``(A) In general.--For purposes of this section,
except as provided in subparagraph (B), the funding
shortfall of a plan for any plan year is the excess (if
any) of--
``(i) the funding target of the plan for
the plan year, over
``(ii) the value of plan assets of the plan
(as reduced under subsection (f)(4)) for the
plan year which are held by the plan on the
valuation date.
``(B) Transition rule for amortization of funding
shortfall.--
``(i) In general.--Solely for purposes of
applying paragraph (3) in the case of plan
years beginning after 2006 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.
``(ii) Applicable percentage.--For purposes
of subparagraph (A)--
``(I) In general.--Except as
provided in subclause (II), the
applicable percentage shall be 93
percent for plan years beginning in
2007, 96 percent for plan years
beginning in 2008, and 100 percent for
any succeeding plan year.
``(II) Small plans.--In the case of
a plan described in subsection
(g)(2)(B), the applicable percentage
shall be determined in accordance with
the following table:
``In the case of a plan year The applicable
beginning in calendar year: percentage is--
2007.......................................... 92
2008.......................................... 94
2009.......................................... 96
2010.......................................... 98.
``(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
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,
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 with respect to
such bases) shall be reduced to zero.
``(f) Use of Prefunding Balances To Satisfy Minimum Required
Contributions.--
``(1) In general.--A plan sponsor may credit any amount of
a plan's prefunding balance for a plan year against the minimum
required contribution for the plan year and the amount of the
contributions an employer is required to make under section
302(b) for the plan year shall be reduced by the amount so
credited. Any such amount shall be credited on the first day of
the plan year.
``(2) Prefunding balance.--
``(A) Beginning balance.--The beginning balance of
a prefunding balance maintained by a plan shall be
zero, except that if a plan was in effect for a plan
year beginning in 2006 and had a positive balance in
the funding standard account under section 302(b) (as
in effect for such plan year) as of the end of such
plan year, the beginning balance for the plan for its
first plan year beginning after 2006 shall be such
positive balance.
``(B) Increases.--
``(i) In general.--As of the first day of
each plan year beginning after 2007, the
prefunding balance of a plan shall be increased
by the excess (if any) of--
``(I) the aggregate amount of
employer contributions to the plan for
the preceding plan year, over
``(II) the minimum required
contribution for the 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
disregarded.--Any contribution which is
required to be made under section 206(g) in
addition to any contribution required under
this section shall not be taken into account
for purposes of clause (i).
``(C) Decreases.--As of the first day of each plan
year after 2007, the prefunding balance of a plan shall
be decreased (but not below zero) by the amount of the
balance credited under paragraph (1) against the
minimum required contribution of the plan for the
preceding plan year.
``(D) Adjustments for investment experience.--In
determining the prefunding 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.
``(3) Limitation for underfunded plans.--
``(A) In general.--If the ratio (expressed as a
percentage) for any plan year which--
``(i) the value of plan assets for the
preceding plan year, 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, the preceding provisions of
this subsection shall not apply unless employers liable
for contributions to the plan under section 302(b) make
contributions to the plan for the plan year in an
aggregate amount not less than the amount determined
under subparagraph (B). Any contribution required by
this subparagraph may not be reduced by any credit
otherwise allowable under paragraph (1).
``(B) Applicable amount.--The amount determined
under this subparagraph for any plan year is the
greater of--
``(i) the target normal cost of the plan
for the plan year, or
``(ii) 25 percent of the minimum required
contribution under subsection (a) for the plan
year without regard to this subsection.
``(4) Reduction in value of assets.--Solely for purposes of
applying subsections (a) and (c)(4)(A)(ii) in determining the
minimum required contribution under this section, the value of
the plan assets otherwise determined without regard to this
paragraph shall be reduced by the amount of the prefunding
balance under this subsection.
``(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 (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 employees of 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 any reasonable
actuarial method of valuation providing for the
averaging of fair market values, but only if such
method--
``(i) is permitted under regulations
prescribed by the Secretary of the Treasury,
and
``(ii) does not provide for averaging of
such values over more than the period beginning
on the last day of the 12th month preceding the
valuation date 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).
``(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 2007, 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 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
paragraph--
``(i) First segment rate.--The term `first
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary of the Treasury for
such month on the basis of the corporate bond
yield curve for such month, taking into account
only that portion of such yield curve which is
based on bonds maturing during the 5-year
period commencing with such month.
``(ii) Second segment rate.--The term
`second segment rate' means, with respect to
any month, the single rate of interest which
shall be determined by the Secretary of the
Treasury for such month on the basis of the
corporate bond yield curve for such month,
taking into account only that portion of such
yield curve which is based on bonds maturing
during each of the years in 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.--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 12-month period ending
with the month preceding such month, of yields on
investment grade corporate bonds with varying
maturities.
``(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 administrator, 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 for such month and each of the rates
determined under this paragraph for such month. The
Secretary of the Treasury shall also publish a
description of the methodology used to determine such
yield curve and such rates which is sufficiently
detailed to enable plans to make reasonable projections
regarding the yield curve and such rates for future
months based on the plan's projection of future
interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the
preceding provisions of this paragraph, for
plan years beginning in 2007 or 2008, the
first, second, or third segment rate for a plan
with respect to any month shall be equal to the
sum of--
``(I) the product of such rate for
such month determined without regard to
this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate
determined under the rules of section
302(b)(5)(B)(ii)(II) (as in effect for
plan years beginning in 2006),
multiplied by a percentage equal to 100
percent minus the applicable
percentage.
``(ii) Applicable percentage.--For purposes
of clause (i), the applicable percentage is
33\1/3\ percent for plan years beginning in
2007 and 66\2/3\ percent for plan years
beginning in 2008.
``(3) Mortality tables.--
``(A) In general.--Except as provided in
subparagraphs (C) and (D), the mortality table used in
determining any present value or making any computation
under this section shall be the RP-2000 Combined
Mortality Table, using Scale AA, as published by the
Society of Actuaries, as in effect on the date of the
enactment of the Pension Security and Transparency Act
of 2005 and as revised from time to time under
subparagraph (B).
``(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 (ii) shall be used in
determining any present value or making any
computation under this section during the 10-
consecutive plan year period specified in the
request. A mortality table described in this
clause shall cease to be in effect if the plan
actuary determines at any time that such table
does not meet the requirements of clause (ii).
``(ii) Requirements.--A mortality table
meets the requirements of this clause if the
Secretary of the Treasury determines that--
``(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),
``(II) such table reflects the
actual experience of the pension plans
maintained by the sponsor and projected
trends in general mortality experience,
``(III) except as provided by the
Secretary, such table will be used by
all plans maintained by the plan
sponsor and all members of any
controlled group which includes the
plan sponsor, and
``(IV) such table is significantly
different from the table described in
subparagraph (A).
``(iii) Deadline for disposition of
application.--Any mortality table submitted to
the Secretary of the Treasury for approval
under this subparagraph shall be treated as in
effect for the first plan year in the 10-year
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 (ii). The 180-
day period shall be extended for any period
during which the Secretary of the Treasury has
requested information from the plan sponsor and
such information has not been provided.
``(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
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.
``(E) Transition rule.--Under regulations of the
Secretary of the Treasury, any difference in present
value resulting from any differences in assumptions as
set forth in the mortality table specified in
subparagraph (A) and assumptions as set forth in the
mortality table described in section 302(d)(7)(C)(ii)
(as in effect for plan years beginning in 2006) shall
be phased in ratably over the first period of 5 plan
years beginning in or after 2007 so as to be fully
effective for the fifth plan year.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining any
present value or making any computation under this section,
there shall be taken into account--
``(A) the probability that future benefit payments
under the plan will be made in the form of optional
forms of benefits provided under the plan (including
lump sum distributions, determined on the basis of the
plan's experience and other related assumptions), and
``(B) any difference in the present value of such
future benefit payments resulting from the use of
actuarial assumptions, in determining benefit payments
in any such optional form of benefits, which are
different from those specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a plan to which this
paragraph applies may be changed without the approval
of the Secretary of the Treasury.
``(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan only if--
``(i) the aggregate unfunded 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 benefits)
exceed $50,000,000; and
``(ii) 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 to which
this subsection applies for a plan year, the funding
target of the plan for the plan year is equal to the
present value of all liabilities to participants and
their beneficiaries under the plan for the plan year,
as determined by using the additional actuarial
assumptions described in subparagraph (B).
``(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 7 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
target liability 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 liabilities.
``(2) Target normal cost of at-risk plans.--In the case of
a plan to which this subsection applies for a plan year, the
target normal cost of the plan for such plan year shall be
equal to 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).
``(3) Minimum amount.--In no event shall--
``(A) the at-risk target liability be less than the
target liability, 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 plan is in at-risk status for a plan year
if--
``(A) the plan is maintained by a financially-weak
employer, and
``(B) the funding target attainment percentage for
the plan year is less than 93 percent.
``(5) Financially-weak employer.--
``(A) In general.--For purposes of this subsection,
the term `financially-weak employer' means any employer
if--
``(i) as of the valuation date for each of
the years during a period of at least 3
consecutive plan years ending with the plan
year--
``(I) the employer has an
outstanding senior unsecured debt
instrument which is rated lower than
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
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 lower than investment
grade, and
``(ii) at least 2 of the years during such
period are deterioration years.
If an employer is treated as a financially-weak
employer for any plan year, clause (ii) shall not apply
in determining whether the employer is so treated for
any succeeding plan year in any continuous period of
plan years for which the employer is treated as a
financially-weak employer.
``(B) Controlled group exception.--If an employer
treated as a financially-weak employer under
subparagraph (A) is a member of a controlled group (as
defined in section 302(d)(3)), the employer shall not
be treated as a financially-weak employer if a
significant member (as determined under regulations
prescribed by the Secretary of the Treasury) of such
group has an outstanding senior unsecured debt
instrument that is rated as being investment grade by
an organization described in subparagraph (A).
``(C) Employers with no ratings.--If--
``(i) an employer has no debt instrument
described in subparagraph (A)(i) which was
rated by an organization described in such
subparagraph, and
``(ii) no such organization has made an
issuer credit rating for such employer,
then such employer shall only be treated as a
financially-weak employer to the extent provided in
regulations prescribed by the Secretary of the
Treasury.
``(6) Determination of deterioration year.--For purposes of
paragraph (5), the term `deterioration year' means any year
during the period described in paragraph (5)(A)(i) for which
the rating described in subclause (I) or (II) of paragraph
(5)(A)(i) by each organization is either--
``(A) lower than the lowest rating of the employer
by such organization for a preceding year in such
period, or
``(B) the lowest rating used by such organization.
``(7) Years before effective date.--For purposes of
paragraphs (5) and (6), plan years beginning before 2007 shall
not be taken into account.
``(8) 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) Improvement years not taken into account.--
``(i) In general.--An improvement year
shall not be taken into account in determining
any consecutive period of plan years for
purposes of subparagraph (A).
``(ii) Application of subsection after
improvement year ends.--Plan years immediately
before and after an improvement year (or
consecutive period of improvement years) shall
be treated as consecutive for purposes of
subparagraph (A).
``(iii) Improvement year.--For purposes of
this subparagraph, the term `improvement year'
means any plan year for which any rating
described in subclause (I) or (II) of paragraph
(5)(A)(i) is higher than such rating for the
preceding plan year.
``(C) Transition percentage.--For purposes of
subparagraph (A), the transition percentage shall be
determined in accordance with the following table:
``If the consecutive number of
years (including the plan year) The transition
the plan is in at-risk status percentage is--
is--
1............................................. 20
2............................................. 40
3............................................. 60
4............................................. 80.
``(D) Years before effective date.--For purposes of
this paragraph, plan years beginning before 2007 shall
not be taken into account.
``(9) Plans to which subsection applies.--
``(A) In general.--Except as provided in this
paragraph, this subsection shall apply to any plan to
which this section applies and which is in at-risk
status for the plan year.
``(B) Exception for small plans.--This subsection
shall not apply to a plan for a plan year if the plan
was described in subsection (g)(2)(B) for the preceding
plan year, determined by substituting `500' for `100'.
``(C) Exception for plans maintained by certain
cooperatives.--This subsection shall not apply to an
eligible cooperative plan described in subparagraph
(D).
``(D) Eligible cooperative plan defined.--For
purposes of subparagraph (C), a plan shall be treated
as an eligible cooperative plan for a plan year if the
plan is maintained by more than 1 employer and at least
85 percent of the employers are--
``(i) rural cooperatives (as defined in
section 401(k)(7)(B) of the Internal Revenue
Code of 1986 without regard to clause (iv)
thereof), or
``(ii) organizations which are--
``(I) 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
``(II) more than 50-percent owned,
or controlled by, one or more
cooperative organizations described in
subclause (I).
A plan shall also be treated as an eligible cooperative
plan for any plan year for which it is described in
section 210(a) and is maintained by a rural telephone
cooperative association described in section
3(40)(B)(v).
``(E) Exception for plans secured by third parties
bound by pbgc agreements.--This subsection shall not
apply to any plan if--
``(i) a person other than the employer
obligated to contribute under the plan is,
under the terms of an agreement with the
Pension Benefit Guaranty Corporation, liable
for any failure of the employer to meet its
obligation to pay any minimum required
contribution or termination liability with
respect to the plan; and
``(ii) such person is not a financially-
weak employer under paragraph (5).
``(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 made after the valuation date for such plan
year shall be increased by interest for the period from the
valuation date to the payment date, determined by using 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.--
``(i) In general.--In the case of a plan to
which this paragraph applies, 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.
``(ii) Plans to which paragraph applies.--
This paragraph applies to any defined benefit
plan to which this section applies other than a
plan which--
``(I) is a plan described in
subsection (g)(2)(B)), or
``(II) had a funding shortfall of
$1,000,000 or less for the preceding
plan year.
``(B) Amount of underpayment, period of
underpayment.--For purposes of subparagraph (A)--
``(i) Amount.--The amount of the
underpayment shall be the excess of--
``(I) the required installment,
over
``(II) the amount (if any) of the
installment contributed to or under the
plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period
for which any interest is charged under this
paragraph with respect to any portion of the
underpayment shall run from the due date for
the installment to the date on which such
portion is contributed to or under the plan.
``(iii) Order of crediting contributions.--
For purposes of clause (i)(II), contributions
shall be credited against unpaid required
installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--
For purposes of this paragraph--
``(i) Payable in 4 installments.--There
shall be 4 required installments for each plan
year.
``(ii) Time for payment of installments.--
The due dates for required installments are set
forth in the following table:
In the case of the following
required installment: The due date is:
1st............................. April 15
2nd............................. July 15
3rd............................. October 15
4th............................. January 15 of the following year.
``(D) Amount of required installment.--For purposes
of this paragraph--
``(i) In general.--The amount of any
required installment shall be 25 percent of the
required annual payment.
``(ii) Required annual payment.--For
purposes of clause (i), the term `required
annual payment' means the lesser of--
``(I) 90 percent of the minimum
required contribution (without regard
to any waiver under section 302(c)) to
the plan for the plan year under this
section, or
``(II) in the case of a plan year
beginning after 2007, 100 percent of
the minimum required contribution
(without regard to any waiver under
section 302(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding
plan year referred to in such clause was not a
year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this
paragraph to a plan year beginning on any date
other than January 1, there shall be
substituted for the months specified in this
paragraph, the months which correspond thereto.
``(ii) Short plan year.--This subparagraph
shall be applied to plan years of less than 12
months in accordance with regulations
prescribed by the Secretary of the Treasury.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph
applies shall be treated as failing to pay the full
amount of any required installment under paragraph (3)
to the extent that the value of the liquid assets paid
in such installment is less than the liquidity
shortfall (whether or not such liquidity shortfall
exceeds the amount of such installment required to be
paid but for this paragraph).
``(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan which--
``(i) is required to pay installments under
paragraph (3) for a plan year, and
``(ii) has a liquidity shortfall for any
quarter during such plan year.
``(C) Period of underpayment.--For purposes of
paragraph (3)(A), any portion of an installment that is
treated as not paid under subparagraph (A) shall
continue to be treated as unpaid until the close of the
quarter in which the due date for such installment
occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of
subparagraph (A), in no event shall such increase
exceed the amount which, when added to prior
installments for the plan year, is necessary to
increase the funding target attainment percentage of
the plan for the plan year (taking into account the
expected increase in funding target due to benefits
accruing or earned during the plan year) to 100
percent.
``(E) Definitions.--For purposes of this
subparagraph:
``(i) Liquidity shortfall.--The term
`liquidity shortfall' means, with respect to
any required installment, an amount equal to
the excess (as of the last day of the quarter
for which such installment is made) of--
``(I) the base amount with respect
to such quarter, over
``(II) the value (as of such last
day) of the plan's liquid assets.
``(ii) Base amount.--
``(I) In general.--The term `base
amount' means, with respect to any
quarter, an amount equal to 3 times the
sum of the adjusted disbursements from
the plan for the 12 months ending on
the last day of such quarter.
``(II) Special rule.--If the amount
determined under subclause (I) exceeds
an amount equal to 2 times the sum of
the adjusted disbursements from the
plan for the 36 months ending on the
last day of the quarter and an enrolled
actuary certifies to the satisfaction
of the Secretary of the Treasury that
such excess is the result of
nonrecurring circumstances, the base
amount with respect to such quarter
shall be determined without regard to
amounts related to those nonrecurring
circumstances.
``(iii) Disbursements from the plan.--The
term `disbursements from the plan' means all
disbursements from the trust, including
purchases of annuities, payments of single sums
and other benefits, and administrative
expenses.
``(iv) Adjusted disbursements.--The term
`adjusted disbursements' means disbursements
from the plan reduced by the product of--
``(I) the plan's funding target
attainment percentage for the plan
year, and
``(II) the sum of the purchases of
annuities, payments of single sums, and
such other disbursements as the
Secretary of the Treasury shall provide
in regulations.
``(v) Liquid assets.--The term `liquid
assets' means cash, marketable securities, and
such other assets as specified by the Secretary
of the Treasury in regulations.
``(vi) Quarter.--The term `quarter' means,
with respect to any required installment, the
3-month period preceding the month in which the
due date for such installment occurs.
``(F) Regulations.--The Secretary of the Treasury
may prescribe such regulations as are necessary to
carry out this paragraph.
``(k) Imposition of Lien Where Failure To Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
subsection applies, 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 defined benefit plan which is 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 person committing a
failure described in paragraph (1) shall notify the
Pension Benefit Guaranty Corporation of such failure
within 10 days of the due date for the required
contribution payment.
``(B) Period of lien.--The lien imposed by
paragraph (1) shall arise on the due date for the
required contribution payment and shall continue until
the last day of the first plan year in which the plan
ceases to be described in paragraph (1)(B). Such lien
shall continue to run without regard to whether such
plan continues to be described in paragraph (2) during
the period referred to in the preceding sentence.
``(C) Certain rules to apply.--Any amount with
respect to which a lien is imposed under paragraph (1)
shall be treated as taxes due and owing the United
States and rules similar to the rules of subsections
(c), (d), and (e) of section 4068 shall apply with
respect to a lien imposed by subsection (a) and the
amount with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a
contribution payment required to be made to the plan,
including any required installment under paragraphs (3)
and (4) of subsection (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 amendments made by this section shall
apply with respect to plan years beginning after 2006.
SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.
(a) Limits on Benefits and Benefit Accruals.--
(1) In general.--Section 206 of such Act 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) Limitations on plan amendments increasing liability
for benefits.--
``(A) In general.--Except as provided in paragraph
(4), no amendment to 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 as of
the valuation date of the plan for such plan year is--
``(i) less than 80 percent, or
``(ii) would be less than 80 percent taking
into account such amendment.
``(B) Exemption.--Subparagraph (A) shall cease to
apply with respect to any plan year, effective as of
the first date of the plan year (or if later, the
effective date of the amendment), upon payment by the
plan sponsor of a contribution (in addition to any
minimum required contribution under section 303) equal
to--
``(i) in the case of subparagraph (A)(i),
the amount of the increase in the funding
target of the plan (under section 303) for the
plan year attributable to the amendment, and
``(ii) in the case of subparagraph (A)(ii),
the amount sufficient to result in 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.
``(2) Limitations on accelerated benefit distributions.--
``(A) In general.--A defined benefit plan which is
a single-employer plan shall provide that, with respect
to any plan year--
``(i) if the plan's adjusted funded target
liability percentage as of the valuation date
for the preceding plan year was less than 60
percent and the preceding plan year is not
otherwise in a prohibited period, the plan
sponsor shall, in addition to any other
contribution required under section 303,
contribute for the current plan year and each
succeeding plan year in the prohibited period
with respect to the current plan year the
amount (if any) which, when added to the
portion of the minimum required contribution
for the plan year described in subparagraphs
(B) and (C) of section 303(a)(1), is sufficient
to result in an adjusted funded target
liability percentage for the plan year of 60
percent, and
``(ii) no prohibited payments will be made
during a prohibited period.
``(B) Prohibited payment.--For purpose of this
subsection--
``(i) In general.--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 a
prohibited period,
``(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.
``(ii) Exception for certain payments.--In
the case of any prohibited period described in
subparagraph (C)(i), the term `prohibited
payment' shall not include any payment if the
amount of the payment does not exceed 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.
The exception under this clause shall only
apply once with respect to any participant,
except that, for purposes of this sentence, 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 subclause (II) 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.
``(C) Prohibited period.--For purposes of
subparagraph (A), the term `prohibited period' means--
``(i) except as provided in subparagraph
(D), if a plan sponsor is required to make the
contribution for the current plan year under
subparagraph (A), the period beginning on the
1st day of the plan year and ending on the last
day of the 1st period of 2 consecutive plan
years (beginning on or after such 1st day) for
which the plan's adjusted funded target
liability percentage was at least 60 percent,
``(ii) any period the plan sponsor is in
bankruptcy, or
``(iii) any period during which the plan
has a liquidity shortfall (as defined in
section 303(j)(4)(E)(i)).
The prohibited period for purposes of clause (ii) shall
not include any portion of a plan year (even if the
plan sponsor is in bankruptcy during such period) which
occurs on or after the date the plan's enrolled actuary
certifies that, as of the valuation date for the plan
year, the plan's adjusted funded target liability
percentage is at least 100 percent.
``(D) Satisfaction of requirement before close of
plan year.--If, before the close of the current plan
year--
``(i) the plan sponsor makes the
contribution required to be made under
subparagraph (A), or
``(ii) the plan's enrolled actuary
certifies that, as of the valuation date for
the plan year, the adjusted funded target
liability percentage of the plan is at least 60
percent,
this paragraph shall be applied as if no prohibited
period had begun as of the beginning of such year and
the plan shall, under rules described by the Secretary
of the Treasury, restore any payments not made during
the prohibited period in effect before the application
of this paragraph.
``(3) Limitation on benefit accruals for plans with severe
funding shortfalls.--
``(A) In general.--Except as provided in paragraph
(4), a single-employer plan shall provide that all
future benefit accruals under the plan shall cease
during a severe funding shortfall period, but only to
the extent the cessation of such accruals would have
been permitted under section 204(g) if the cessation
had been implemented by a plan amendment adopted
immediately before the severe funding shortfall period.
``(B) Severe funding shortfall period.--For
purposes of subparagraph (A), the term `severe funding
shortfall period' means in the case of a plan the
adjusted funding target attainment percentage of which
as of the valuation date of the plan for any plan year
is less than 60 percent, the period--
``(i) beginning on the 1st day of the
succeeding plan year, and
``(ii) ending on the date the plan's
enrolled actuary certifies that the plan's
adjusted funding target attainment percentage
is at least 60 percent, and
``(C) Opportunity for increased funding.--For
purposes of subparagraph (B), a plan shall not be
treated as described in such subparagraph for a plan
year if the plan's enrolled actuary certifies that the
plan sponsor has before the end of the plan year
contributed (in addition to any minimum required
contribution under section 303) the amount sufficient
to result in an adjusted funding target attainment
percentage as of the valuation date for the plan year
of 60 percent.
``(4) Exception for certain collectively bargained
benefits.--In the case of a plan maintained pursuant to a
collective bargaining agreement between employee
representatives and the plan sponsor and in effect before the
beginning of the first day on which a limitation would
otherwise apply under paragraph (1), (2), or (3)--
``(A) such limitations shall not apply to any
amendment, prohibited payment, or accrual with respect
to such plan, but
``(B) the plan sponsor shall contribute (in
addition to any minimum required contribution under
section 303) the amount sufficient to result in an
adjusted funding target attainment percentage (as of
the valuation date for the plan year in which any such
limitation would otherwise apply) equal to the
percentage necessary to prevent the limitation from
applying.
``(5) Rules relating to required contributions.--
``(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
``(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 may not be used.--No
prefunding balance under section 303(f) may be used to
satisfy any required contribution under this
subsection.
``(C) Treatment as unpaid minimum required
contribution.--The amount of any required contribution
which a plan sponsor fails to make under paragraph (1)
or (3) for any plan year shall be treated as an unpaid
minimum required contribution for purposes of
subsection (j) and (k) of section 303 and for purposes
of section 4971 of the Internal Revenue Code of 1986.
``(6) New plans.--Paragraphs (1) and (3) shall not apply to
a plan for the first 5 plan years of the plan. For purposes of
this 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 based on prior year's funding status.--
``(A) Presumption of continued underfunding.--In
any case in which a benefit limitation under paragraph
(1), (2), or (3) has been applied to a plan with
respect to the plan year preceding the current plan
year, the adjusted funding target attainment percentage
of the plan as of the valuation date of the plan for
the current plan year shall be presumed to be equal to
the adjusted funding target attainment percentage of
the plan as of the valuation date of the plan for the
preceding plan year until the enrolled actuary of the
plan certifies the actual adjusted funding target
attainment percentage of the plan as of the valuation
date of the plan for the current plan year.
``(B) Presumption of underfunding after 10th
month.--In any case in which no such certification is
made with respect to the plan before the first day of
the 10th month of the current plan year, for purposes
of paragraphs (1), (2), and (3), the plan's adjusted
funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of
the first day of such 10th month.
``(8) Treatment of plan as of close of prohibited or
cessation period.--For purposes of applying this part--
``(A) Operation of plan after period.--Unless the
plan provides otherwise, payments and accruals will
resume effective as of the day following the close of a
period of limitation of payment or accrual of benefits
under paragraph (2) or (3).
``(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) 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 funded target liability
percentage.--The term `adjusted funded target liability
percentage' means the funded target liability
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, payments of single
sums, and such other disbursements as the Secretary of
the Treasury shall prescribe in regulations, which were
made by the plan during the preceding 2 plan years.
``(10) Years before effective date.--No plan year beginning
before 2007 shall be taken into account in determining whether
this subsection applies to any plan year beginning after
2006.''.
(2) Notice requirement.--
(A) In general.--Section 101 of such Act (29 U.S.C.
1021) is amended--
(i) by redesignating subsection (j) as
subsection (k); and
(ii) by inserting after subsection (i) the
following new subsection:
``(j) Notice of Funding-Based Limitation on Certain Forms of
Distribution.--The plan administrator of a single-employer plan shall
provide a written notice to plan participants and beneficiaries within
30 days--
``(1) after the plan has become subject to the restriction
described in section 206(g)(2),
``(2) in the case of a plan to which section 206(g)(3)
applies, after--
``(A) the date in the plan year described in
section 206(g)(3)(B) on which the plan's enrolled
actuary certifies that the plan's adjusted funding
target attainment percentage for the plan year is less
than 60 percent (or, if earlier, the date such
percentage is deemed to be less than 60 percent under
section 206(g)(7)), and
``(B) the first day of the severe funding shortfall
period, 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.''.
(B) Enforcement.--Section 502(c)(4) of such Act (29
U.S.C. 1132(c)(4)) is amended by striking ``section
302(b)(7)(F)(iv)'' and inserting ``sections 101(j) and
302(b)(7)(F)(iv)''.
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
(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, 2007, 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. 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 striking ``section 302(e)''
and inserting ``section 303(j)'';
(2) in section 103(d)(8)(B), by striking ``the requirements
of section 302(c)(3)'' and inserting ``the applicable
requirements of sections 303(h) and 304(c)(3)'';
(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).'';
(4) in section 203(a)(3)(C), by striking ``section
302(c)(8)'' and inserting ``section 302(d)(2)'';
(5) in section 204(g)(1), by 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 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), and 408(b)(13), by
striking ``American Jobs Creation Act of 2004'' and inserting
``Pension Security and Transparency Act of 2005''.
(b) Miscellaneous Amendments to Title IV.--Title IV of such Act is
amended--
(1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by
striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by
striking ``412(c)(11)(A)'' and inserting ``412(c)(1)'', by
striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by
striking ``412(c)(11)(B)'' and inserting ``412(c)(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)(1) (29 U.S.C. 1362(c)(1)), by
striking paragraphs (1), (2), and (3) and inserting the
following:
``(1)(A) in the case of a single-employer plan, the sum of
the shortfall amortization charge (within the meaning of
section 303(c)(1) of this Act and 430(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(d) of such Code which are pending with respect
to such plan were denied and if no additional contributions
(other than those already made by the termination date) were
made for the plan year in which the termination date occurs or
for any previous plan year), or
``(B) in the case of a multiemployer plan, the outstanding
balance of the accumulated funding deficiencies (within the
meaning of section 304(a)(2) of this Act and section 431(a) of
the Internal Revenue Code of 1986) of the plan (if any) (which,
for purposes of this subparagraph, shall include the amount of
any increase in such accumulated funding deficiencies of the
plan which would result if all pending applications for waivers
of the minimum funding standard under section 302(c) of this
Act or section 412(d) of such Code and for extensions of the
amortization period under section 304(d) of this Act or section
431(d) of such Code with respect to such plan were denied and
if no additional contributions (other than those already made
by the termination date) were made for the plan year in which
the termination date occurs or for any previous plan year),
``(2)(A) in the case of a single-employer plan, the sum of
the waiver amortization charge (within the meaning of section
303(e)(1) of this Act and 430(e)(2) of the Internal Revenue
Code of 1986) with respect to the plan (if any) for the plan
year in which the termination date occurs, plus the aggregate
total of waiver amortization installments (if any) determined
for succeeding plan years under section 303(e)(3) of this Act
and section 430(e)(3) of such Code, or
``(B) in the case of a multiemployer plan, the outstanding
balance of the amount of waived funding deficiencies of the
plan waived before such date under section 302(c) of this Act
or section 412(d) of such Code (if any), and
``(3) in the case of a multiemployer plan, the outstanding
balance of the amount of decreases in the minimum funding
standard allowed before such date under section 304(d) of this
Act or section 431(d) of such Code (if any);'';
(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 Reorganization Plan No. 4 of 1978.--Section
106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified and affirmed
as law by Public Law 98-532 (98 Stat. 2705)) is amended by striking
``302(c)(8)'' and inserting ``302(d)(2)'', by striking ``304(a) and
(b)(2)(A)'' and inserting ``304(d)(1), (d)(2), and (e)(2)(A)'', and by
striking ``412(c)(8), (e), and (f)(2)(A)'' and inserting ``412(d)(2)
and 431(d)(1), (d)(2), and (e)(2)(A)''.
(d) Repeal of Expired Authority for Temporary Variances.--Section
207 of such Act (29 U.S.C. 1057) is repealed.
(e) Effective Date.--The amendments made by this section shall
apply to plan years beginning after 2006.
SEC. 105. 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 section 401
of this Act, 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) and in applying
section 4006(a)(3)(E)(iii) of such Act (as in effect before the
amendments made by section 401) to an eligible cooperative plan for
plan years beginning after December 31, 2006, 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 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. 106. TEMPORARY RELIEF FOR CERTAIN RESCUED PLANS.
(a) General Rule.--Except as provided in this section, if a plan in
existence on July 26, 2005, was a rescued plan as of such date, the
amendments made by section 401 of this Act, 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), and in applying
section 4006(a)(3)(E)(iii) of such Act (as in effect before the
amendments made by section 401), to a rescued plan for plan years
beginning after December 31, 2006, 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) Rescued Plan.--For purposes of this section, the term ``rescued
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 at least $100,000,000, but not greater
than $150,000,000, and
(2) 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.
Subtitle B--Amendments to Internal Revenue Code of 1986
SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING STANDARDS.
(a) In General.--Section 412 of the Internal Revenue Code of 1986
(relating to minimum funding standards) is amended to read as follows:
``SEC. 412. MINIMUM FUNDING STANDARDS.
``(a) Requirement To Meet Minimum Funding Standard.--
``(1) In general.--A plan to which this section applies
shall satisfy the minimum funding standard applicable to the
plan for any plan year.
``(2) Minimum funding standard.--For purposes of paragraph
(1), a plan shall be treated as satisfying the minimum funding
standard for a plan year if--
``(A) in the case of a defined benefit plan which
is 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 430 for
the plan for the plan year,
``(B) in the case of a money purchase pension plan
which is a single-employer plan, the employer makes
contributions to or under the plan for the plan year
which are required under the terms of the plan, and
``(C) in the case of a multiemployer plan, the
employers make contributions to or under the plan for
the plan year which, in the aggregate, are sufficient
to ensure that the plan does not have an accumulated
funding deficiency under section 431 as of the end of
the plan year.
``(b) Plans to Which Section Applies.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), 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) the plan included a trust which qualified (or
was determined by the Secretary to have qualified)
under section 401(a), or
``(B) the 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
subsection (g)(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 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).
``(c) Liability for Contributions.--
``(1) In general.--Except as provided in paragraph (2), the
amount of any contribution required by this section and any
required installments under section 430(j) shall be paid by any
employer responsible for making the contribution 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
contribution or required installment.
``(d) 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 are) 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 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 430 for the plan year shall be reduced
by the amount of the waived funding deficiency
and such amount shall be amortized as required
under section 430(e), and
``(ii) in the case of a multiemployer plan,
the funding standard account shall be credited
under section 431(b)(3)(C) with the amount of
the waived funding deficiency and such amount
shall be amortized as required under section
431(b)(2)(C).
``(C) Waiver of amortized portion not allowed.--The
Secretary may not waive under subparagraph (A) any
portion of the minimum funding standard under
subsection (a) for a plan year which is attributable to
any waived funding deficiency for any preceding plan
year.
``(2) Determination of business hardship.--For purposes of
this subsection, the factors taken into account in determining
temporary substantial business hardship (substantial business
hardship in the case of a multiemployer plan) shall include
(but shall not be limited to) whether or not--
``(A) the employer is operating at an economic
loss,
``(B) there is substantial unemployment or
underemployment in the trade or business and in the
industry concerned,
``(C) the sales and profits of the industry
concerned are depressed or declining, and
``(D) it is reasonable to expect that the plan will
be continued only if the waiver is granted.
``(3) Waived funding deficiency.--For purposes of this
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 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 such Act)
or a member of such sponsor's controlled group
(within the meaning of section 4001(a)(14) of
such Act).
``(B) Consultation with the pension benefit
guaranty corporation.--Except as provided in
subparagraph (C), the Secretary shall, before granting
or modifying a waiver under this subsection with
respect to a plan described in subparagraph (A)(i)--
``(i) provide the Pension Benefit Guaranty
Corporation with--
``(I) notice of the completed
application for any waiver or
modification, and
``(II) an opportunity to comment on
such application within 30 days after
receipt of such notice, and
``(ii) consider--
``(I) any comments of the
Corporation under clause (i)(II), and
``(II) any views of any employee
organization (within the meaning of
section 3(4) of such Act) 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).
``(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
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.
``(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 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.
``(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 430
for the plan year.
``(5) Special rules for single-employer plans.--
``(A) Application must be submitted before date
2\1/2\ months after close of year.--In the case of a
single-employer plan, no waiver may be granted under
this subsection with respect to any plan for any plan
year unless an application therefor is submitted to the
Secretary 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 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 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) of
the Employee Retirement Income Security Act of 1974)
other than the Pension Benefit Guaranty Corporation and
in the case of a multiemployer plan, to each employer
required to contribute to the plan under subsection
(b)(1). 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
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 (e)(2) has been made at any time in the
preceding 24 months. 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 (e)(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.
``(e) Miscellaneous Rules.--For purposes of this section--
``(1) Change in method or year.--If the funding method, the
valuation date, or a plan year for a plan is changed, the
change shall take effect only if approved by the Secretary.
``(2) Certain retroactive plan amendments.--For purposes of
this section, any amendment applying to a plan year which--
``(A) is adopted after the close of such plan year
but no later than 2\1/2\ months after the close of the
plan year (or, in the case of a multiemployer plan, no
later than 2 years after the close of such plan year),
``(B) does not reduce the accrued benefit of any
participant determined as of the beginning of the first
plan year to which the amendment applies, and
``(C) does not reduce the accrued benefit of any
participant determined as of the time of adoption
except to the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed to
have been made on the first day of such plan year. No amendment
described in this paragraph which reduces the accrued benefits
of any participant shall take effect unless the plan
administrator files a notice with the Secretary notifying him
of such amendment and the Secretary has approved such
amendment, or within 90 days after the date on which such
notice was filed, failed to disapprove such amendment. No
amendment described in this subsection shall be approved by the
Secretary unless the Secretary determines that such amendment
is necessary because of a temporary substantial business
hardship (as determined under subsection (d)(2)) or a
substantial business hardship (as so determined) in the case of
a multiemployer plan and that a waiver under subsection (d)(1)
(or in the case of a multiemployer plan, any extension of the
amortization period under section 431(d)) is unavailable or
inadequate.
``(3) Certain insurance contract plans.--A plan is
described in this paragraph if--
``(A) the plan is funded exclusively by the
purchase of individual insurance contracts,
``(B) such contracts provide for level annual
premium payments to be paid extending not later than
the retirement age for each individual participating in
the plan, and commencing with the date the individual
became a participant in the plan (or, in the case of an
increase in benefits, commencing at the time such
increase becomes effective),
``(C) benefits provided by the plan are equal to
the benefits provided under each contract at normal
retirement age under the plan and are guaranteed by an
insurance carrier (licensed under the laws of a State
to do business with the plan) to the extent premiums
have been paid,
``(D) premiums payable for the plan year, and all
prior plan years, under such contracts have been paid
before lapse or there is reinstatement of the policy,
``(E) no rights under such contracts have been
subject to a security interest at any time during the
plan year, and
``(F) no policy loans are outstanding at any time
during the plan year.
A plan funded exclusively by the purchase of group insurance
contracts which are 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) Controlled group.--For purposes of this section and
section 430, the term `controlled group' means any group
treated as a single employer under subsection (b), (c), (m), or
(o) of section 414.''.
(b) Effective Date.--The amendment made by this section shall apply
to plan years beginning after December 31, 2006.
SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EMPLOYER PENSION PLANS.
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--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT
LIMITATION
``430. Minimum funding standards for single-employer defined benefit
plans.
``431. Minimum funding standards for multiemployer plans.
``SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED
BENEFIT 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 a single employer plan--
``(1) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)) 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)) 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 any 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 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 the excess (if any) of--
``(A) the funding shortfall of such plan for such
plan year, over
``(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.--
``(A) In general.--For purposes of this section,
except as provided in subparagraph (B), the funding
shortfall of a plan for any plan year is the excess (if
any) of--
``(i) the funding target of the plan for
the plan year, over
``(ii) the value of plan assets of the plan
(as reduced under subsection (f)(4)) for the
plan year which are held by the plan on the
valuation date.
``(B) Transition rule for amortization of funding
shortfall.--
``(i) In general.--Solely for purposes of
applying paragraph (3) in the case of plan
years beginning after 2006 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.
``(ii) Applicable percentage.--For purposes
of subparagraph (A)--
``(I) In general.--Except as
provided in subclause (II), the
applicable percentage shall be 93
percent for plan years beginning in
2007, 96 percent for plan years
beginning in 2008, and 100 percent for
any succeeding plan year.
``(II) Small plans.--In the case of
a plan described in subsection
(g)(2)(B), the applicable percentage
shall be determined in accordance with
the following table:
``In the case of a plan year The applicable
beginning in calendar year: percentage is--
2007.......................................... 92
2008.......................................... 94
2009.......................................... 96
2010.......................................... 98.
``(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
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,
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
412(d).
``(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 with respect to
such bases) shall be reduced to zero.
``(f) Use of Prefunding Balances To Satisfy Minimum Required
Contributions.--
``(1) In general.--A plan sponsor may credit any amount of
a plan's prefunding balance for a plan year against the minimum
required contribution for the plan year and the amount of the
contributions an employer is required to make under section
412(c) for the plan year shall be reduced by the amount so
credited. Any such amount shall be credited on the first day of
the plan year.
``(2) Prefunding balance.--
``(A) Beginning balance.--The beginning balance of
a prefunding balance maintained by a plan shall be
zero, except that if a plan was in effect for a plan
year beginning in 2006 and had a positive balance in
the funding standard account under section 412(b) (as
in effect for such plan year) as of the end of such
plan year, the beginning balance for the plan for its
first plan year beginning after 2006 shall be such
positive balance.
``(B) Increases.--
``(i) In general.--As of the first day of
each plan year beginning after 2007, the
prefunding balance of a plan shall be increased
by the excess (if any) of--
``(I) the aggregate amount of
employer contributions to the plan for
the preceding plan year, over
``(II) the minimum required
contribution for the 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
disregarded.--Any contribution which is
required to be made under section 436 in
addition to any contribution required under
this section shall not be taken into account
for purposes of clause (i).
``(C) Decreases.--As of the first day of each plan
year after 2007, the prefunding balance of a plan shall
be decreased (but not below zero) by the amount of the
balance credited under paragraph (1) against the
minimum required contribution of the plan for the
preceding plan year.
``(D) Adjustments for investment experience.--In
determining the prefunding 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, 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.
``(3) Limitation for underfunded plans.--
``(A) In general.--If the ratio (expressed as a
percentage) for any plan year which--
``(i) the value of plan assets for the
preceding plan year, 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, the preceding provisions of
this subsection shall not apply unless employers liable
for contributions to the plan under section 412(c) make
contributions to the plan for the plan year in an
aggregate amount not less than the amount determined
under subparagraph (B). Any contribution required by
this subparagraph may not be reduced by any credit
otherwise allowable under paragraph (1).
``(B) Applicable amount.--The amount determined
under this subparagraph for any plan year is the
greater of--
``(i) the target normal cost of the plan
for the plan year, or
``(ii) 25 percent of the minimum required
contribution under subsection (a) for the plan
year without regard to this subsection.
``(4) Reduction in value of assets.--Solely for purposes of
applying subsections (a) and (c)(4)(A)(ii) in determining the
minimum required contribution under this section, the value of
the plan assets otherwise determined without regard to this
paragraph shall be reduced by the amount of the prefunding
balance under this subsection.
``(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 (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 employees of 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 any reasonable
actuarial method of valuation providing for the
averaging of fair market values, but only if such
method--
``(i) is permitted under regulations
prescribed by the Secretary, and
``(ii) does not provide for averaging of
such values over more than the period beginning
on the last day of the 12th month preceding the
valuation date 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).
``(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 2007, 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 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
paragraph--
``(i) First segment rate.--The term `first
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary for such month on
the basis of the corporate bond yield curve for
such month, taking into account only that
portion of such yield curve which is based on
bonds maturing during the 5-year period
commencing with such month.
``(ii) Second segment rate.--The term
`second segment rate' means, with respect to
any month, the single rate of interest which
shall be determined by the Secretary for such
month on the basis of the corporate bond yield
curve for such month, taking into account only
that portion of such yield curve which is based
on bonds maturing during each of the years in
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.--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 12-month period ending with the month
preceding such month, of yields on investment grade
corporate bonds with varying maturities.
``(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 administrator, 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 for such month and each of the rates determined
under this paragraph for such month. The Secretary
shall also publish a description of the methodology
used to determine such yield curve and such rates which
is sufficiently detailed to enable plans to make
reasonable projections regarding the yield curve and
such rates for future months based on the plan's
projection of future interest rates.
``(G) Transition rule.--
``(i) In general.--Notwithstanding the
preceding provisions of this paragraph, for
plan years beginning in 2007 or 2008, the
first, second, or third segment rate for a plan
with respect to any month shall be equal to the
sum of--
``(I) the product of such rate for
such month determined without regard to
this subparagraph, multiplied by the
applicable percentage, and
``(II) the product of the rate
determined under the rules of section
412(b)(5)(B)(ii)(II) (as in effect for
plan years beginning in 2006),
multiplied by a percentage equal to 100
percent minus the applicable
percentage.
``(ii) Applicable percentage.--For purposes
of clause (i), the applicable percentage is
33\1/3\ percent for plan years beginning in
2007 and 66\2/3\ percent for plan years
beginning in 2008.
``(3) Mortality tables.--
``(A) In general.--Except as provided in
subparagraphs (C) and (D), the mortality table used in
determining any present value or making any computation
under this section shall be the RP-2000 Combined
Mortality Table, using Scale AA, as published by the
Society of Actuaries, as in effect on the date of the
enactment of the Pension Security and Transparency Act
of 2005 and as revised from time to time under
subparagraph (B).
``(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 (ii) shall be used in determining any
present value or making any computation under
this section during the 10-consecutive plan
year period specified in the request. A
mortality table described in this clause shall
cease to be in effect if the plan actuary
determines at any time that such table does not
meet the requirements of clause (ii).
``(ii) Requirements.--A mortality table
meets the requirements of this clause if the
Secretary determines that--
``(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),
``(II) such table reflects the
actual experience of the pension plans
maintained by the sponsor and projected
trends in general mortality experience,
``(III) except as provided by the
Secretary, such table will be used by
all plans maintained by the plan
sponsor and all members of any
controlled group which includes the
plan sponsor, and
``(IV) such table is significantly
different from the table described in
subparagraph (A).
``(iii) Deadline for disposition of
application.--Any mortality table submitted to
the Secretary for approval under this
subparagraph shall be treated as in effect for
the first plan year in the 10-year 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 (ii). The
180-day period shall be extended for any period
during which the Secretary has requested
information from the plan sponsor and such
information has not been provided.
``(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
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.
``(E) Transition rule.--Under regulations of the
Secretary, any difference in present value resulting
from any differences in assumptions as set forth in the
mortality table specified in subparagraph (A) and
assumptions as set forth in the mortality table
described in section 412(l)(7)(C)(ii) (as in effect for
plan years beginning in 2006) shall be phased in
ratably over the first period of 5 plan years beginning
in or after 2007 so as to be fully effective for the
fifth plan year.
``(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining any
present value or making any computation under this section,
there shall be taken into account--
``(A) the probability that future benefit payments
under the plan will be made in the form of optional
forms of benefits provided under the plan (including
lump sum distributions, determined on the basis of the
plan's experience and other related assumptions), and
``(B) any difference in the present value of such
future benefit payments resulting from the use of
actuarial assumptions, in determining benefit payments
in any such optional form of benefits, which are
different from those specified in this subsection.
``(5) Approval of large changes in actuarial assumptions.--
``(A) In general.--No actuarial assumption used to
determine the funding target for a plan to which this
paragraph applies may be changed without the approval
of the Secretary.
``(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan only if--
``(i) the aggregate unfunded 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 of such Act
(disregarding plans with no unfunded benefits)
exceed $50,000,000; and
``(ii) 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 to which
this subsection applies for a plan year, the funding
target of the plan for the plan year is equal to the
present value of all liabilities to participants and
their beneficiaries under the plan for the plan year,
as determined by using the additional actuarial
assumptions described in subparagraph (B).
``(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 7 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
target liability 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 liabilities.
``(2) Target normal cost of at-risk plans.--In the case of
a plan to which this subsection applies for a plan year, the
target normal cost of the plan for such plan year shall be
equal to 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).
``(3) Minimum amount.--In no event shall--
``(A) the at-risk target liability be less than the
target liability, 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 plan is in at-risk status for a plan year
if--
``(A) the plan is maintained by a financially-weak
employer, and
``(B) the funding target attainment percentage for
the plan year is less than 93 percent.
``(5) Financially-weak employer.--
``(A) In general.--For purposes of this subsection,
the term `financially-weak employer' means any employer
if--
``(i) as of the valuation date for each of
the years during a period of at least 3
consecutive plan years ending with the plan
year--
``(I) the employer has an
outstanding senior unsecured debt
instrument which is rated lower than
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
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 lower than investment
grade, and
``(ii) at least 2 of the years during such
period are deterioration years.
If an employer is treated as a financially-weak
employer for any plan year, clause (ii) shall not apply
in determining whether the employer is so treated for
any succeeding plan year in any continuous period of
plan years for which the employer is treated as a
financially-weak employer.
``(B) Controlled group exception.--If an employer
treated as a financially-weak employer under
subparagraph (A) is a member of a controlled group (as
defined in section 412(e)(4)), the employer shall not
be treated as a financially-weak employer if a
significant member (as determined under regulations
prescribed by the Secretary) of such group has an
outstanding senior unsecured debt instrument that is
rated as being investment grade by an organization
described in subparagraph (A).
``(C) Employers with no ratings.--If--
``(i) an employer has no debt instrument
described in subparagraph (A)(i) which was
rated by an organization described in such
subparagraph, and
``(ii) no such organization has made an
issuer credit rating for such employer,
then such employer shall only be treated as a
financially-weak employer to the extent provided in
regulations prescribed by the Secretary.
``(6) Determination of deterioration year.--For purposes of
paragraph (5), the term `deterioration year' means any year
during the period described in paragraph (5)(A)(i) for which
the rating described in subclause (I) or (II) of paragraph
(5)(A)(i) by each organization is either--
``(A) lower than the lowest rating of the employer
by such organization for a preceding year in such
period, or
``(B) the lowest rating used by such organization.
``(7) Years before effective date.--For purposes of
paragraphs (5) and (6), plan years beginning before 2007 shall
not be taken into account.
``(8) 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) Improvement years not taken into account.--
``(i) In general.--An improvement year
shall not be taken into account in determining
any consecutive period of plan years for
purposes of subparagraph (A).
``(ii) Application of subsection after
improvement year ends.--Plan years immediately
before and after an improvement year (or
consecutive period of improvement years) shall
be treated as consecutive for purposes of
subparagraph (A).
``(iii) Improvement year.--For purposes of
this subparagraph, the term `improvement year'
means any plan year for which any rating
described in subclause (I) or (II) of paragraph
(5)(A)(i) is higher than such rating for the
preceding plan year.
``(C) Transition percentage.--For purposes of
subparagraph (A), the transition percentage shall be
determined in accordance with the following table:
``If the consecutive number of
years (including the plan year) The transition
the plan is in at-risk status percentage is--
is--
1............................................. 20
2............................................. 40
3............................................. 60
4............................................. 80.
``(D) Years before effective date.--For purposes of
this paragraph, plan years beginning before 2007 shall
not be taken into account.
``(9) Plans to which subsection applies.--
``(A) In general.--Except as provided in this
paragraph, this subsection shall apply to any plan to
which this section applies and which is in at-risk
status for the plan year.
``(B) Exception for small plans.--This subsection
shall not apply to a plan for a plan year if the plan
was described in subsection (g)(2)(B) for the preceding
plan year, determined by substituting `500' for `100'.
``(C) Exception for plans maintained by certain
cooperatives.--This subsection shall not apply to an
eligible cooperative plan described in subparagraph
(D).
``(D) Eligible cooperative plan defined.--For
purposes of subparagraph (C), a plan shall be treated
as an eligible cooperative plan for a plan year if the
plan is maintained by more than 1 employer and at least
85 percent of the employers are--
``(i) rural cooperatives (as defined in
section 401(k)(7)(B) without regard to clause
(iv) thereof), or
``(ii) organizations which are--
``(I) cooperative organizations
described in section 1381(a) which are
more than 50-percent owned by
agricultural producers or by
cooperatives owned by agricultural
producers, or
``(II) more than 50-percent owned,
or controlled by, one or more
cooperative organizations described in
subclause (I).
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.
``(E) Exception for plans secured by third parties
bound by pbgc agreements.--This subsection shall not
apply to any plan if--
``(i) a person other than the employer
obligated to contribute under the plan is,
under the terms of an agreement with the
Pension Benefit Guaranty Corporation, liable
for any failure of the employer to meet its
obligation to pay any minimum required
contribution or termination liability with
respect to the plan; and
``(ii) such person is not a financially-
weak employer under paragraph (5).
``(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 made after the valuation date for such plan
year shall be increased by interest for the period from the
valuation date to the payment date, determined by using the
effective rate of interest for the plan for such plan year.
``(3) Accelerated quarterly contribution schedule for
underfunded plans.--
``(A) Interest penalty for failure to meet
accelerated quarterly payment schedule.--A plan shall
make the required installments under this paragraph for
a plan year if the plan had a funding shortfall for the
preceding plan year. If the required installment is not
paid in full, then the minimum required contribution
for the plan year (as increased under paragraph (2))
shall be further increased by an amount equal to the
interest on the amount of the underpayment for the
period of the underpayment, using an interest rate
equal to the excess of--
``(i) 175 percent of the Federal mid-term
rate (as in effect under section 1274 for the
1st month of such plan year), over
``(ii) the effective rate of interest for
the plan for the plan year.
``(B) Amount of underpayment, period of
underpayment.--For purposes of subparagraph (A)--
``(i) Amount.--The amount of the
underpayment shall be the excess of--
``(I) the required installment,
over
``(II) the amount (if any) of the
installment contributed to or under the
plan on or before the due date for the
installment.
``(ii) Period of underpayment.--The period
for which any interest is charged under this
paragraph with respect to any portion of the
underpayment shall run from the due date for
the installment to the date on which such
portion is contributed to or under the plan.
``(iii) Order of crediting contributions.--
For purposes of clause (i)(II), contributions
shall be credited against unpaid required
installments in the order in which such
installments are required to be paid.
``(C) Number of required installments; due dates.--
For purposes of this paragraph--
``(i) Payable in 4 installments.--There
shall be 4 required installments for each plan
year.
``(ii) Time for payment of installments.--
The due dates for required installments are set
forth in the following table:
In the case of the following
required installment: The due date is:
1st............................. April 15
2nd............................. July 15
3rd............................. October 15
4th............................. January 15 of the following year.
``(D) Amount of required installment.--For purposes
of this paragraph--
``(i) In general.--The amount of any
required installment shall be 25 percent of the
required annual payment.
``(ii) Required annual payment.--For
purposes of clause (i), the term `required
annual payment' means the lesser of--
``(I) 90 percent of the minimum
required contribution (without regard
to any waiver under section 302(c)) to
the plan for the plan year under this
section, or
``(II) in the case of a plan year
beginning after 2007, 100 percent of
the minimum required contribution
(without regard to any waiver under
section 302(c)) to the plan for the
preceding plan year.
Subclause (II) shall not apply if the preceding
plan year referred to in such clause was not a
year of 12 months.
``(E) Fiscal years and short years.--
``(i) Fiscal years.--In applying this
paragraph to a plan year beginning on any date
other than January 1, there shall be
substituted for the months specified in this
paragraph, the months which correspond thereto.
``(ii) Short plan year.--This subparagraph
shall be applied to plan years of less than 12
months in accordance with regulations
prescribed by the Secretary of the Treasury.
``(4) Liquidity requirement in connection with quarterly
contributions.--
``(A) In general.--A plan to which this paragraph
applies shall be treated as failing to pay the full
amount of any required installment under paragraph (3)
to the extent that the value of the liquid assets paid
in such installment is less than the liquidity
shortfall (whether or not such liquidity shortfall
exceeds the amount of such installment required to be
paid but for this paragraph).
``(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan which--
``(i) is required to pay installments under
paragraph (3) for a plan year, and
``(ii) has a liquidity shortfall for any
quarter during such plan year.
``(C) Period of underpayment.--For purposes of
paragraph (3)(A), any portion of an installment that is
treated as not paid under subparagraph (A) shall
continue to be treated as unpaid until the close of the
quarter in which the due date for such installment
occurs.
``(D) Limitation on increase.--If the amount of any
required installment is increased by reason of
subparagraph (A), in no event shall such increase
exceed the amount which, when added to prior
installments for the plan year, is necessary to
increase the funding target attainment percentage of
the plan for the plan year (taking into account the
expected increase in funding target due to benefits
accruing or earned during the plan year) to 100
percent.
``(E) Definitions.--For purposes of this
subparagraph:
``(i) Liquidity shortfall.--The term
`liquidity shortfall' means, with respect to
any required installment, an amount equal to
the excess (as of the last day of the quarter
for which such installment is made) of--
``(I) the base amount with respect
to such quarter, over
``(II) the value (as of such last
day) of the plan's liquid assets.
``(ii) Base amount.--
``(I) In general.--The term `base
amount' means, with respect to any
quarter, an amount equal to 3 times the
sum of the adjusted disbursements from
the plan for the 12 months ending on
the last day of such quarter.
``(II) Special rule.--If the amount
determined under subclause (I) exceeds
an amount equal to 2 times the sum of
the adjusted disbursements from the
plan for the 36 months ending on the
last day of the quarter and an enrolled
actuary certifies to the satisfaction
of the Secretary that such excess is
the result of nonrecurring
circumstances, the base amount with
respect to such quarter shall be
determined without regard to amounts
related to those nonrecurring
circumstances.
``(iii) Disbursements from the plan.--The
term `disbursements from the plan' means all
disbursements from the trust, including
purchases of annuities, payments of single sums
and other benefits, and administrative
expenses.
``(iv) Adjusted disbursements.--The term
`adjusted disbursements' means disbursements
from the plan reduced by the product of--
``(I) the plan's funding target
attainment percentage for the plan
year, and
``(II) the sum of the purchases of
annuities, payments of single sums, and
such other disbursements as the
Secretary shall provide in regulations.
``(v) Liquid assets.--The term `liquid
assets' means cash, marketable securities, and
such other assets as specified by the Secretary
in regulations.
``(vi) Quarter.--The term `quarter' means,
with respect to any required installment, the
3-month period preceding the month in which the
due date for such installment occurs.
``(F) Regulations.--The Secretary may prescribe
such regulations as are necessary to carry out this
paragraph.
``(k) Imposition of Lien Where Failure To Make Required
Contributions.--
``(1) In general.--In the case of a plan to which this
subsection applies, if--
``(A) any person fails to make a contribution
payment required by section 412 and this section before
the due date for such payment, and
``(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance
of all preceding such payments for which payment was
not made before the due date (including interest),
exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights to
property, whether real or personal, belonging to such person
and any other person who is a member of the same controlled
group of which such person is a member.
``(2) Plans to which subsection applies.--This subsection
shall apply to a defined benefit plan which is a single-
employer 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 302 for which payment has not been made before the
due date.
``(4) Notice of failure; lien.--
``(A) Notice of failure.--A person committing a
failure described in paragraph (1) shall notify the
Pension Benefit Guaranty Corporation of such failure
within 10 days of the due date for the required
contribution payment.
``(B) Period of lien.--The lien imposed by
paragraph (1) shall arise on the due date for the
required contribution payment and shall continue until
the last day of the first plan year in which the plan
ceases to be described in paragraph (1)(B). Such lien
shall continue to run without regard to whether such
plan continues to be described in paragraph (2) during
the period referred to in the preceding sentence.
``(C) Certain rules to apply.--Any amount with
respect to which a lien is imposed under paragraph (1)
shall be treated as taxes due and owing the United
States and rules similar to the rules of subsections
(c), (d), and (e) of section 4068 of the Employee
Retirement Income Security Act of 1974 shall apply with
respect to a lien imposed by subsection (a) and the
amount with respect to such lien.
``(5) Enforcement.--Any lien created under paragraph (1)
may be perfected and enforced only by the Pension Benefit
Guaranty Corporation, or at the direction of the Pension
Benefit Guaranty Corporation, by the contributing sponsor (or
any member of the controlled group of the contributing
sponsor).
``(6) Definitions.--For purposes of this subsection--
``(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a
contribution payment required to be made to the plan,
including any required installment under paragraphs (3)
and (4) of subsection (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.
``(l) Qualified Transfers to Health Benefit Accounts.--In the case
of a qualified transfer (as defined in section 420), any assets so
transferred shall not, for purposes of this section, be treated as
assets in the plan.''.
(b) Effective Date.--The amendments made by this section shall
apply with respect to plan years beginning after 2006.
SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.
(a) In General.--Part III of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 (relating to rules relating to minimum
funding standards) is amended by adding at the end the following new
subpart:
``Subpart B--Limitations on Benefit Improvements by Single-Employer
Plans
``Sec. 436. Funding-based limits on benefits and benefit
accruals under single-employer plans.
``SEC. 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), and (d).
``(b) Limitations on Plan Amendments Increasing Liability for
Benefits.--
``(1) In general.--Except as provided in this section, no
amendment to 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 as of the
valuation date of the plan for such plan year is--
``(A) less than 80 percent, or
``(B) would be less than 80 percent taking into
account such amendment.
``(2) Exemption.--Paragraph (1) shall cease to apply with
respect to any plan year, effective as of the first date of the
plan year (or if later, the effective date of the amendment),
upon payment by the plan sponsor of a contribution (in addition
to any minimum required contribution under section 430) equal
to--
``(A) in the case of paragraph (1)(A), the amount
of the increase in the funding target of the plan
(under section 430) for the plan year attributable to
the amendment, and
``(B) in the case of paragraph (1)(B), the amount
sufficient to result in a funding target attainment
percentage of 80 percent.
``(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.
``(c) Limitations on Accelerated Benefit Distributions.--
``(1) In general.--The requirements of this subsection are
met if the plan provides that, with respect to any plan year--
``(A) if the plan's adjusted funded target
liability percentage as of the valuation date for the
preceding plan year was less than 60 percent and the
preceding plan year is not otherwise in a prohibited
period, the plan sponsor shall, in addition to any
other contribution required under section 430,
contribute for the current plan year and each
succeeding plan year in the prohibited period with
respect to the current plan year the amount (if any)
which, when added to the portion of the minimum
required contribution for the plan year described in
subparagraphs (B) and (C) of section 430(a)(1), is
sufficient to result in an adjusted funded target
liability percentage for the plan year of 60 percent,
and
``(B) no prohibited payments will be made during a
prohibited period.
``(2) Prohibited payment.--For purpose of this subsection--
``(A) In general.--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 411(a)(9)), to a
participant or beneficiary whose annuity
starting date (as defined in section 417(f)(2))
occurs during a prohibited period,
``(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 for certain payments.--In the case
of any prohibited period described in paragraph (3)(A),
the term `prohibited payment' shall not include any
payment if the amount of the payment does not exceed
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 417(e)) of
the maximum guarantee with respect to the
participant under section 4022 of the Employee
Retirement Income Security Act of 1974.
The exception under this subparagraph shall only apply
once with respect to any participant, except that, for
purposes of this sentence, 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 clause (ii)
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.
``(3) Prohibited period.--For purposes of paragraph (1),
the term `prohibited period' means--
``(A) except as provided in paragraph (4), if a
plan sponsor is required to make the contribution for
the current plan year under paragraph (1), the period
beginning on the 1st day of the plan year and ending on
the last day of the 1st period of 2 consecutive plan
years (beginning on or after such 1st day) for which
the plan's adjusted funded target liability percentage
was at least 60 percent,
``(B) any period the plan sponsor is in bankruptcy,
or
``(C) any period during which the plan has a
liquidity shortfall (as defined in section
430(j)(4)(E)(i)).
The prohibited period for purposes of subparagraph (B) shall
not include any portion of a plan year (even if the plan
sponsor is in bankruptcy during such period) which occurs on or
after the date the plan's enrolled actuary certifies that, as
of the valuation date for the plan year, the plan's adjusted
funded target liability percentage is at least 100 percent.
``(4) Satisfaction of requirement before close of plan
year.--If, before the close of the current plan year--
``(A) the plan sponsor makes the contribution
required to be made under paragraph (1), or
``(B) the plan's enrolled actuary certifies that,
as of the valuation date for the plan year, the
adjusted funded target liability percentage of the plan
is at least 60 percent,
this subsection shall be applied as if no prohibited period had
begun as of the beginning of such year and the plan shall,
under rules described by the Secretary, restore any payments
not made during the prohibited period in effect before the
application of this paragraph.
``(d) Limitation on Benefit Accruals for Plans With Severe Funding
Shortfalls.--
``(1) In general.--Except as provided in subsection (e), a
single-employer plan shall provide that all future benefit
accruals under the plan shall cease during a severe funding
shortfall period, but only to the extent the cessation of such
accruals would have been permitted under section 411(d)(6) if
the cessation had been implemented by a plan amendment adopted
immediately before the severe funding shortfall period.
``(2) Severe funding shortfall period.--For purposes of
paragraph (1), the term `severe funding shortfall period' means
in the case of a plan the adjusted funding target attainment
percentage of which as of the valuation date of the plan for
any plan year is less than 60 percent, the period--
``(A) beginning on the 1st day of the succeeding
plan year, and
``(B) ending on the date the plan's enrolled
actuary certifies that the plan's funding target
attainment percentage is at least 60 percent.
``(3) Opportunity for increased funding.--For purposes of
paragraph (2)(A), a plan shall not be treated as described in
such paragraph for a plan year if the plan's enrolled actuary
certifies that the plan sponsor has before the end of the plan
year contributed (in addition to any minimum required
contribution under section 430) the amount sufficient to result
in an adjusted funding target attainment percentage as of the
valuation date for the plan year of 60 percent.
``(e) Exception for Certain Collectively Bargained Benefits.--In
the case of a plan maintained pursuant to a collective bargaining
agreement between employee representatives and the plan sponsor and in
effect before the beginning of the first day on which a limitation
would otherwise apply under subsections (b), (c), or (d)--
``(1) such limitations shall not apply to any amendment,
prohibited payment, or accrual with respect to such plan, but
``(2) the plan sponsor shall contribute (in addition to any
minimum required contribution under section 430) the amount
sufficient to result in a funding target attainment percentage
(as of the valuation date for the plan year in which any such
limitation would otherwise apply) equal to the percentage
necessary to prevent the limitation from applying.
``(f) Rules Relating to Required Contributions.--
``(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 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 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 may not be used.--No prefunding
balance under section 430(f) may be used to satisfy any
required contribution under this section.
``(3) Treatment as unpaid minimum required contribution.--
The amount of any required contribution which a plan sponsor
fails to make under subsection (b) or (d) for any plan year
shall be treated as an unpaid minimum required contribution for
purposes of subsection (j) and (k) of section 430 and for
purposes of section 4971.
``(g) New Plans.--Subsections (b) and (d) shall not apply to a plan
for the first 5 plan years of the plan. For purposes of this
subsection, the reference in this subsection to a plan shall include a
reference to any predecessor plan.
``(h) Presumed Underfunding for Purposes of Benefit Limitations
Based on Prior Year's Funding Status.--
``(1) Presumption of continued underfunding.--In any case
in which a benefit limitation under subsection (b), (c), or (d)
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 as of the valuation date of
the plan for the current plan year shall be presumed to be
equal to the adjusted funding target attainment percentage of
the plan as of the valuation date of the plan for the preceding
plan year until the enrolled actuary of the plan certifies the
actual adjusted funding target attainment percentage of the
plan as of the valuation date of the plan for the current plan
year.
``(2) Presumption of underfunding after 10th month.--In any
case in which no such certification is made with respect to the
plan before the first day of the 10th month of the current plan
year, for purposes of subsections (b), (c), and (d), the plan's
adjusted funding target attainment percentage shall be
conclusively presumed to be less than 60 percent as of the
first day of such 10th month.
``(i) Treatment of Plan as of Close of Prohibited or Cessation
Period.--For purposes of applying this part--
``(1) Operation of plan after period.--Unless the plan
provides otherwise, payments and accruals will resume effective
as of the day following the close of a period of limitation of
payment or accrual of benefits under subsection (c) or (d).
``(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.
``(j) 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 funded target liability percentage.--The
term `adjusted funded target liability percentage' means the
funded target liability percentage which is determined under
subparagraph (A) by increasing each of the amounts under
subparagraphs (A) and (B) of section 430(d)(2) by the aggregate
amount of purchases of annuities, payments of single sums, and
such other disbursements as the Secretary shall prescribe in
regulations, which were made by the plan during the preceding 2
plan years.
``(k) Special Rules.--
``(1) Bankruptcy.--In the case of a plan sponsor during any
period the plan is in bankruptcy--
``(A) subsection (b) shall be applied by
substituting `100 percent' for `80 percent' each place
it appears,
``(B) any exception under subsection (b) for any
benefit increases pursuant to a collective bargaining
agreement shall not apply, and
``(C) the exception under subsection (f) shall not
apply for purposes of subsection (b).
``(2) Years before effective date.--No plan year beginning
before 2007 shall be taken into account in determining whether
this section applies to any plan year beginning after 2006.''.
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
(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, 2007, 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. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.
(a) In General.--Section 404 of the Internal Revenue Code of 1986
(relating to deduction for contributions of an employer to an
employees' trust or annuity plan and compensation under a deferred
payment plan) is amended--
(1) in subsection (a)(1)(A), by inserting ``in the case of
a defined benefit plan other than a multiemployer plan, in an
amount determined under subsection (o), and in the case of any
other plan'' after ``section 501(a),'', and
(2) by inserting at the end the following new subsection:
``(o) Deduction Limit for Single-Employer Plans.--For purposes of
subsection (a)(1)(A)--
``(1) In general.--In the case of a defined benefit plan to
which subsection (a)(1)(A) applies (other than a multiemployer
plan), the amount determined under this subsection for any
taxable year shall be equal to the 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) 80 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.--
``(i) In general.--In 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 (j) or (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, 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--
(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)(A) of such Code, as amended by this
Act, 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(g)(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) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2006.
SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Amendments Related to Qualification Requirements.--
(1) Section 401(a)(29) of the Internal Revenue Code of 1986
is amended to read as follows:
``(29) Benefit limitations on plans in at-risk status.--In
the case of a defined benefit plan (other than a multiemployer
plan) to which the requirements of section 412 apply, the trust
of which the plan is a part shall not constitute a qualified
trust under this subsection unless the plan meets the
requirements of 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), as amended by this Act, is amended by
striking paragraph (33) and by redesignating paragraphs (34)
and (35) as paragraph (33) and (34).
(b) Vesting Rules.--Section 411 of such Code is amended--
(1) by striking ``section 412(c)(8)'' in subsection
(a)(3)(C) and inserting ``section 412(d)(2)'',
(2) in subsection (b)(1)(F)--
(A) by striking ``paragraphs (2) and (3) of section
412(i)'' in clause (ii) and inserting ``subparagraphs
(B) and (C) of section 412(e)(3)'', and
(B) by striking ``paragraphs (4), (5), and (6) of
section 412(i)'' and inserting ``subparagraphs (D),
(E), and (F) of section 412(e)(3)'', and
(3) by striking ``section 412(c)(8)'' in subsection
(d)(6)(A) and inserting ``section 412(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:
``(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 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
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, 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.--
``(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 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.''.
Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006
SEC. 121. 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 is amended--
(A) by striking ``2006'' and inserting ``2007'',
and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, and 2006''.
(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,
or 2006'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, and 2006''.
(3) PBGC premium rate.--Subclause (V) of section
4006(a)(3)(E)(iii) of such Act is amended by striking ``2006''
and inserting ``2007''.
(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 is
amended--
(A) by striking ``2006'' and inserting ``2007'',
and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, and 2006''.
(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,
or 2006'', and
(B) by striking ``and 2005'' in the heading and
inserting ``, 2005, and 2006''.
(c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) of the
Pension Funding Equity Act of 2004 is amended by striking ``2006'' and
inserting ``2007''.
SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS.
(a) In General.--Clause (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 `180 percent (130
percent in the case of a multiemployer plan) of current liability' for
`the current liability' in clause (i).''
(b) Conforming Amendment.--Section 404(a)(1) of the Internal
Revenue Code of 1986 is amended by striking subparagraph (F).
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2005.
SEC. 123. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.
(a) In General.--Subparagraph (C) of section 404(a)(7) of the
Internal Revenue Code of 1986 (relating to limitation on deductions
where combination of defined contribution plan and defined benefit
plan) is amended by adding after clause (ii) the following new clause:
``(iii) Limitation.--In the case of
employer contributions to 1 or more defined
contribution plans, this paragraph shall only
apply to the extent that such contributions
exceed 6 percent of the compensation otherwise
paid or accrued during the taxable year to the
beneficiaries under such plans. For purposes of
this clause, amounts carried over from
preceding taxable years under subparagraph (B)
shall be treated as employer contributions to 1
or more defined contributions to the extent
attributable to employer contributions to such
plans in such preceding taxable years.''
(b) Conforming 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''.
(c) Effective Date.--The amendments made by this section shall
apply to contributions for taxable years beginning after December 31,
2005.
TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT
PLANS AND RELATED PROVISIONS
Subtitle A--Funding Rules
PART I--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 purposes of section 302, the
accumulated funding deficiency of a multiemployer plan for any plan
year is--
``(1) except as provided in paragraph (2), the amount,
determined as of the end of the plan year, equal to the excess
(if any) of the total charges to the funding standard account
of the plan for all plan years (beginning with the first plan
year for which this part applies to the plan) over the total
credits to such account for such years, and
``(2) if the multiemployer plan is in reorganization for
any plan year, the accumulated funding deficiency of the plan
determined under section 4243.
``(b) Funding Standard Account.--
``(1) Account required.--Each multiemployer plan to which
this part applies shall establish and maintain a funding
standard account. Such account shall be credited and charged
solely as provided in this section.
``(2) Charges to account.--For a plan year, the funding
standard account shall be charged with the sum of--
``(A) the normal cost of the plan for the plan
year,
``(B) the amounts necessary to amortize in equal
annual installments (until fully amortized)--
``(i) 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,
``(ii) separately, with respect to each
plan year, the net experience loss (if any)
under the plan, over a period of 15 plan years,
and
``(iii) 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 Security and Transparency Act of 2005),
and
``(E) the amount necessary to amortize in equal
annual installments (until fully amortized) over a
period of 20 years the contributions which would be
required to be made under the plan but for the
provisions of section 302(c)(7)(A)(i)(I) (as in effect
on the day before the date of the enactment of the
Pension Security and Transparency Act of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the
employer to or under the plan for the plan year,
``(B) the amount necessary to amortize in equal
annual installments (until fully amortized)--
``(i) separately, with respect to each plan
year, the net decrease (if any) in unfunded
past service liability under the plan arising
from plan amendments adopted in such year, over
a period of 15 plan years,
``(ii) separately, with respect to each
plan year, the net experience gain (if any)
under the plan, over a period of 15 plan years,
and
``(iii) separately, with respect to each
plan year, the net gain (if any) resulting from
changes in actuarial assumptions used under the
plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency
(within the meaning of section 302(c)(3)) for the plan
year, and
``(D) in the case of a plan year for which the
accumulated funding deficiency is determined under the
funding standard account if such plan year follows a
plan year for which such deficiency was determined
under the alternative minimum funding standard under
section 305 (as in effect on the day before the date of
the enactment of the Pension Security and Transparency
Act of 2005), the excess (if any) of any debit balance
in the funding standard account (determined without
regard to this subparagraph) over any debit balance in
the alternative minimum funding standard account.
``(4) Special rule for amounts first amortized to plan
years before 2007.--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 Security and Transparency Act of 2005)
over any period beginning with a plan year beginning before
2007, in lieu of the amortization described in paragraphs
(2)(B) and (3)(B), such amount shall continue to be amortized
under such section as so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary of the Treasury,
amounts required to be amortized under paragraph (2) or
paragraph (3), as the case may be--
``(A) may be combined into one amount under such
paragraph to be amortized over a period determined on
the basis of the remaining amortization period for all
items entering into such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the
resulting amount to be amortized over a period
determined on the basis of the remaining amortization
periods for all items entering into whichever of the
two amounts being offset is the greater.
``(6) Interest.--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 shall be considered an amount
contributed by the employer to or under the plan. The
Secretary of the Treasury may prescribe by regulation
additional charges and credits to a multiemployer
plan's funding standard account to the extent necessary
to prevent withdrawal liability payments from being
unduly reflected as advance funding for plan
liabilities.
``(B) Adjustments when a multiemployer plan leaves
reorganization.--If a multiemployer plan is not in
reorganization in the plan year but was in
reorganization in the immediately preceding plan year,
any balance in the funding standard account at the
close of such immediately preceding plan year--
``(i) shall be eliminated by an offsetting
credit or charge (as the case may be), but
``(ii) shall be taken into account in
subsequent plan years by being amortized in
equal annual installments (until fully
amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of
any accumulated funding deficiency under section
4243(a) as of the end of the last plan year that the
plan was in reorganization.
``(C) Plan payments to supplemental program or
withdrawal liability payment fund.--Any amount paid by
a plan during a plan year to the Pension Benefit
Guaranty Corporation pursuant to section 4222 of this
Act or to a fund exempt under section 501(c)(22) of the
Internal Revenue Code of 1986 pursuant to section 4223
of this Act shall reduce the amount of contributions
considered received by the plan for the plan year.
``(D) Interim withdrawal liability payments.--Any
amount paid by an employer pending a final
determination of the employer's withdrawal liability
under part 1 of subtitle E of title IV and subsequently
refunded to the employer by the plan shall be charged
to the funding standard account in accordance with
regulations prescribed by the Secretary of the
Treasury.
``(E) Election for deferral of charge for portion
of net experience loss.--If an election is in effect
under section 302(b)(7)(F) (as in effect on the day
before the date of the enactment of the Pension
Security and Transparency Act of 2005) for any plan
year, the funding standard account shall be charged in
the plan year to which the portion of the net
experience loss deferred by such election was deferred
with the amount so deferred (and paragraph (2)(B)(ii)
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 of the Internal Revenue Code of 1986 in
such manner as is determined by the Secretary of the
Treasury.
``(G) Short-term benefits.--To the extent that any
plan amendment increases the unfunded past service
liability under the plan by reason of an increase in
benefits which are payable under the terms of the plan
for a period that does not exceed 14 years from the
effective date of the amendment, paragraph (2)(B)(i)
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.
``(2) Valuation of assets.--
``(A) In general.--For 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. Any
election under this subparagraph shall be made at such
time and in such manner as the Secretary of the
Treasury shall by regulations provide, shall apply to
all such evidences of indebtedness, and may be revoked
only with the consent of such Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be determined
on the basis of actuarial assumptions and methods--
``(A) each of which is reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social
Security Act or in other retirement benefits created
under Federal or State law, or
``(B) a change in the definition of the term
`wages' under section 3121 of the Internal Revenue Code
of 1986, or a change in the amount of such wages taken
into account under regulations prescribed for purposes
of section 401(a)(5) of such Code,
results in an increase or decrease in accrued liability under a
plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be
credited with the amount of such excess, and
``(B) all amounts described in subparagraphs (B),
(C), and (D) of subsection (b) (2) and subparagraph (B)
of subsection (b)(3) which are required to be amortized
shall be considered fully amortized for purposes of
such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5),
the term `full-funding limitation' means the excess (if
any) of--
``(i) the accrued liability (including
normal cost) under the plan (determined under
the entry age normal funding method if such
accrued liability cannot be directly calculated
under the funding method used for the plan),
over
``(ii) the lesser of--
``(I) the fair market value of the
plan's assets, or
``(II) the value of such assets
determined under paragraph (2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the
full-funding limitation determined under
subparagraph (A) be less than the excess (if
any) of--
``(I) 90 percent of the current
liability of the plan (including the
expected increase in current liability
due to benefits accruing during the
plan year), over
``(II) the value of the plan's
assets determined under paragraph (2).
``(ii) Assets.--For purposes of clause (i),
assets shall not be reduced by any credit
balance in the funding standard account.
``(C) Full funding limitation.--For purposes of
this paragraph, unless otherwise provided by the plan,
the accrued liability under a multiemployer plan shall
not include benefits which are not nonforfeitable under
the plan after the termination of the plan (taking into
consideration section 411(d)(3) of the Internal Revenue
Code of 1986).
``(D) Current liability.--For purposes of this
paragraph--
``(i) In general.--The term `current
liability' means all liabilities to employees
and their beneficiaries under the plan.
``(ii) Treatment of unpredictable
contingent event benefits.--For purposes of
clause (i), any benefit contingent on an event
other than--
``(I) age, service, compensation,
death, or disability, or
``(II) an event which is reasonably
and reliably predictable (as determined
by the Secretary of the Treasury),
shall not be taken into account until the event
on which the benefit is contingent occurs.
``(iii) Interest rate used.--The rate of
interest used to determine current liability
under this paragraph shall be the rate of
interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard
table.--In the case of plan years
beginning before the first plan year to
which the first tables prescribed under
subclause (II) apply, the mortality
table used in determining current
liability under this paragraph shall be
the table prescribed by the Secretary
of the Treasury which is based on the
prevailing commissioners' standard
table (described in section
807(d)(5)(A) of the Internal Revenue
Code of 1986) used to determine
reserves for group annuity contracts
issued on January 1, 1993.
``(II) Secretarial authority.--The
Secretary of the Treasury may by
regulation prescribe for plan years
beginning after December 31, 1999,
mortality tables to be used in
determining current liability under
this subsection. Such tables shall be
based upon the actual experience of
pension plans and projected trends in
such experience. In prescribing such
tables, such Secretary shall take into
account results of available
independent studies of mortality of
individuals covered by pension plans.
``(v) Separate mortality tables for the
disabled.--Notwithstanding clause (iv)--
``(I) In general.--The Secretary of
the Treasury shall establish mortality
tables which may be used (in lieu of
the tables under clause (iv)) to
determine current liability under this
subsection for individuals who are
entitled to benefits under the plan on
account of disability. Such Secretary
shall establish separate tables for
individuals whose disabilities occur in
plan years beginning before January 1,
1995, and for individuals whose
disabilities occur in plan years
beginning on or after such date.
``(II) Special rule for
disabilities occurring after 1994.--In
the case of disabilities occurring in
plan years beginning after December 31,
1994, the tables under subclause (I)
shall apply only with respect to
individuals described in such subclause
who are disabled within the meaning of
title II of the Social Security Act and
the regulations thereunder.
``(vi) Periodic review.--The Secretary of
the Treasury shall periodically (at least every
5 years) review any tables in effect under this
subparagraph and shall, to the extent such
Secretary determines necessary, by regulation
update the tables to reflect the actual
experience of pension plans and projected
trends in such experience.
``(E) Required change of interest rate.--For
purposes of determining a plan's current liability for
purposes of this paragraph--
``(i) In general.--If any rate of interest
used under the plan under subsection (b)(6) to
determine cost is not within the permissible
range, the plan shall establish a new rate of
interest within the permissible range.
``(ii) Permissible range.--For purposes of
this subparagraph--
``(I) In general.--Except as
provided in subclause (II), the term
`permissible range' means a rate of
interest which is not more than 5
percent above, and not more than 10
percent below, the weighted average of
the rates of interest on 30-year
Treasury securities during the 4-year
period ending on the last day before
the beginning of the plan year.
``(II) Secretarial authority.--If
the Secretary of the Treasury finds
that the lowest rate of interest
permissible under subclause (I) is
unreasonably high, such Secretary may
prescribe a lower rate of interest,
except that such rate may not be less
than 80 percent of the average rate
determined under such subclause.
``(iii) Assumptions.--Notwithstanding
paragraph (3)(A), the interest rate used under
the plan shall be--
``(I) determined without taking
into account the experience of the plan
and reasonable expectations, but
``(II) consistent with the
assumptions which reflect the purchase
rates which would be used by insurance
companies to satisfy the liabilities
under the plan.
``(7) Annual valuation.--
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a
valuation of the plan's liability shall be made not
less frequently than once every year, except that such
determination shall be made more frequently to the
extent required in particular cases under regulations
prescribed by the Secretary of the Treasury.
``(B) Valuation date.--
``(i) Current year.--Except as provided in
clause (ii), the valuation referred to in
subparagraph (A) shall be made as of a date
within the plan year to which the valuation
refers or within one month prior to the
beginning of such year.
``(ii) Use of prior year valuation.--The
valuation referred to in subparagraph (A) may
be made as of a date within the plan year prior
to the year to which the valuation refers if,
as of such date, the value of the assets of the
plan are not less than 100 percent of the
plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under
clause (ii) shall, in accordance with
regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) Limitation.--A change in funding
method to use a prior year valuation, as
provided in clause (ii), may not be made unless
as of the valuation date within the prior plan
year, the value of the assets of the plan are
not less than 125 percent of the plan's current
liability (as defined in paragraph (6)(D)
without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall be
deemed to have been made on such last day. For purposes of this
subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary of the Treasury.
``(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
assumptions--
``(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.
``(2) Additional 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 5 years) 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 make 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 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 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 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 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(e)(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 C.F.R. 1.412(c)(1)-2).
(4) Benefit restrictions to apply.--The benefit
restrictions under section 302(c)(7) of such Act and section
412(d)(7) of such Code shall apply during any period a
multiemployer 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 Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2006.
(2) Special rule for certain amortization extensions.--If
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 (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 purposes of this part, in the
case of a multiemployer plan--
``(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 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 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 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 described in subparagraph
(B) shall be treated as in seriously endangered status.
``(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 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 5 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 5
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
``(II) the present value of the reasonably
anticipated employer contributions for the
current plan year,
``(ii) the present value 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 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.--During the 90-day period
beginning on the first day of each plan year of a
multiemployer plan, the plan actuary shall certify to
the Secretary of the Treasury--
``(i) whether or not the plan is in
endangered status for such plan year and
whether or not the plan is in critical status
for such plan year, 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, using reasonable
actuarial estimates, assumptions, and methods,
of the current value of the assets of the plan
and the present value of all liabilities to
participants and beneficiaries under the plan
for the current plan year as of the beginning
of such year. The projected present value of
liabilities as of the beginning of such year
shall be determined based on the actuarial
statement required under section 103(d) with
respect to the most recently filed annual
report or 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.
``(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 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.--In any case in which a multiemployer
plan is certified to be in endangered or critical
status under subparagraph (A), 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, the Secretary of the
Treasury, and the Secretary.
``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
Plans in Endangered Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, 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) in the case of a plan in seriously
endangered status, 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
requirements under paragraph (3) in accordance
with the funding improvement plan, including a
description of the reductions in future benefit
accruals and increases in contributions that
the plan sponsor determines are reasonably
necessary to meet the applicable requirements
if the plan sponsor assumes that there are no
increases in contributions under the plan other
than the increases necessary to meet the
applicable requirements after future benefit
accruals have been reduced to the maximum
extent permitted by law, 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 requirements under
paragraph (3) in accordance with the funding
improvement plan.
``(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, which, under reasonable actuarial assumptions,
will result in the plan meeting the requirements of
this paragraph.
``(B) Plans other than seriously endangered
plans.--In the case of plan not in seriously endangered
status, the requirements of this paragraph are met if
the plan's funded percentage as of the close of the
funding improvement period exceeds the lesser of 80
percent or a percentage equal to the sum of--
``(i) such percentage as of the beginning
of such period, plus
``(ii) 10 percent of the percentage under
clause (i).
``(C) Seriously endangered plans.--In the case of a
plan in seriously endangered status, the requirements
of this paragraph are met if--
``(i) the plan's funded percentage as of
the close of the funding improvement period
equals or exceeds the percentage which is 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), and
``(ii) there is 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)).
``(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) 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.
``(C) 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 certain underfunded plans.--
``(A) In general.--Except as provided in
subparagraph (B), if the funded percentage of a plan in
seriously endangered status was 70 percent or less as
of the beginning of the initial determination year, the
following rules shall apply in determining whether the
requirements of paragraph (3)(C)(i) are met:
``(i) The plan's funded percentage as of
the close of the funding improvement period
must equal or exceed a percentage which is
equal to the sum of--
``(I) such percentage as of the
beginning of such period, plus
``(II) 20 percent of the difference
between 100 percent and the percentage
under subclause (I).
``(ii) The funding improvement period under
paragraph (4)(A) shall be 15 years rather than
10 years.
``(B) Special rules for plans with funded
percentage over 70 percent.--If the funded percentage
described in subparagraph (A) was more than 70 percent
but less than 80 percent as of the beginning of the
initial determination year--
``(i) subparagraph (A) shall apply 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)(C)(i)
without regard to this paragraph, 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 subparagraph (A) 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.
Notwithstanding clause (ii), if for any plan year
ending after the date described in clause (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)(C)(i) without regard to this paragraph, the plan
may continue to assume for such year that the funding
improvement period is 15 years rather than 10 years.
``(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 may periodically
update any schedule of contribution rates provided
under this subsection to reflect the experience of the
plan, except that the schedule or schedules described
in paragraph (1)(B)(i) shall be updated at least once
every 3 years.
``(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) Penalty if no funding improvement plan adopted.--A
failure of the plan sponsor to adopt a funding improvement plan
by the date specified in paragraph (1)(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).
``(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; Failure To Meet Requirements.--
``(1) Special rules for plan adoption period.--During the
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.
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
under subsection (c) 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 under subsection (c) so as to
increase benefits, including future benefit accruals,
unless--
``(i) in the case of a plan in seriously
endangered status, the plan actuary certifies
that, after taking into account the benefit
increase, the plan is still reasonably expected
to meet the requirements under subsection
(c)(3) in accordance with the schedule
contemplated in the funding improvement plan,
and
``(ii) in the case of a plan not in
seriously endangered status, the actuary
certifies that such increase is paid for out of
contributions not required by the funding
improvement plan to meet the requirements under
subsection (c)(3) in accordance with the
schedule contemplated in the funding
improvement plan.
``(3) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g)
of the Internal Revenue Code of 1986, if a plan fails
to meet the requirements of subsection (c)(3) by the
end of the funding improvement period, the plan shall
be treated as having an accumulated funding deficiency
for purposes of section 4971 of such Code for the last
plan year in such period (and each succeeding plan year
until such requirements are met) in an amount equal to
the greater of the amount of the contributions
necessary to meet such requirements or the amount of
such accumulated funding deficiency without regard to
this paragraph.
``(B) Waiver.--In the case of a failure described
in subparagraph (A) which is due to reasonable cause
and not to willful neglect, the Secretary of the
Treasury may waive part or all of the tax imposed by
section 4971 of such Code to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans
in Critical Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, 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
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 which will enable, under
reasonable actuarial assumptions, 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).
Such plan shall include the schedules required to be
provided under paragraph (1)(B)(i). If clause (ii)
applies, such plan 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 may
periodically update any schedule of
contribution rates provided under this
subsection to reflect the experience of the
plan, except that the schedule or schedules
described in paragraph (1)(B)(i) shall be
updated at least once every 3 years.
``(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) Default schedule.--If the collective
bargaining agreement providing for contributions under
a multiemployer plan that was in effect at the time the
plan entered critical status expires and, after
receiving a schedule from the plan sponsor under
paragraph (1)(B)(i), the bargaining parties have not
adopted a collective bargaining agreement with terms
consistent with such a schedule, the default schedule
described in the last sentence of paragraph (1) shall
go into effect with respect to those bargaining
parties.
``(4) Rehabilitation period.--For purposes of this
section--
``(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 use
of the shortfall method or any extension of
amortization periods under section 304(d).
``(5) Penalty if no rehabilitation plan adopted.--A failure
of a plan sponsor to adopt a rehabilitation plan by the date
specified in paragraph (1)(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).
``(6) 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.
``(7) Limitation on reduction in rates of future
accruals.--Any reduction in the rate of future accruals under
any 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.
``(8) Employer impact.--For the purposes of this section,
the plan sponsor shall consider the impact of the
rehabilitation plan and contribution schedules authorized by
this section on bargaining parties with fewer than 500
employees and shall implement the plan in a manner that
encourages their continued participation in the plan and
minimizes financial harm to employers and their workers.
``(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 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
``(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.
``(5) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g)
of the Internal Revenue Code of 1986, if a plan--
``(i) fails to meet the requirements of
subsection (e) by the end of the rehabilitation
period, or
``(ii) has received a certification under
subsection (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 section 4971 of such
Code for the last plan year in such period (and each
succeeding plan year until such requirements are met)
in an amount equal to the greater of the amount of the
contributions necessary to meet such requirements or
the amount of such accumulated funding deficiency
without regard to this paragraph.
``(B) Waiver.--In the case of a failure described
in subparagraph (A) which is due to reasonable cause
and not to willful neglect, the Secretary of the
Treasury may waive part or all of the tax imposed by
section 4971 of such Code to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within
60 days of the due date for adoption of a funding improvement plan
under subsection (c) 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 to
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 parties, and its participation
agreement with the plan was 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).
``(3) Employees covered by a collective bargaining
agreement.--The determination as to whether an employee covered
by a collective bargaining agreement for purposes of this
section shall be made without regard to the special rule in
Treasury Regulation section 1.410(b)-6(d)(ii)(D).
``(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 employee 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 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).''.
(b) Cause of Action To Compel Adoption of Funding Improvement or
Rehabilitation Plan.--Section 502(a) of the Employee Retirement Income
Security Act of 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 has not adopted a
funding improvement or rehabilitation plan under subsection (c)
or (e) of that section by the deadline established in that
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.''.
(c) 4971 Excise Tax Inapplicable.--Section 4971 of the Internal
Revenue Code of 1986 is amended by redesignating subsection (g) as
subsection (h), and inserting after subsection (f) the following:
``(g) Multiemployer Plans in Critical Status.--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 305 of
the Employee Retirement Income Security Act of 1974. This subsection
shall only apply if the plan adopts a rehabilitation plan in accordance
with section 305(e) of such Act and complies with such rehabilitation
plan (and any modifications of the plan) and shall not apply if an
excise tax is required to be imposed under this section by reason of a
violation of such section 305.''.
(d) No Additional Contributions Required.--
(1) Section 302(b) of the Employee Retirement Income
Security Act of 1974, as amended by this Act , is amended by
adding at the end the following new paragraph:
``(3) Multiemployer plans in critical status.--Subparagraph
(A) 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 such rehabilitation plan (and any modifications
of the plan).''.
(2) Section 412(c) of the Internal Revenue Code of 1986, as
amended by this Act, is amended by adding at the end the
following new paragraph:
``(3) Multiemployer plans in critical status.--Subparagraph
(A) 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 of the Employee Retirement Income Security Act of
1974. This paragraph shall only apply if the plan adopts a
rehabilitation plan in accordance with section 305(e) of such
Act and complies with such rehabilitation plan (and any
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) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply with respect to plan years beginning after 2006.
(2) 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) Effective Date.--The amendments made by this section shall
apply with respect to determinations made in plan years beginning after
2006.
SEC. 204. 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).
SEC. 205. WITHDRAWAL LIABILITY REFORMS.
(a) Repeal of Limitation on Withdrawal Liability of Insolvent
Employers.--
(1) In general.--Subsections (b) and (d) of section 4225 of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1405) are repealed.
(2) Conforming amendments.--Subsections (c) and (e) of
section 4225 of such Act are redesignated as subsections (b)
and (c), respectively.
(3) Effective date.--The amendments made by this section
shall apply with respect to sales occurring on or after January
1, 2006.
(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) 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 Forgiveness Rule to Plans Primarily Covering
Employees in the Building and Construction.--
(1) In general.--Section 4210(b) of such Act (29 U.S.C.
1390(b)) is amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through (4) as
paragraphs (1) through (3), respectively.
(2) Effective date.--The amendments made by this subsection
shall apply with respect to plan withdrawals occurring on or
after January 1, 2006.
PART II--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. 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) 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,
``(ii) separately, with respect to each
plan year, the net experience loss (if any)
under the plan, over a period of 15 plan years,
and
``(iii) 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(d)(3)) for each prior plan year in equal annual
installments (until fully amortized) over a period of
15 plan years,
``(D) the amount necessary to amortize in equal
annual installments (until fully amortized) over a
period of 5 plan years any amount credited to the
funding standard account under section 412(b)(3)(D) (as
in effect on the day before the date of the enactment
of the Pension Security and Transparency Act of 2005),
and
``(E) the amount necessary to amortize in equal
annual installments (until fully amortized) over a
period of 20 years the contributions which would be
required to be made under the plan but for the
provisions of section 412(c)(7)(A)(i)(I) (as in effect
on the day before the date of the enactment of the
Pension Security and Transparency Act of 2005).
``(3) Credits to account.--For a plan year, the funding
standard account shall be credited with the sum of--
``(A) the amount considered contributed by the
employer to or under the plan for the plan year,
``(B) the amount necessary to amortize in equal
annual installments (until fully amortized)--
``(i) separately, with respect to each plan
year, the net decrease (if any) in unfunded
past service liability under the plan arising
from plan amendments adopted in such year, over
a period of 15 plan years,
``(ii) separately, with respect to each
plan year, the net experience gain (if any)
under the plan, over a period of 15 plan years,
and
``(iii) separately, with respect to each
plan year, the net gain (if any) resulting from
changes in actuarial assumptions used under the
plan, over a period of 15 plan years,
``(C) the amount of the waived funding deficiency
(within the meaning of section 412(d)(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 Security and
Transparency Act of 2005), the excess (if any) of any
debit balance in the funding standard account
(determined without regard to this subparagraph) over
any debit balance in the alternative minimum funding
standard account.
``(4) Special rule for amounts first amortized to plan
years before 2007.--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 Security and Transparency Act of 2005)
over any period beginning with a plan year beginning before
2007, in lieu of the amortization described in paragraphs
(2)(B) and (3)(B), such amount shall continue to be amortized
under such section as so in effect.
``(5) Combining and offsetting amounts to be amortized.--
Under regulations prescribed by the Secretary, amounts required
to be amortized under paragraph (2) or paragraph (3), as the
case may be--
``(A) may be combined into one amount under such
paragraph to be amortized over a period determined on
the basis of the remaining amortization period for all
items entering into such combined amount, and
``(B) may be offset against amounts required to be
amortized under the other such paragraph, with the
resulting amount to be amortized over a period
determined on the basis of the remaining amortization
periods for all items entering into whichever of the
two amounts being offset is the greater.
``(6) Interest.--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) Interim withdrawal liability payments.--Any
amount paid by an employer pending a final
determination of the employer's withdrawal liability
under part 1 of subtitle E of title IV of such Act and
subsequently refunded to the employer by the plan shall
be charged to the funding standard account in
accordance with regulations prescribed by the
Secretary.
``(E) Election for deferral of charge for portion
of net experience loss.--If an election is in effect
under section 412(b)(7)(F) (as in effect on the day
before the date of the enactment of the Pension
Security and Transparency Act of 2005) for any plan
year, the funding standard account shall be charged in
the plan year to which the portion of the net
experience loss deferred by such election was deferred
with the amount so deferred (and paragraph (2)(B)(ii)
shall not apply to the amount so charged).
``(F) Financial assistance.--Any amount of any
financial assistance from the Pension Benefit Guaranty
Corporation to any plan, and any repayment of such
amount, shall be taken into account under this section
and section 412 in such manner as is determined by the
Secretary.
``(G) Short-term benefits.--To the extent that any
plan amendment increases the unfunded past service
liability under the plan by reason of an increase in
benefits which are payable under the terms of the plan
for a period that does not exceed 14 years from the
effective date of the amendment, paragraph (2)(B)(i)
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.
``(2) Valuation of assets.--
``(A) In general.--For 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 value of
a bond or other evidence of indebtedness which is not
in default as to principal or interest may, at the
election of the plan administrator, be determined on an
amortized basis running from initial cost at purchase
to par value at maturity or earliest call date. Any
election under this subparagraph shall be made at such
time and in such manner as the Secretary shall by
regulations provide, shall apply to all such evidences
of indebtedness, and may be revoked only with the
consent of the Secretary.
``(3) Actuarial assumptions must be reasonable.--For
purposes of this section, all costs, liabilities, rates of
interest, and other factors under the plan shall be determined
on the basis of actuarial assumptions and methods--
``(A) each of which is reasonable (taking into
account the experience of the plan and reasonable
expectations), and
``(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
``(4) Treatment of certain changes as experience gain or
loss.--For purposes of this section, if--
``(A) a change in benefits under the Social
Security Act or in other retirement benefits created
under Federal or State law, or
``(B) a change in the definition of the term
`wages' under section 3121, or a change in the amount
of such wages taken into account under regulations
prescribed for purposes of section 401(a)(5),
results in an increase or decrease in accrued liability under a
plan, such increase or decrease shall be treated as an
experience loss or gain.
``(5) Full funding.--If, as of the close of a plan year, a
plan would (without regard to this paragraph) have an
accumulated funding deficiency in excess of the full funding
limitation--
``(A) the funding standard account shall be
credited with the amount of such excess, and
``(B) all amounts described in subparagraphs (B),
(C), and (D) of subsection (b) (2) and subparagraph (B)
of subsection (b)(3) which are required to be amortized
shall be considered fully amortized for purposes of
such subparagraphs.
``(6) Full-funding limitation.--
``(A) In general.--For purposes of paragraph (5),
the term `full-funding limitation' means the excess (if
any) of--
``(i) the accrued liability (including
normal cost) under the plan (determined under
the entry age normal funding method if such
accrued liability cannot be directly calculated
under the funding method used for the plan),
over
``(ii) the lesser of--
``(I) the fair market value of the
plan's assets, or
``(II) the value of such assets
determined under paragraph (2).
``(B) Minimum amount.--
``(i) In general.--In no event shall the
full-funding limitation determined under
subparagraph (A) be less than the excess (if
any) of--
``(I) 90 percent of the current
liability of the plan (including the
expected increase in current liability
due to benefits accruing during the
plan year), over
``(II) the value of the plan's
assets determined under paragraph (2).
``(ii) Assets.--For purposes of clause (i),
assets shall not be reduced by any credit
balance in the funding standard account.
``(C) Full funding limitation.--For purposes of
this paragraph, unless otherwise provided by the plan,
the accrued liability under a multiemployer plan shall
not include benefits which are not nonforfeitable under
the plan after the termination of the plan (taking into
consideration section 411(d)(3)).
``(D) Current liability.--For purposes of this
paragraph--
``(i) In general.--The term `current
liability' means all liabilities to employees
and their beneficiaries under the plan.
``(ii) Treatment of unpredictable
contingent event benefits.--For purposes of
clause (i), any benefit contingent on an event
other than--
``(I) age, service, compensation,
death, or disability, or
``(II) an event which is reasonably
and reliably predictable (as determined
by the Secretary),
shall not be taken into account until the event
on which the benefit is contingent occurs.
``(iii) Interest rate used.--The rate of
interest used to determine current liability
under this paragraph shall be the rate of
interest determined under subparagraph (E).
``(iv) Mortality tables.--
``(I) Commissioners' standard
table.--In the case of plan years
beginning before the first plan year to
which the first tables prescribed under
subclause (II) apply, the mortality
table used in determining current
liability under this paragraph shall be
the table prescribed by the Secretary
which is based on the prevailing
commissioners' standard table
(described in section 807(d)(5)(A))
used to determine reserves for group
annuity contracts issued on January 1,
1993.
``(II) Secretarial authority.--The
Secretary may by regulation prescribe
for plan years beginning after December
31, 1999, mortality tables to be used
in determining current liability under
this subsection. Such tables shall be
based upon the actual experience of
pension plans and projected trends in
such experience. In prescribing such
tables, the Secretary shall take into
account results of available
independent studies of mortality of
individuals covered by pension plans.
``(v) Separate mortality tables for the
disabled.--Notwithstanding clause (iv)--
``(I) In general.--The Secretary
shall establish mortality tables which
may be used (in lieu of the tables
under clause (iv)) to determine current
liability under this subsection for
individuals who are entitled to
benefits under the plan on account of
disability. The Secretary shall
establish separate tables for
individuals whose disabilities occur in
plan years beginning before January 1,
1995, and for individuals whose
disabilities occur in plan years
beginning on or after such date.
``(II) Special rule for
disabilities occurring after 1994.--In
the case of disabilities occurring in
plan years beginning after December 31,
1994, the tables under subclause (I)
shall apply only with respect to
individuals described in such subclause
who are disabled within the meaning of
title II of the Social Security Act and
the regulations thereunder.
``(vi) Periodic review.--The Secretary
shall periodically (at least every 5 years)
review any tables in effect under this
subparagraph and shall, to the extent 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 purposes of this section, a
determination of experience gains and losses and a
valuation of the plan's liability shall be made not
less frequently than once every year, except that such
determination shall be made more frequently to the
extent required in particular cases under regulations
prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as provided in
clause (ii), the valuation referred to in
subparagraph (A) shall be made as of a date
within the plan year to which the valuation
refers or within one month prior to the
beginning of such year.
``(ii) Use of prior year valuation.--The
valuation referred to in subparagraph (A) may
be made as of a date within the plan year prior
to the year to which the valuation refers if,
as of such date, the value of the assets of the
plan are not less than 100 percent of the
plan's current liability (as defined in
paragraph (6)(D) without regard to clause (iv)
thereof).
``(iii) Adjustments.--Information under
clause (ii) shall, in accordance with
regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) Limitation.--A change in funding
method to use a prior year valuation, as
provided in clause (ii), may not be made unless
as of the valuation date within the prior plan
year, the value of the assets of the plan are
not less than 125 percent of the plan's current
liability (as defined in paragraph (6)(D)
without regard to clause (iv) thereof).
``(8) Time when certain contributions deemed made.--For
purposes of this section, any contributions for a plan year
made by an employer after the last day of such plan year, but
not later than two and one-half months after such day, shall be
deemed to have been made on such last day. For purposes of this
subparagraph, such two and one-half month period may be
extended for not more than six months under regulations
prescribed by the Secretary.
``(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 certification with respect to a
multiemployer plan is described in this subparagraph if
the plan's actuary certifies that, based on reasonable
assumptions--
``(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.
``(2) Additional extension.--
``(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 5 years) 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 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 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) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after 2006.
(2) Special rule for certain amortization extensions.--If
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 (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. 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--
``(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 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 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 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 described in subparagraph
(B) shall be treated as in seriously endangered status.
``(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 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 5 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 5
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 contributions for the
current plan year,
``(ii) the present value 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 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.--During the 90-day period
beginning on the first day of each plan year of a
multiemployer plan, the plan actuary shall certify to
the Secretary--
``(i) whether or not the plan is in
endangered status for such plan year and
whether or not the plan is in critical status
for such plan year, 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, using reasonable
actuarial estimates, assumptions, and methods,
of the current value of the assets of the plan
and the present value of all liabilities to
participants and beneficiaries under the plan
for the current plan year as of the beginning
of such year. The projected present value of
liabilities as of the beginning of such year
shall be determined based on 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 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.
``(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 purposes of section 502(c)(2) of
such Act 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.--In any case in which a multiemployer
plan is certified to be in endangered or critical
status under subparagraph (A), 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, the Secretary, and the
Secretary of Labor.
``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
Plans in Endangered Status.--
``(1) In general.--In any case in which a multiemployer
plan is in endangered status for a plan year, 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) in the case of a plan in seriously
endangered status, 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
requirements under paragraph (3) in accordance
with the funding improvement plan, including a
description of the reductions in future benefit
accruals and increases in contributions that
the plan sponsor determines are reasonably
necessary to meet the applicable requirements
if the plan sponsor assumes that there are no
increases in contributions under the plan other
than the increases necessary to meet the
applicable requirements after future benefit
accruals have been reduced to the maximum
extent permitted by law, 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 requirements under
paragraph (3) in accordance with the funding
improvement plan.
``(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, which, under reasonable actuarial assumptions,
will result in the plan meeting the requirements of
this paragraph.
``(B) Plans other than seriously endangered
plans.--In the case of plan not in seriously endangered
status, the requirements of this paragraph are met if
the plan's funded percentage as of the close of the
funding improvement period exceeds the lesser of 80
percent or a percentage equal to the sum of--
``(i) such percentage as of the beginning
of such period, plus
``(ii) 10 percent of the percentage
determined under clause (i).
``(C) Seriously endangered plans.--In the case of a
plan in seriously endangered status, the requirements
of this paragraph are met if--
``(i) the plan's funded percentage as of
the close of the funding improvement period
equals or exceeds the percentage which is 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), and
``(ii) there is no accumulated funding
deficiency for any plan year during the funding
improvement period (taking into account any
extension of amortization periods under section
431(d)).
``(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) 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.
``(5) Special rules for certain underfunded plans.--
``(A) In general.--Except as provided in
subparagraph (B), if the funded percentage of a plan in
seriously endangered status was 70 percent or less as
of the beginning of the initial determination year, the
following rules shall apply in determining whether the
requirements of paragraph (3)(C)(i) are met:
``(i) The plan's funded percentage as of
the close of the funding improvement period
must equal or exceed a percentage which is
equal to the sum of--
``(I) such percentage as of the
beginning of such period, plus
``(II) 20 percent of the difference
between 100 percent and the percentage
under subclause (I).
``(ii) The funding improvement period under
paragraph (4)(A) shall be 15 years rather than
10 years.
``(B) Special rules for plans with funded
percentage over 70 percent.--If the funded percentage
described in subparagraph (A) was more than 70 percent
but less than 80 percent as of the beginning of the
initial determination year--
``(i) subparagraph (A) shall apply 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)(C)(i)
without regard to this paragraph, 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 subparagraph (A) 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.
Notwithstanding clause (ii), if for any plan year
ending after the date described in clause (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)(C)(i) without regard to this paragraph, the plan
may continue to assume for such year that the funding
improvement period is 15 years rather than 10 years.
``(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 of the Employee Retirement Income
Security Act of 1974.
``(B) Schedules.--The plan sponsor may periodically
update any schedule of contribution rates provided
under this subsection to reflect the experience of the
plan, except that the schedule or schedules described
in paragraph (1)(B)(i) shall be updated at least once
every 3 years.
``(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) Penalty if no funding improvement plan adopted.--A
failure of the plan sponsor to adopt a funding improvement plan
by the date specified in paragraph (1)(A) shall be treated for
purposes of section 502(c)(2) of such Act as a failure or
refusal by the plan administrator to file the annual report
required to be filed with the Secretary of Labor under section
101(b)(4) of such Act.
``(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; Failure to Meet Requirements.--
``(1) Special rules for plan adoption period.--During the
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
under subsection (c) 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 under subsection (c) so as to
increase benefits, including future benefit accruals,
unless--
``(i) in the case of a plan in seriously
endangered status, the plan actuary certifies
that, after taking into account the benefit
increase, the plan is still reasonably expected
to meet the requirements under subsection
(c)(3) in accordance with the schedule
contemplated in the funding improvement plan,
and
``(ii) in the case of a plan not in
seriously endangered status, the actuary
certifies that such increase is paid for out of
contributions not required by the funding
improvement plan to meet the requirements under
subsection (c)(3) in accordance with the
schedule contemplated in the funding
improvement plan.
``(3) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g),
if a plan fails to meet the requirements of subsection
(c)(3) by the end of the funding improvement period,
the plan shall be treated as having an accumulated
funding deficiency for purposes of section 4971 for the
last plan year in such period (and each succeeding plan
year until such requirements are met) in an amount
equal to the greater of the amount of the contributions
necessary to meet such requirements or the amount of
such accumulated funding deficiency without regard to
this paragraph.
``(B) Waiver.--In the case of a failure described
in subparagraph (A) which is due to reasonable cause
and not to willful neglect, the Secretary of the
Treasury may waive part or all of the tax imposed by
section 4971 of such Code to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans
in Critical Status.--
``(1) In general.--In any case in which a multiemployer
plan is in critical status for a plan year, 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
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 which will enable, under
reasonable actuarial assumptions, 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 of the Employee
Retirement Income Security Act of 1974).
Such plan shall include the schedules required to be
provided under paragraph (1)(B)(i). If clause (ii)
applies, such plan 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 may
periodically update any schedule of
contribution rates provided under this
subsection to reflect the experience of the
plan, except that the schedule or schedules
described in paragraph (1)(B)(i) shall be
updated at least once every 3 years.
``(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) Default schedule.--If the collective
bargaining agreement providing for contributions under
a multiemployer plan that was in effect at the time the
plan entered critical status expires and, after
receiving a schedule from the plan sponsor under
paragraph (1)(B)(i), the bargaining parties have not
adopted a collective bargaining agreement with terms
consistent with such a schedule, the default schedule
described in the last sentence of paragraph (1) shall
go into effect with respect to those bargaining
parties.
``(4) Rehabilitation period.--For purposes of this
section--
``(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 use
of the shortfall method or any extension of
amortization periods under section 431(d).
``(5) Penalty if no rehabilitation plan adopted.--A failure
of a plan sponsor to adopt a rehabilitation plan by the date
specified in paragraph (1)(A) shall be treated for 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 of Labor under section 101(b)(4) of such Act.
``(6) 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.
``(7) Limitation on reduction in rates of future
accruals.--Any reduction in the rate of future accruals under
any 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.
``(8) Employer impact.--For the purposes of this section,
the plan sponsor shall consider the impact of the
rehabilitation plan and contribution schedules authorized by
this section on bargaining parties with fewer than 500
employees and shall implement the plan in a manner that
encourages their continued participation in the plan and
minimizes financial harm to employers and their workers.
``(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 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.
``(5) Failure to meet requirements.--
``(A) In general.--Notwithstanding section 4971(g),
if a plan--
``(i) fails to meet the requirements of
subsection (e) by the end of the rehabilitation
period, or
``(ii) has received a certification under
subsection (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 section 4971 for the
last plan year in such period (and each succeeding plan
year until such requirements are met) in an amount
equal to the greater of the amount of the contributions
necessary to meet such requirements or the amount of
such accumulated funding deficiency without regard to
this paragraph.
``(B) Waiver.--In the case of a failure described
in subparagraph (A) which is due to reasonable cause
and not to willful neglect, the Secretary may waive
part or all of the tax imposed by section 4971 to the
extent that the payment of such tax would be excessive
or otherwise inequitable relative to the failure
involved.
``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within
60 days of the due date for adoption of a funding improvement plan
under subsection (c) 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 to
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 parties, and its participation
agreement with the plan was 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).
``(3) Employees covered by a collective bargaining
agreement.--The determination as to whether an employee covered
by a collective bargaining agreement for purposes of this
section shall be made without regard to the special rule in
Treasury Regulation section 1.410(b)-6(d)(ii)(D).
``(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 employee 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
``(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).''
(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply with respect to plan years beginning after 2006.
(2) 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.
PART III--SUNSET OF FUNDING RULES
SEC. 216. SUNSET OF 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,
(E) the possibility of alternatives 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) 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, this subtitle shall not apply
to plan years beginning after December 31, 2014, and the
Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 shall be applied to such plan
years under the provisions of sections 302 through 308 of such
Act and 412 of such Code (as in effect before the amendments
made by this Act).
(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.
(3) Amortization schedules.--In the case of any amount
amortized under section 304(b) of such Act or 431 of such Code
(as in effect after the amendments made by this subtitle) over
any period beginning with a plan year beginning before January
1, 2015, such amount shall, in lieu of the amortization which
would apply after the application of this subsection, continue
to be amortized under such section 304 or 431 (as so in
effect).
Subtitle B--Deduction and Related Provisions
SEC. 221. 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.--
``(i) In general.--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 unfunded
current liability of the plan.
``(ii) Unfunded current liability.--For
purposes of clause (i), the term `unfunded
current liability' means the excess (if any)
of--
``(I) 140 percent of the current
liability of the plan determined under
section 431(c)(6)(C), over
``(II) the value of the plan's
assets determined under section
431(c)(2).''.
(b) Exception From Limitation on Deduction Where Combination of
Defined Contribution and Defined Benefit Plans.--
(1) In general.--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.''.
(2) Conforming amendment.--Section 404(a)(7)(A) of such
Code is amended by striking the last sentence.
(c) Effective Dates.--
(1) Deduction limit.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2006.
(2) Exception.--The amendments made by subsection (b) shall
apply to years beginning after December 31, 2005.
SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER HEALTH
PLAN.
(a) In General.--Section 420(e) of the Internal Revenue Code of
1986 (relating to definitions and special rules) is amended by adding
at the end the following new paragraph:
``(5) Application to multiemployer plan.--In the case of
any plan to which section 404(c) applies (or any successor plan
primarily covering employees in the building and construction
industry)--
``(A) the prohibition under subsection (a) on the
application of this section to a multiemployer plan
shall not apply, and
``(B) this section shall be applied to any such
plan--
``(i) 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
``(ii) in accordance with such
modifications of this section (and the
provisions of this title and the Employee
Retirement Income Security Act of 1974 relating
to this section) as the Secretary determines
appropriate to reflect the fact the plan is not
maintained by a single employer.''
(b) Amendments of ERISA.--
(1) Section 101(e)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by
striking ``American Jobs Creation Act of 2004'' and inserting
``Pension Security and Transparency Act of 2005''.
(2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is
amended by striking ``American Jobs Creation Act of 2004'' and
inserting ``Pension Security and Transparency Act of 2005''.
(3) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13))
is amended by striking ``American Jobs Creation Act of 2004''
and inserting ``Pension Security and Transparency Act of
2005''.
(c) Effective Date.--The amendment made by this section shall apply
to transfers made in taxable years beginning after December 31, 2004.
TITLE III--INTEREST RATE ASSUMPTIONS
SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM
DISTRIBUTIONS.
(a) Amendments of ERISA.--
(1) In general.--Section 205(g)(3)(A) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1055(g)(3)(A)) is amended by adding at the end the following
new sentence: ``In the case of plan years beginning after 2006,
the preceding sentence shall be applied by using the applicable
yield curve method under subparagraph (C) rather than the
applicable interest rate.''.
(2) Applicable yield curve method.--Section 205(g)(3) of
such Act (29 U.S.C. 1055(g)(3)) is amended by adding at the end
the following new subparagraphs:
``(C) Applicable yield curve method.--For purposes
of subparagraph (A), the term `applicable yield curve
method' means--
``(i) the phase-in yield curve method in
the case of plan years beginning in 2007, 2008,
and 2009, and
``(ii) the yield curve method for years
beginning after 2009.
``(D) Yield curve method.--For purposes of this
paragraph--
``(i) In general.--The yield curve method
is a method under which present value is
determined--
``(I) by using interest rates drawn
from a yield curve which is prescribed
by the Secretary of the Treasury and
which reflects the yield on high-
quality corporate bonds with varying
maturities, and
``(II) by matching the timing of
the expected benefit payments under the
plan to the interest rates on such
yield curve.
``(ii) Publication.--Each month the
Secretary of the Treasury shall publish any
yield curve prescribed under this subparagraph
which shall apply to plan years beginning in
such month and such yield curve shall be based
on average interest rates for business days
occurring during the 3 preceding months.
``(E) Phase-in yield curve method.--
``(i) In general.--Present value determined
under the phase-in yield curve method shall be
equal to the sum of--
``(I) the applicable percentage of
such amount determined under the yield
curve method described in subparagraph
(D), and
``(II) the product of such amount
determined by using the applicable
interest rate and a percentage equal to
100 percent minus the applicable
percentage.
``(ii) Applicable percentage.--For purposes
of clause (i), the applicable percentage is 25
percent for plan years beginning in 2007, 50
percent for plan years beginning in 2008, and
75 percent for plan years beginning in 2009.''.
(b) Amendments of Internal Revenue Code.--
(1) In general.--Section 417(e)(3)(A) of the Internal
Revenue Code of 1986 (relating to determination of present
value) is amended by adding at the end the following new
sentence: ``In the case of plan years beginning after 2006, the
preceding sentence shall be applied by using the applicable
yield curve method under subparagraph (C) rather than the
applicable interest rate.''
(2) Applicable yield curve method.--Section 417(e) of such
Code is amended by adding at the end the following new
subparagraphs:
``(C) Applicable yield curve method.--For purposes
of subparagraph (A), the term `applicable yield curve
method' means--
``(i) the phase-in yield curve method in
the case of plan years beginning in 2007, 2008,
and 2009, and
``(ii) the yield curve method for years
beginning after 2009.
``(D) Yield curve method.--For purposes of this
paragraph--
``(i) In general.--The yield curve method
is a method under which present value is
determined--
``(I) by using interest rates drawn
from a yield curve which is prescribed
by the Secretary and which reflects the
yield on high-quality corporate bonds
with varying maturities, and
``(II) by matching the timing of
the expected benefit payments under the
plan to the interest rates on such
yield curve.
``(ii) Publication.--Each month the
Secretary shall publish any yield curve
prescribed under this subparagraph which shall
apply to plan years beginning in such month and
such yield curve shall be based on average
interest rates for business days occurring
during the 3 preceding months.
``(E) Phase-in yield curve method.--
``(i) In general.--Present value determined
under the phase-in yield curve method shall be
equal to the sum of--
``(I) the applicable percentage of
such amount determined under the yield
curve method described in subparagraph
(D), and
``(II) the product of such amount
determined by using the applicable
interest rate and a percentage equal to
100 percent minus the applicable
percentage.
``(ii) Applicable percentage.--For purposes
of clause (i), the applicable percentage is 25
percent for plan years beginning in 2007, 50
percent for plan years beginning in 2008, and
75 percent for plan years beginning in 2009.''.
(c) Special Rule for Plan Amendments.--A plan shall not fail to
meet the requirements of section 204(g) of the Employee Retirement
Income Security Act of 1974 or section 411(d)(6) of the Internal
Revenue Code of 1986 solely by reason of the adoption by the plan of an
amendment necessary to meet the requirements of the amendments made by
this section.
(d) Effective Date.--The amendments made by this section shall
apply with respect to plan years beginning after 2006.
SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO
LUMP SUM DISTRIBUTIONS.
(a) In General.--Clause (ii) of section 415(b)(2)(E) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(ii) For purposes of adjusting any
benefit under subparagraph (B) for any form of
benefit subject to section 417(e)(3), clause
(i) shall be applied by substituting `5.5
percent' for `5 percent'.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 2005.
SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED COMPENSATION
PLANS BY EMPLOYERS MAINTAINING UNDERFUNDED OR TERMINATED
SINGLE-EMPLOYER PLANS.
(a) Amendments of ERISA.--
(1) In general.--Part 3 of subtitle A of title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1081
et seq.), as amended by this Act, is amended by adding at the
end the following new section:
``notice of funding of nonqualified deferred compensation plans
``Sec. 306. (a) Notice and Access.--
``(1) Notice relating to restricted period.--The plan
administrator of a defined benefit plan which is a single-
employer plan shall notify each plan sponsor of the plan within
a reasonable period of time after the occurrence of an event
which results in a restricted period with respect to the plan.
Such notice shall include information--
``(A) as to the duration of the restricted period,
and
``(B) the restrictions under section 409A(b)(3) of
the Internal Revenue Code of 1986 which apply during
the restricted period to the plan sponsor and any
member of a controlled group which includes such
sponsor.
``(2) Notice of existence of, and transfers to,
nonqualified deferred compensation plans.--
``(A) Initial notice.--Within 30 days of receipt of
a notice under paragraph (1), each plan sponsor shall
notify the plan administrator of the plan described in
paragraph (1)--
``(i) of nonqualified deferred compensation
plans maintained by the plan sponsor or any
member of a controlled group which includes
such sponsor, and
``(ii) the amount of any assets transferred
or otherwise reserved by the plan sponsor or
such member in violation of section 409A(b)(3)
of such Code during any portion of the
restricted period occurring on or before the
date the plan sponsor provides such notice.
``(B) Additional notices.--If, after the date on
which notice is provided under subparagraph (A) and
during any portion of the remaining restricted period
specified in the notice provided under paragraph (1),
the plan sponsor of a plan described in paragraph (1)
or a member of a controlled group which includes such
sponsor--
``(i) transfers or reserves assets in
violation of section 409A(b)(3) of such Code,
or
``(ii) establishes a new nonqualified
deferred compensation plan,
the plan sponsor shall notify the plan administrator of
the plan described in paragraph (1) of such transfer,
reservation, or establishment within 3 days of the date
of such action.
``(3) Access to financial data.--Any fiduciary of the plan
shall have access to the financial records of a plan sponsor or
any member of a controlled group which includes such sponsor to
determine if assets were transferred or otherwise reserved in
violation of section 409A(b)(3) of such Code.
``(4) Form and manner.--The Secretary may prescribe the
form and manner of a notice required under this section. Such a
notice 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) Restricted Period.--For purposes of this section, the term
`restricted period' means, with respect to any plan described in
subsection (a)(1)--
``(1) any period--
``(A) beginning on the first day of a plan year
following a plan year for which the plan's adjusted
funding target attainment percentage (as defined in
section 303) was less than 60 percent (determined as of
the close of such year), and
``(B) ending on the last day of the first period of
2 consecutive plan years (beginning on or after such
first day) for which such percentage was at least 60
percent,
``(2) any period the plan sponsor is in bankruptcy, and
``(3) 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).
In the case of a plan which is in at-risk status, paragraph (1) shall
be applied by substituting `80 percent' for `60 percent' each place it
appears.
``(c) Nonqualified Deferred Compensation Plan.--For purposes of
this section--
``(1) In general.--The term `nonqualified deferred
compensation plan' means any plan that provides for the
deferral of compensation, other than--
``(A) a qualified employer plan, and
``(B) any bona fide vacation leave, sick leave,
compensatory time, disability pay, or death benefit
plan.
``(2) Qualified employer plan.--The term `qualified
employer plan' means--
``(A) any plan, contract, pension, account, or
trust described in subparagraph (A) or (B) of section
219(g)(5) of the Internal Revenue Code of 1986 (without
regard to subparagraph (A)(iii)),
``(B) any eligible deferred compensation plan
(within the meaning of section 457(b)) of such Code,
and
``(C) any plan described in section 415(m) of such
Code.
``(3) Plan includes arrangements, etc.--The term `plan'
includes any agreement or arrangement, including an agreement
or arrangement that includes one person.
``(d) Other Definitions.--For purposes of this section--
``(1) Applicable covered employee.--
``(A) In general.--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.
``(B) Covered employee.--The term `covered
employee' has the meaning given such term by section
162(m)(3) of the Internal Revenue Code of 1986.
``(2) Controlled group.--The term `controlled group' has
the meaning given such term by section 302(d)(3).''.
(2) Enforcement.--
(A) In general.--Section 502(a) of the Employee
Retirement Income Security Act (29 U.S.C. 1132(a)), as
amended by this Act, is amended--
(i) by striking ``or'' at the end of
paragraph (9), by striking the period at the
end of paragraph (10) and inserting ``; or'',
and by adding at the end the following new
paragraph:
``(11) by a fiduciary of a defined benefit plan which is a
single-employer plan against--
``(A) a plan sponsor, a member of a controlled
group which includes the plan sponsor, an applicable
covered employee, or a person holding assets which are
part of a nonqualified deferred compensation plan to
recover on behalf of the plan--
``(i) assets which were set aside or
transferred in violation of section 409A(b)(3)
of the Internal Revenue Code of 1986 (and any
earnings properly allocable to the assets); or
``(ii) amounts equivalent to the assets and
earnings described in clause (i); or
``(B) a plan sponsor, or a member of a controlled
group which includes the plan sponsor, to compel the
production of records the fiduciary is entitled to
under section 306.''; and
(ii) by adding at the end the following new
flush sentence:
``For purposes of paragraph (11), any term used in such paragraph which
is also used in section 306 shall have the meaning given such term by
section 306.''.
(B) Awarding of fees.--Section 502(g) of such Act
(29 U.S.C. 1132(g)) is amended by adding at the end the
following new paragraph:
``(3) Actions to recover assets transferred to nonqualified
deferred compensation plans.--If, in any action under
subsection (a)(11) by a fiduciary for or on behalf of a plan to
enforce section 306 of this Act and section 409A(b)(3), a
judgment is awarded in favor of the plan, the court may, in
addition to any other amount, award the plan reasonable
attorney's fees and costs of the action, to be paid by the
defendant''.
(3) Clerical amendment.--The table of contents in section 1
of such Act, as amended by this Act, is amended by adding at
the end the following new item:
``Sec. 306. Restrictions on funding of nonqualified deferred
compensation plans.''.
(b) Amendments of Internal Revenue Code.--
(1) In general.--Subsection (b) of section 409A of the
Internal Revenue Code of 1986 (providing rules relating to
funding) is amended by redesignating paragraphs (3) and (4) as
paragraphs (4) and (5), respectively, and by inserting after
paragraph (2) the following new paragraph:
``(3) Employers of underfunded or terminated defined
benefit plans.--During any restricted period--
``(A) a plan sponsor of a defined benefit plan
which is a single-employer plan, or
``(B) any member of a controlled group which
includes such sponsor,
shall not directly or indirectly transfer assets, or directly
or indirectly otherwise reserve assets, in a trust (or other
arrangement determined by the Secretary) for purposes of paying
deferred compensation of an applicable covered employee under a
nonqualified deferred compensation plan of the plan sponsor or
member. Any assets transferred or reserved in violation of the
preceding sentence 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. For purposes
of this paragraph, any term used in this paragraph which is
also used in section 306 of the Employee Retirement Income
Security Act of 1974 shall have the meaning given such term by
such section.''.
(2) Conforming amendments.--Paragraphs (4) and (5) of
section 409A(b) of such Code, as redesignated by subsection (a)
of this subsection, are each amended by striking ``paragraph
(1) or (2)'' each place it appears and inserting ``paragraph
(1), (2), or (3)''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers or other reservation of assets after December 31,
2006.
SEC. 304. MODIFICATION OF PENSION FUNDING REQUIREMENTS FOR PLANS
SUBJECT TO CURRENT TRANSITION RULE.
(a) Plan Year Before New Funding Rules.--Section 769(c)(3) of the
Retirement Protection Act of 1994, as added by section 201 of the
Pension Funding Equity Act of 2004, is amended by striking ``and 2005''
and inserting ``, 2005, and 2006''.
(b) Plan Years After New Funding Rules.--
(1) In general.--In the case of a plan that--
(A) was not required to pay a variable rate premium
for the plan year beginning in 1996,
(B) 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
(C) 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 2006.
(2) Modified rules.--The rules described in this subsection
are as follows:
(A) For purposes of--
(i) determining unfunded benefits under
section 4006(a)(3)(E)(ii) of the Employee
Retirement Income Security Act of 1974, and
(ii) determining any present value or
making any computation under section 412 and
section 430 of the Internal Revenue Code of
1986 and sections 302 and 303 of such Act,
the mortality table shall be the mortality table used by the
plan.
(B) Notwithstanding section 303(f)(4) of such Act
or 430(f)(4) of such Code, for purposes of section
303(c)(4)(A)(ii) of such Act and 430(c)(4)(A)(ii) of
such Code, the value of plan assets shall not be
reduced by the amount of the prefunding balance if,
pursuant to a binding written agreement with the
Pension Benefit Guaranty Corporation entered into
before January 1, 2006, the prefunding balance is not
available to reduce the minimum required contribution
for the plan year.
(3) Definitions.--Any term used in this section which is
also used in section 303 of such Act or section 430 of such
Code shall have the meaning provided such term in such section.
(4) Conforming amendment.--Section 769 of the Retirement
Protection Act of 1994 is amended by striking subsection (c).
(5) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after 2006.
TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS
SEC. 401. INCREASES IN PBGC PREMIUMS.
(a) Flat-Rate Premiums.--
(1) In general.--Section 4006(a)(3)(A)(i) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)(A)(i)) is amended to read as follows:
``(i) in the case of a single-employer
plan, an amount equal to--
``(I) for plan years beginning
after December 31, 1990, and before
January 1, 2006, $19, or
``(II) for plan years beginning
after December 31, 2005, the amount
determined under subparagraph (H),
plus the additional premium (if any) determined
under subparagraph (E) for each individual who
is a participant in such plan during the plan
year;''.
(2) Amount of premium after 2005.--Section 4006(a)(3) of
such Act (29 U.S.C. 1306(a)(3)), as amended by sections 406 and
407, is amended by adding at the end the following:
``(H) Amount of premium.--
``(i) In general.--The amount determined
under this subparagraph is the greater of $30
or in the case of plan years beginning after
December 31, 2006, the adjusted amount
determined under clause (ii).
``(ii) Adjusted amount.--The adjusted
amount determined under this clause is the
product derived by multiplying $30 by the ratio
of--
``(I) the contribution and benefit
base (determined under section 230 of
the Social Security Act) in effect in
the calendar year in which the plan
year begins, to
``(II) the contribution and benefit
base in effect in 2006.
``(iii) Rounding.--If the amount determined
under clause (ii) is not a multiple of $1, such
product shall be rounded to the nearest
multiple of $1.''.
(b) Risk-Based Premiums.--
(1) Conforming amendments related to funding rules for
single-employer plans.--Section 4006(a)(3)(E) of such Act is
amended by striking clauses (iii) and (iv) and inserting the
following:
``(iii)(I) For purposes of clause (ii), except as provided in
subclause (II), the term `unfunded benefits' means, for a plan year,
the amount which would be the plan's funding shortfall (as defined in
section 303(c)(4)) if the value of plan assets of the plan were equal
to the fair market value of such assets.
``(II) The interest rate used in valuing benefits for purposes of
subclause (I) shall be equal to the first, second, or third segment
rate which would be determined under section 303(h)(2)(C) if section
303(h)(2)(D) were applied by using the yields on investment grade
corporate bonds with varying maturities rather than the average of such
yields for a 12-month period.''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply with respect to plan years beginning after 2006.
(c) Flat-Rate Premium Adjustment.--
(1) In general.--Beginning in 2011, and every 5 years
thereafter, the Board of Directors of the Pension Benefit
Guaranty Corporation under title IV of the Employee Retirement
Income Security Act (29 U.S.C. 1301 et seq.) shall submit to
Congress a report that describes any recommendations for
adjusting the premium rate payable to the Corporation described
under section 4006(a)(3)(A)(i) of such Act (as amended by
subsection (a)).
(2) Considerations.--In developing the report described
under paragraph (1), the Corporation shall consider--
(A) the national average wage index (as defined in
section 209(k)(1) of the Social Security Act (42 U.S.C.
409(k)(1)));
(B) the finances of the Corporation as of the date
of such report and an actuarial evaluation of the
expected operations and status of the funds established
under section 4005 of such title IV (29 U.S.C. 1305)
for the 5 years succeeding such date;
(C) the impact of any increases in such premium
rate on plan sponsors subject to such title IV; and
(D) such other factors determined relevant by the
Corporation.
SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING AGREEMENTS TO PREVENT
PLAN TERMINATIONS.
(a) Authority To Enter Into Agreements.--
(1) Distress terminations.--Section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)) is
amended by adding at the end the following:
``(4) Alternative funding agreements.--
``(A) In general.--If the corporation determines
that--
``(i) a plan meets the requirements for a
distress termination under this subsection
without regard to an alternative funding
agreement under section 4047(a), and
``(ii) the termination of the plan would
not be necessary if such an agreement were
entered into,
the corporation may request that the Secretary of the
Treasury, in consultation with the corporation, enter
into such an agreement with the contributing sponsors
under the plan.
``(B) Early action initiatives.--Subject to the
limitations in subsection (a)(3), if--
``(i) the corporation determines that it is
reasonable to believe that a plan may be
subject to a distress termination within 6
months unless action is taken, the corporation
may request that the Secretary of the Treasury,
in consultation with the corporation, enter
into an alternative funding agreement under
section 4047(a); and
``(ii) the corporation, upon the request of
the contributing sponsor of a plan or other
person, determines that it is reasonable to
believe that a plan may be subject to a
distress termination within 2 years unless
action is taken, the corporation may request
that the Secretary of the Treasury, in
consultation with the corporation, enter into
an alternative funding agreement under section
4047(a).''.
(2) Involuntary terminations.--Section 4042 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1342) is
amended by adding at the end the following:
``(i) Alternative Funding Agreements.--If--
``(1) the corporation determines that it is reasonable to
believe that a plan will meet the requirements for an
involuntary termination under this section without regard to an
alternative funding agreement under section 4047(a) within 6
months unless action is taken, or
``(B) the corporation, upon the request of the contributing
sponsor of a plan or other person, determines that it is
reasonable to believe that a plan may be subject to an
involuntary termination within 2 years unless action is taken,
and such a termination would not be necessary if such an agreement is
entered into, the corporation may request that the Secretary of the
Treasury, in consultation with the corporation, enter into an
alternative funding agreement under section 4047(a).''.
(b) Alternative Funding Schedules To Prevent Plan Termination.--
(1) In general.--Section 4047 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1347) is amended by--
(A) striking the section heading and all that
follows through ``Whenever'' and inserting--
``SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PREVENT TERMINATION;
RESTORATION OF TERMINATED PLANS.
``(a) Alternative Funding Agreements.--
``(1) In general.--If the requirements of section
4041(c)(4) or 4042(i) are met with respect to any plan, the
Secretary of the Treasury, in consultation with the
corporation, may enter into an alternative funding agreement
with the contributing sponsors under the plan that meets the
requirements of this subsection.
``(2) Other requirements.--An alternative funding agreement
may be entered into by the Secretary of the Treasury, in
consultation with corporation, only if--
``(A) such Secretary finds the agreement to be in
the best interests of the participants and
beneficiaries; and
``(B) the agreement meets the requirements set
forth by such Secretary in regulations.
``(3) Alternative funding agreement.--
``(A) In general.--An agreement meets the
requirements of this subsection if the agreement--
``(i) provides for an additional
amortization schedule for a period not to
exceed 10 years,
``(ii) requires the plan to pay at the time
the agreement is entered into any professional
fees or other expenses incurred by the
Secretary of the Treasury or the corporation in
connection with the agreements,
``(iii) requires approval by the
corporation before the contributing sponsor
establishes or maintains any other defined
benefit plan other than any multiemployer plan
that covers a substantial number of employees
who are covered by the plan subject to the
agreement or who perform substantially the same
type of work with respect to the same business
operations as employees covered by such plan,
and
``(iv) provides for a termination date, or
a schedule of termination dates, for the
purpose of the guarantee under section 4022, to
apply if a plan terminates during the period
that the agreement is in effect.
``(B) Other conditions.--Notwithstanding any other
provision of this Act, an agreement meeting the
requirements of this subsection may provide--
``(i) for restrictions on, or the
elimination of, future accruals, but only to
the extent that such restrictions or
eliminations would have been permitted under
section 204(g) or section 411(d)(6) of the
Internal Revenue Code of 1986 if they had been
implemented by a plan amendment adopted
immediately before the effective date of the
agreement,
``(ii) that the contributing sponsors will
provide security or other collateral in such
form and amount as specified in the agreement,
``(iii) conditions under which the plan
could be terminated in a standard termination
under section 4041(b) or conditions under which
accruals to which clause (i) applies could
resume in the future, and
``(iv) for such other terms and conditions
as the Secretary of the Treasury, in
consultation with the corporation, determines
necessary to protect the interests of the
corporation.
``(C) Employee requirements.--
``(i) In general.--An agreement meets the
requirements of this subsection only if--
``(I) at least 60 days before the
agreement is to take effect the
contributing sponsors notify affected
parties (other than the corporation) of
the terms of the agreement and its
effect on such parties, and
``(II) each employee organization
representing participants in the plan
approves the agreement before it takes
effect.
``(ii) Form and manner of notice.--The
notice under clause (i) shall be written in a
manner calculated to be understood by the
average plan participant and may be provided to
a person designated, in writing, by the person
to which it would otherwise be provided. Such
notice 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.
``(4) Coordination with minimum funding requirements.--Any
alternative funding schedule under an agreement meeting the
requirements under this subsection shall supersede the minimum
funding requirements of this Act and the Internal Revenue Code
of 1986. For purposes of applying this Act or such Code, any
contribution required under such schedule shall be treated in
the same manner as contributions required under section 302 of
this Act and section 412 of such Code.
``(b) Restoration of Terminated Plans.--Whenever''.
(2) Conforming amendment.--The table of contents for title
IV of such Act is amended by striking the item relating to
section 4047 and inserting the following:
``4047. Alternative funding schedules to prevent terminations;
restoration of terminated plans.''.
(c) Amendments to Other Provisions.--
(1) Qualification requirement.--Section 401(a) of the
Internal Revenue Code of 1986, as amended by sections 115 and
701 of this Act, is amended by inserting after paragraph (35)
the following new paragraph:
``(36) Successor plans to certain plans.--If--
``(A) an alternative funding agreement described in
section 4047(a) of the Employee Retirement Income
Security Act of 1974 is in effect with respect to any
plan, and
``(B) the 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 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 this subsection unless all
benefit obligations of the plan to which the alternative
funding agreement applies have been satisfied. For purposes of
this paragraph, the term `successor employee' means any
employee who is or was covered by the plan to which the
alternative funding agreement applies and any employee who
performs substantially the same type of work with respect to
the same business operations as an employee covered by such
plan.''.
(2) Limitation on deductions under certain plans.--Section
404(a)(7)(C) of the Internal Revenue Code of 1986 is amended by
adding at the end the following:
``(iii) Plans subject to alternative
funding agreements.--This paragraph shall not
apply to any plan for a plan year if an
alternative funding agreement described in
section 4047(a) of the Employee Retirement
Income Security Act of 1974 is in effect for
such year.''.
(d) Effective Date.--The amendments made by this section shall take
effect on the date of enactment of this Act.
SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAINTAINED BY COMMERCIAL
AIRLINES THAT ARE AMENDED TO CEASE FUTURE BENEFIT
ACCRUALS.
(a) In General.--If an election is made to have this section apply
to an eligible plan--
(1) in the case of any applicable plan year beginning
before January 1, 2007, 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 (d) for the
plan for the plan year, and
(2) in the case of any applicable plan year beginning on or
after January 1, 2007, 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 (d)
for the plan for the plan year.
(b) Eligible Plan.--For purposes of this section--
(1) In general.--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--
(A) which is sponsored by an employer--
(i) which is a commercial airline passenger
airline, or
(ii) the principal business of which is
providing catering services to a commercial
passenger airline, and
(B) with respect to which the requirements of
paragraphs (2) and (3) are met.
(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 disregarded.--
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 paragraph
unless, 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 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 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) if the participant--
(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) Elections and Related Terms.--
(1) In general.--A plan sponsor shall make the election
under subsection (a) at such time and in such manner as the
Secretary of the Treasury may prescribe. Except as provided in
subsection (h)(5), such election, once made, may be revoked
only with the consent of such Secretary.
(2) Years for which election made.--
(A) In general.--The plan sponsor may select the
first plan year to which the election under subsection
(a) applies from among plan years ending after the date
of the election. The election shall apply to such plan
year and all subsequent years.
(B) Election of new plan year.--The plan sponsor
may specify a new plan year in the election under
subsection (a) and the plan year of the plan may be
changed to such new plan year without the approval of
the Secretary of the Treasury.
(3) Applicable plan year.--The term ``applicable plan
year'' means each plan year to which the election under
subsection (a) applies under paragraph (1).
(d) Minimum Required Contribution.--
(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
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 20-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) 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) the rate of interest under section 302(b) of
such Act and section 412(b) of such Code, as so in
effect, 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 (a), 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 subsection (a)(1) for
the eligible plan for such applicable plan year shall be
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
the minimum required contribution between such plans for the
applicable plan year and direct the appropriate reallocation
between the plans of any contributions for the applicable plan
year.
(e) Funding Standard Account and Prefunding Balance.--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 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.
(f) Amendments to Other Provisions.--
(1) Qualification requirement.--Section 401(a)(36) of the
Internal Revenue Code of 1986, as added by section 402 of this
Act, is amended by adding at the end the following: ``This
paragraph shall also apply to any plan during any period during
which an amortization schedule under section 403 of the Pension
Security and Transparency Act of 2005 is in effect.''
(2) PBGC liability limited.--Section 4022 of the Employee
Retirement Income Security Act of 1974, as amended by this Act,
is amended by adding at the end the following new subsection:
``(h) Special Rule for Plans Electing Certain Funding
Requirements.--During any period in which an election by a plan under
section 403 of the Pension Security and Transparency Act of 2005 is in
effect, then this section and section 4044(a)(3) shall be applied by
treating the first day of the first applicable plan year as the
termination date of the plan. This subsection shall not apply to any
plan for which an election under section 403(h) of such Act is in
effect.''.
(3) Limitation on deductions under certain plans.--Section
404(a)(7)(C)(iii) of the Internal Revenue Code of 1986, as
added by this Act, is amended by adding at the end the
following new sentence: ``This clause shall also apply to any
plan for a plan year if an election under section 403 of the
Pension Security and Transparency Act of 2005 is in effect for
such year.''
(4) Notice.--In 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.
(g) Special Rules for Termination of Eligible Plans.--During any
period an election is in effect under this section with respect to an
eligible plan, the Pension Benefit Guaranty Corporation shall, before
it seeks or approves a termination of such plan under section 4041(c)
or 4042 of the Employee Retirement Income Security Act of 1974--
(1) make a determination under section 4041(c)(4) or
4042(i) of such Act whether the termination would be necessary
if the Secretary of the Treasury were to enter into an
agreement under section 4047(a) of such Act which provides an
alternative funding agreement to replace the amortization
schedule under this section, and
(2) if the Corporation determines such an agreement would
make such termination unnecessary, take all necessary actions
to ensure the agreement is entered into.
The Pension Benefit Guaranty Corporation shall make the determination
under paragraph (1) within 90 days of receiving all information needed
in connection with a request for a termination (or if no such request
is made, within 90 days of consideration of the termination by the
Corporation).
(h) Certain Benefit Accruals and Increases Allowed if Additional
Contributions Made To Cover Costs.--
(1) In general.--If an employer elects the application of
this subsection--
(A) the requirements of paragraphs (2) and (3) of
subsection (b) shall not apply with respect to any
eligible plan maintained by the employer and specified
in the election, and
(B) the minimum required contribution under
subsection (d) for any plan year with respect to the
plan shall be increased by the amounts described in
paragraphs (2) and (3).
Any liabilities and assets taken into account under this
subsection shall not be taken into account in determining the
unfunded liability of the plan for purposes of subsection (d).
(2) Current funding of accruals and increases.--The amount
determined under this paragraph for any plan year is the target
normal cost which would occur under section 303(b) of such Act
and 430(b) of such Code if--
(A) any benefit accrual, or benefit increase taking
effect, during the plan year by reason of this
subsection were treated as having been accrued or
earned during the plan year, and
(B) the plan were treated as if it were in at-risk
status.
(3) Funding must be maintained.--The amount determined
under this paragraph for any plan year is the amount of any
increase in the shortfall amortization charge which would occur
under section 303(c) of such Act and 430(c) of such Code if--
(A) the funding target were determined by only
taking into account benefits to which paragraph (2)
applied for preceding plan years,
(B) the only assets taken into account were the
contributions required under this paragraph and
paragraph (2) for preceding plan years (and any
earnings thereon),
(C) the amortization period included only the plan
year,
(D) the transition rule under section 303(c)(4)(B)
of such Act and section 430(c)(4)(B) of such Code did
not apply, and
(E) the plan were treated as if it were in at-risk
status.
(4) Special rules for years before 2007.--Notwithstanding
any other provision of this Act, in the case of an applicable
plan year of an eligible plan to which this subsection applies
which begins before January 1, 2007, in determining the amounts
described in paragraphs (2) and (3) for such plan year--
(A) the provisions of, and amendments made by,
sections 101, 102, 111, and 112 shall apply to such
plan year, except that
(B) the interest rate used under section 303 of
such Act and section 430 of such Code for purposes of
applying paragraphs (2) and (3) to such plan year shall
be the interest rate determined under section 302(b)(5)
of such Act and section 412(b)(5) of such Code, as in
effect for plan years beginning in 2005.
(5) Election out of section.--An employer maintaining an
eligible plan to which this subsection applies may make a one-
time election with respect to any applicable plan year not to
have this section apply to such plan year and all subsequent
plan years. Subject to subsection (d)(2), the minimum required
contribution under section 303 of such Act and 430 of such Code
for all such plan years shall be determined without regard to
this section.
(i) Exclusion of Certain Employees From Minimum Coverage
Requirements.--
(1) In general.--Section 410(b)(3) of such Code 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.
(j) Effective Date.--Except as otherwise provided in this section,
the amendments made by this section shall apply to plan years ending
after the date of the enactment of this Act.
SEC. 404. 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 a benefit is payable by reason of--
``(A) a plant shutdown or similar event; or
``(B) any event other than attainment of any age,
performance of any service, receipt or derivation of
any compensation, or the occurrence of death or
disability,
this section shall be applied as if a plan amendment had been
adopted on the date such event occurred that provides for the
payment of such benefit.''.
(b) Effective Date.--The amendment made by this section shall apply
to benefits that become payable as a result of a plant shutdown or
other similar event, as such terms are used in the amendment made by
subsection (a), that occurs after July 26, 2005.
SEC. 405. RULES RELATING TO BANKRUPTCY OF EMPLOYER.
(a) Guarantee.--Section 4022 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322), as amended by this Act, is
amended by adding at the end the following:
``(i) 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, 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, then subsection (a)(3) shall be
applied by treating the date such petition was filed as the termination
date of the plan.''.
(c) 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. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EMPLOYERS.
(a) In General.--Subparagraph (A) of section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)(A)) is amended--
(1) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by a
small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(v) in the case of a new single-employer plan (as defined
in subparagraph (F)) maintained by a small employer (as so
defined) for the plan year, $5 for each individual who is a
participant in such plan during the plan year.''
(b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)) is amended by adding at the end the following new
subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer plan
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the
sponsor or any member of such sponsor's controlled group (or any
predecessor of either) did not establish or maintain a plan to which
this title applies with respect to which benefits were accrued for
substantially the same employees as are in the new single-employer
plan.
``(ii)(I) For purposes of this paragraph, the term `small employer'
means an employer which on the first day of any plan year has, in
aggregation with all members of the controlled group of such employer,
100 or fewer employees.
``(II) In the case of a plan maintained by two or more contributing
sponsors that are not part of the same controlled group, the employees
of all contributing sponsors and controlled groups of such sponsors
shall be aggregated for purposes of determining whether any
contributing sponsor is a small employer.''
(c) Effective Date.--The amendments made by this section shall
apply to plans first effective after December 31, 2005.
SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS.
(a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)),
as amended by this Act, is amended by adding at the end the following
new clause:
``(iv) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an amount equal
to the product of the amount determined under clause (ii) and the
applicable percentage. For purposes of this clause, the term
`applicable percentage' means--
``(I) 0 percent, for the first plan year.
``(II) 20 percent, for the second plan year.
``(III) 40 percent, for the third plan year.
``(IV) 60 percent, for the fourth plan year.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in
section 3(35)) maintained by a contributing sponsor shall be treated as
a new defined benefit plan for each of its first 5 plan years if,
during the 36-month period ending on the date of the adoption of the
plan, the sponsor and each member of any controlled group including the
sponsor (or any predecessor of either) did not establish or maintain a
plan to which this title applies with respect to which benefits were
accrued for substantially the same employees as are in the new plan.''
(b) 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--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'', and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(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.''
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans first effective after December 31, 2005.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2005.
SEC. 408. 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) 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) 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. 409. 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.
``(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)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan
terminations--
(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 proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on January 1, 2006.
SEC. 410. 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 (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 (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--
``(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) 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 the date which is 30
days after the date of enactment of this section.
SEC. 411. 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 single-employer
plan which is a defined benefit plan being
maintained by an employer which is not a member
of the same controlled group of which the
employer maintaining the plan before such
transaction or series of transactions was a
member,
``(ii) the corporation treats the
transaction or series of transactions as
resulting in a standard termination to which
this subsection applies, and
``(iii) the plan is fully funded,
then the interest rate used in determining whether the
plan is sufficient for benefit liabilities for purposes
of this subsection shall be 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 30 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, 2007, 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 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.''
(b) 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. 412. EFFECT OF TITLE.
The decreases in Federal outlays resulting from the enactment of
this title, and the amendments made by this title, shall be treated as
in lieu of the decreases in Federal outlays which--
(1) resulted from amendments made to title IV of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301
et seq.); and
(2) were contained in an Act enacted pursuant to the
concurrent resolution on the budget for fiscal year 2006.
SEC. 413. AGE REQUIREMENT FOR EMPLOYERS.
(a) Single-Employer Plan Benefits Guaranteed.--Section 4022(b) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1322(b))
is amended in the flush matter following paragraph (3), by adding at
the end the following: ``If, at the time of termination of a plan under
this title, regulations prescribed by the Federal Aviation
Administration require an individual to separate from service as a
commercial airline pilot after attaining any age before age 65,
paragraph (3) shall be applied to an individual who is a participant in
the plan by reason of such service by substituting such age for age
65.''.
(b) Multiemployer Plan Benefits Guaranteed.--Section 4022B(a) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1322b(a)) is amended by adding at the end the following: ``If, at the
time of termination of a plan under this title, regulations prescribed
by the Federal Aviation Administration require an individual to
separate from service as a commercial airline pilot after attaining any
age before age 65, this subsection shall be applied to an individual
who is a participant in the plan by reason of such service by
substituting such age for age 65.''.
(c) Effective Date.--The amendments made by this section shall
apply to benefits payable on or after the date of enactment of this
Act.
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 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 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 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 (I) of section 4006(a)(3)(E)(iii) and
the interest rate under subclause (II) of such
section, 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,
``(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
``(II) 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 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
appropriate, adopted under section 305
and the actuarial and financial data
that demonstrate any action taken by
the plan toward fiscal improvement,
``(vi) 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,
``(vii) in the case of any plan amendments,
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,
``(viii)(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 and any potential benefit
reductions and suspensions (and the potential
effects of such limitations, reductions, and
suspensions on the plan), and
``(ix) a general description of the
benefits under the plan which are eligible to
be guaranteed by the Pension Benefit Guaranty
Corporation, along with an explanation of the
limitations on the guarantee and the
circumstances under which such limitations
apply.
``(C) Other information.--Each notice under
paragraph (1) shall include--
``(i) 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 90 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).
``(4) Form and manner.--Any notice under paragraph (1)--
``(A) shall be provided in a form and manner
prescribed in regulations of the Secretary,
``(B) shall be written in a manner so as to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, or
other appropriate form to the extent such form is
reasonably accessible to persons to whom the notice is
required to be provided.''.
(b) Model Notice.--Not later than 180 days after the date of the
enactment of this Act, the Secretary of Labor shall publish a model
version of the notice required by section 101(f) of the Employee
Retirement Income Security Act of 1974. The Secretary of Labor may
promulgate any interim final rules as the Secretary determines
appropriate to carry out the provisions of this subsection.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
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) 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) In general.--Each administrator of a multiemployer
plan shall, upon written request, furnish to any plan
participant 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 sensitivity testing) received by the plan
for any plan year which has been in the plan's
possession for at least 30 days, and
``(B)(i) 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, or
``(ii) at the discretion of the person submitting
the written request, a copy of a quarterly summary of
the financial reports described clause (i).
``(2) Compliance.--Information required to be provided
under paragraph (1) --
``(A) shall be provided to the requesting
participant, beneficiary, or employer within 30 days
after the request in a form and manner prescribed in
regulations of the Secretary,
``(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 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) Regulations.--The Secretary shall prescribe regulations
under section 101(k)(2) of the Employee Retirement Income
Security Act of 1974 (added by paragraph (1)) not later than
270 days 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)) 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.--
``(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) shall be provided to the requesting employer
within--
``(i) 180 days after the request in a form
and manner prescribed in regulations of the
Secretary, 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.--Section
204(h)(1) of such Act (29 U.S.C. 1054(h)(1)) is amended by inserting at
the end before the period ``and to each employer who has an obligation
to contribute to the plan.''.
(d) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
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) General information.--With respect to any defined
benefit plan, an annual report under this section for a plan
year shall include the following:
``(A) In any case in which any liabilities to
participants or their beneficiaries under such plan as
of the end of such plan year consist (in whole or in
part) of liabilities to such participants and
beneficiaries under 2 or more pension plans as of
immediately before such plan year, 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) 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 notice 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 employer contributions have been made
to the plan for such plan year and for each of the 2
preceding plan years. For purposes of this
subparagraph, the term `employer contribution' means,
in connection with a participant, a contribution made
by an employer as an employer of such participant.
``(D) The ratio 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) or section 431(d) of the
Internal Revenue Code of 1986 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 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 funding ratio 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) Guidance by secretary of labor.--
(A) In general.--Not later than 180 days after the
date of enactment of this Act, the Secretary of Labor
shall publish guidance to assist multiemployer defined
benefit plans to--
(i) identify and enumerate plan
participants for whom there is no employer with
an obligation to make an employer contribution
under the plan; and
(ii) report such information under section
103(f)(2)(D) of the Employee Retirement Income
Security Act of 1974 (as added by this
section).
(B) Waiver of requirement.--The Secretary of Labor
shall waive the requirement under section 103(f)(2)(D)
of such Act (as added by this section) for the
construction and entertainment industries.
(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) Form and Manner of Report.--Section 104(b)(3) of such Act (29
U.S.C. 1024(b)(3)) is amended by--
(1) striking ``(3) Within'' and inserting--
``(A) In general.--Within''; and
(2) adding at the end the following:
``(B) Form of report.--The material provided
pursuant to subparagraph (A) to summarize the latest
annual report shall be written in a manner calculated
to be understood by the average plan participant.
(d) Furnishing Summary Plan Information to Employers and Employee
Representatives of Multiemployer Plans.--
(1) In general.--Section 104 of such Act (29 U.S.C. 1024)
is amended--
(A) in the header, by striking ``participants'' and
inserting ``participants and certain employers'';
(B) redesignating subsection (d) as subsection (e);
and
(C) inserting after subsection (c) the following:
``(d) Furnishing Summary Plan Information to Employers and Employee
Representatives of Multiemployer Plans.--
``(1) In general.--With 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, employer with an obligation to
contribute to the plan, and the Pension Benefit Guaranty
Corporation, 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 employer contributions (which, for
purposes of this paragraph, means, in connection with a
participant, a contribution made by an employer as an
employer of such participant) have been made to the
plan 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 appropriate, adopted
under section 305 and the actuarial and
financial data that demonstrate any action
taken by the plan toward fiscal improvement;
``(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, as reported on the annual report for the
plan year to which the report under this subsection
relates;
``(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;
``(J) a description as to whether the plan--
``(i) sought or received an amortization
extension under section 304(d) or section
431(d) of the Internal Revenue Code of 1986 for
such plan year;
``(ii) used the shortfall funding method
(as such term is used in section 305) for such
plan year; or
``(iii) was in critical or endangered
status under section 305 for such plan year;
and
``(K) 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 annual
report, 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 report 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 section.--Nothing in this section waives
any other provision under this title requiring plan
administrators to provide, upon request, information to
employers that have an obligation to contribution under the
plan.''.
(e) Model Form.--Not later than 270 days after the date of the
enactment of this Act, the Secretary of Labor shall publish a model
form for providing the statements, schedules, and other material
required to be provided under section 104(b)(3) of the Employee
Retirement Income Security Act of 1974, as amended by this section. The
Secretary of Labor may promulgate any interim final rules as the
Secretary determines appropriate to carry out the provisions of this
subsection.
(f) Five-year Report With Respect to Multiemployer Plans.--Section
4022A(f) of such Act (29 U.S.C. 1322a(f)) is amended by adding at the
end the following:
``(6) Not later than 5 years after the date of the
enactment of the Pension Security and Transparency Act of 2005,
and at least every fifth year thereafter, the corporation shall
submit to Congress a report that contains a description of the
fiscal conditions of the multiemployer pension plan system as
of the date of such report based on the information submitted
to the corporation under section 104(d).''.
(g) Conforming Amendment.--Title IV of such Act (29 U.S.C. 1301 et
seq.) is amended by striking section 4011.
(h) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
(2) Special rule.--Notwithstanding the provisions of
paragraph (1), the requirement under section 103(f)(2)(D) of
the Employee Retirement Income Security Act (as added by this
section) shall apply to plan years beginning after December 31,
2007.
SEC. 504. TIMING OF ANNUAL REPORTING REQUIREMENTS.
(a) Filing After 285 Days After Plan Year Only in Cases of
Hardship.--Section 104(a)(1) of such Act (29 U.S.C. 1024(a)(1)) is
amended by inserting after the first sentence the following new
sentence: ``In the case of a pension plan, the Secretary may extend the
deadline for filing the annual report for any plan year past 285 days
after the close of the plan year only on a case by case basis and only
in cases of hardship, in accordance with regulations which shall be
prescribed by the Secretary.''.
(b) Internet Display of Information.--Section 104(b) of such Act
(29 U.S.C. 1024(b)) is amended by adding at the end the following:
``(5) Identification and basic plan information and actuarial
information included in the annual report for any plan year shall be
filed with the Secretary in an electronic format which accommodates
display on the Internet, in accordance with regulations which shall be
prescribed by the Secretary. The Secretary shall provide for display of
such information included in the annual report, within 90 days after
the date of the filing of the annual report, on an Internet website
maintained by the Secretary and other appropriate media. Such
information shall also be displayed on any Internet website maintained
by the plan sponsor (or by the plan administrator on behalf of the plan
sponsor), in accordance with regulations which shall be prescribed by
the Secretary.''.
(c) Summary Annual Report Filed Within 30 Days After Deadline for
Filing of Annual Report.--Section 104(b)(3) of such Act (29 U.S.C.
1024(b)(3)), as amended by section 503, is amended by--
(1) striking ``(3)(A) Within 210 days after the close of
the fiscal year,'' and inserting ``(3)(A) 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'';
(2) striking ``the latest'' and inserting ``such''; and
(3) adding at the end the following
``(C) Date of internet display.--Display of the
summary annual report on the Internet website
maintained by the plan sponsor (or by the plan
administrator on behalf of the plan sponsor) by the
date required under subparagraph (A) shall be treated
as furnishing such report to each participant and
beneficiary receiving benefits under the plan by such
date, except that such report shall be furnished to
each such participant and beneficiary as soon as
practicable thereafter, and in no event later the 30
days after such date.''.
(d) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
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--
(1) in paragraph (1)--
(A) by striking ''(1) the aggregate'' and inserting
``(1)(A) the aggregate'';
(B) by striking the semicolon and inserting ``;
and'';
(C) by inserting after subparagraph (A) the
following:
``(B)(i) the aggregate funding targets attainment
percentage of the plan (as defined in subsection (d)) is less
than 90 percent; or
``(ii) any debt instrument of the plan sponsor or the plan
sponsor has received a rating described in subclause (I) or
(II) of section 303(i)(5)(A)(i);''; and
(2) by redesignating paragraphs (2) and (3) as paragraphs
(4) and (5), respectively, and by inserting before paragraph
(4) (as so redesignated) the following new paragraphs:
``(2) the aggregate funding targets attainment percentage
of the plan (as defined in subsection (d)) is less than 60
percent;
``(3)(A) the aggregate funding targets attainment
percentage of the plan (as defined in subsection (d)) is less
than 75 percent, and
``(B) the plan sponsor is in an industry with respect to
which the corporation determines that there is substantial
unemployment or underemployment and the sales and profits are
depressed or declining;''.
(b) 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) Value of plan assets.--The term `value of
plan assets' means the value of plan assets, as
determined under section 303(g)(3).
``(B) Funding target.--The term `funding target'
has the meaning provided under section 303(d)(1).
``(C) Funding target attainment percentage.--The
term `funding target attainment percentage' has the
meaning provided in section 303(d)(2).
``(D) Aggregate funding targets attainment
percentage.--The term `aggregate funding targets
attainment percentage' means, with respect to a
contributing sponsor for a plan year, the percentage,
taking into account all plans maintained by the
contributing sponsor and the members of its controlled
group as of the end of such plan year, which--
``(i) the aggregate total of the values of
plan assets, as of the end of such plan year,
of such plans, is of
``(ii) the aggregate total of the funding
targets of such plans, as of the end of such
plan year, taking into account only benefits to
which participants and beneficiaries have a
nonforfeitable right.
``(E) At-risk status.--The term `at-risk status'
has the meaning provided in section 303(i)(4).
``(e) Notice to Congress.--The Corporation shall, on an annual
basis, submit to the Committee on Health, Education, Labor, and
Pensions of the Senate and the Committee on Education and the Workforce
of the House of Representatives, a summary report of the information
submitted to the Corporation under this section.''.
(c) Effective Date.--The amendment made by this section shall apply
with respect to plan years beginning after 2006.
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 paragraph (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 the previous request.
``(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
sponsor 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 conjunction 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).
``(B) 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) Effective Date.--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.
SEC. 507. BENEFIT SUSPENSION NOTICE.
(a) Modification of Regulation.--The Secretary of Labor shall
modify the regulation under subparagraph (B) of section 203(a)(3) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(3)(B)) to provide that the notification required by such
regulation in connection with any suspension of benefits described in
such subparagraph--
(1) in the case of an employee who returns to service
described in section 203(a)(3)(B) (i) or (ii) of such Act after
commencement of payment of benefits under the plan, shall be
made during the first calendar month or the first 4- or 5-week
payroll period ending in a calendar month in which the plan
withholds payments, and
(2) in the case of any employee who is not described in
paragraph (1)--
(A) may be included in the summary plan description
for the plan furnished in accordance with section
104(b) of such Act (29 U.S.C. 1024(b)), rather than in
a separate notice, and
(B) need not include a copy of the relevant plan
provisions.
(b) Effective Date.--The modification made under this section shall
apply to plan years beginning after December 31, 2005.
SEC. 508. STUDY AND REPORT BY GOVERNMENT ACCOUNTABILITY OFFICE.
(a) In General.--The Comptroller General of the United States shall
conduct a study to determine the effectiveness of the enforcement of
provisions in the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 et seq.) and in other Federal laws designed to protect
pension plans and the assets and participants of such plan from fraud
and mismanagement, including excessive investment management fees,
violations of fiduciary duties under Title I of such Act, and the
quality of plan assets.
(b) Content of Study.--The study described in subsection (a) shall
include:
(1) An identification of which Federal departments and
agencies have responsibility for enforcement of these
provisions, including the recovery of lost plan assets due to
fraud and mismanagement.
(2) Identification of all administrative enforcement
powers, procedures, and strategies used by the Securities and
Exchange Commission that have the potential to improve the
Department of Labor's enforcement of the fiduciary provisions
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 et seq.).
(3) Identification of any statutory or other barriers that
restrict the Department of Labor's authority to use such
powers, procedures, and strategies identified in paragraph (2).
(4) An evaluation of whether giving additional
investigative or enforcement authority to the Pension Benefit
Guaranty Corporation or the Securities and Exchange Commission
would significantly improve enforcement of those provisions.
(5) An evaluation of the current authority of the Pension
Benefit Guaranty Corporation to bring actions to recover any
funds lost by pension plans due to violations of any fiduciary
standards under Title I of such Act or other Federal statutes.
(6) The impact that expanding any such authority by the
Pension Benefit Guaranty Corporation to bring such actions
would have on the Corporation's solvency.
(c) Report.--Not later than 6 months after the enactment of this
Act, the Comptroller General shall submit a report to Congress on the
study conducted under subsection (a) that includes such recommendations
for legislation or administrative action as the Comptroller General
determines are appropriate.
TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT
PENSION PLANS
SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINATION, CONVERSION,
AND PRESENT VALUE ASSUMPTION RULES.
(a) Application of Age Discrimination Prohibitions.--
(1) Amendment of erisa.--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:
``(5) Special rules for cash balance and other hybrid
defined benefit plans.--
``(A) In general.--A qualified cash balance plan
shall not be treated as violating the requirements of
paragraph (1)(H) merely because it may reasonably be
expected that the period over which interest credits
will be made to a participant's accumulation account
(or its equivalent) is longer for a younger
participant. This paragraph shall not apply to any plan
if the rate of any pay credit or interest credit to
such an account under the plan decreases by reason of
the participant's attainment of any age.
``(B) Qualified cash balance plan.--For purposes of
this paragraph--
``(i) In general.--The term `qualified cash
balance plan' means a cash balance plan which
meets the vesting requirement under clause (ii)
and the interest credit requirement under
clause (iii).
``(ii) Vesting requirements.--A plan meets
the requirements of this clause 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.
``(iii) Interest credits.--A plan meets the
requirements of this clause if the terms of the
plan provide that any interest credit (or
equivalent amount) for any plan year shall be
at a rate which--
``(I) is not less than the
applicable Federal mid-term interest
rate (as determined under section
1274(d)(1) of the Internal Revenue Code
of 1986), and
``(II) is not greater than the
greater of the rate determined under
subclause (I) or a rate equal to the
rate of interest on amounts invested
conservatively in long-term investment
grade corporate bonds.
``(iv) Determination of rates.--For
purposes of clause (iii)(II), the rate of
interest on amounts invested conservatively in
long-term investment grade corporate bonds
shall be determined by the Secretary of the
Treasury on the basis of 2 or more indices that
are selected periodically by the Secretary of
the Treasury. The Secretary of the Treasury
shall make publicly available the indices and
methodology used to determine the rate.
``(v) Variable rate of interest.--If the
interest credit rate under the plan is a
variable rate, the plan shall provide that,
upon the termination of the plan, 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.
``(C) Cash balance plan.--For purposes of this
paragraph, the term `cash balance plan' means a defined
benefit plan under which--
``(i) the accrued benefit is determined by
reference to the balance of a hypothetical
accumulation account, and
``(ii) pay credits and interest credits are
credited to such account.
``(D) Regulations to include similar or other
hybrid plans.--
``(i) Cash balance plan.--The Secretary of
the Treasury shall issue regulations which
include in the definition of cash balance plan
any defined benefit plan (or any portion of
such a plan) which has an effect similar to a
cash balance plan. Such regulations may provide
that if a plan sponsor represents in
communications to participants and
beneficiaries that a plan amendment results in
a plan being described in the preceding
sentence, such plan shall be treated as a cash
balance plan.
``(ii) Qualified cash balance plan.--The
Secretary of the Treasury may in the
regulations issued under clause (i) provide for
the treatment of a cash balance plan as a
qualified cash balance plan in cases where the
cash balance plan has an effect similar to the
qualified cash balance plan.''.
(2) Age discrimination in employment act.--Section 4(i)(2)
of the Age Discrimination of Employment Act of 1967 (29 U.S.C.
623(i)(2)) is amended--
(A) by inserting ``(A)'' after ``(2)'', and
(B) by adding at the end the following new
subparagraph:
``(B) A defined benefit plan which is treated as a qualified cash
balance plan for purposes of section 204(b)(5) of the Employee
Retirement Income Security Act of 1974 shall not be treated as
violating the requirements of paragraph (1)(A) merely because it may
reasonably be expected that the period over which interest credits will
be made under the plan to a participant's accumulation account (or its
equivalent) is longer for a younger participant. This subparagraph
shall not apply to any plan if the rate of any pay credit or interest
credit to such an account under the plan decreases by reason of the
participant's attainment of any age.''.
(3) Amendment of internal revenue code.--Section 411(b) of
the Internal Revenue Code of 1986 (relating to accrued benefit
requirements) is amended by adding at the end the following:
``(5) Special rules for cash balance and other hybrid
defined benefit plans.--
``(A) In general.--A qualified cash balance plan
shall not be treated as violating the requirements of
paragraph (1)(H) merely because it may reasonably be
expected that the period over which interest credits
will be made to a participant's accumulation account
(or its equivalent) is longer for a younger
participant. This paragraph shall not apply to any plan
if the rate of any pay credit or interest credit to
such an account under the plan decreases by reason of
the participant's attainment of any age.
``(B) Qualified cash balance plan.--For purposes of
this paragraph--
``(i) In general.--The term `qualified cash
balance plan' means a cash balance plan which
meets the vesting requirement under clause (ii)
and the interest credit requirement under
clause (iii).
``(ii) Vesting requirements.--A plan meets
the requirements of this clause 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.
``(iii) Interest credits.--A plan meets the
requirements of this clause if the terms of the
plan provide that any interest credit (or
equivalent amount) for any plan year shall be
at a rate which--
``(I) is not less than the
applicable Federal mid-term interest
rate (as determined under section
1274(d)(1)), and
``(II) is not greater than the
greater of the rate determined under
subclause (I) or a rate equal to the
rate of interest on amounts invested
conservatively in long-term investment
grade corporate bonds.
``(iv) Determination of rates.--For
purposes of clause (iii)(II), the rate of
interest on amounts invested conservatively in
long-term investment grade corporate bonds
shall be determined by the Secretary on the
basis of 2 or more indices that are selected
periodically by the Secretary. The Secretary
shall make publicly available the indices and
methodology used to determine the rate.
``(v) Variable rate of interest.--If the
interest credit rate under the plan is a
variable rate, the plan shall provide that,
upon the termination of the plan, 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.
``(C) Cash balance plan.--For purposes of this
paragraph, the term `cash balance plan' means a defined
benefit plan under which--
``(i) the accrued benefit is determined by
reference to the balance of a hypothetical
accumulation account, and
``(ii) pay credits and interest credits are
credited to such account.
``(D) Regulations to include similar or other
hybrid plans.--
``(i) Cash balance plan.--The Secretary
shall issue regulations which include in the
definition of cash balance plan any defined
benefit plan (or any portion of such a plan)
which has an effect similar to a cash balance
plan. Such regulations may provide that if a
plan sponsor represents in communications to
participants and beneficiaries that a plan
amendment results in a plan being described in
the preceding sentence, such plan shall be
treated as a cash balance plan.
``(ii) Qualified cash balance plan.--The
Secretary may in the regulations issued under
clause (i) provide for the treatment of a cash
balance plan as a qualified cash balance plan
in cases where the cash balance plan has an
effect similar to the qualified cash balance
plan.''.
(b) Rules Applicable to Accrued Benefits Under Converted Plans.--
(1) Amendment of erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following new paragraph:
``(6) Treatment of conversions to cash balance or other
hybrid plans.--
``(A) In general.--For purposes of this subsection,
an applicable plan amendment shall be treated as
reducing the accrued benefit of a participant if, under
the terms of the plan as in effect after the amendment,
the accrued benefit of any participant who was a
participant as of the effective date of the amendment
may at any time be less than the accrued benefit
determined under the method under subparagraph (B),
(C), or (D) which is specified in the plan and applies
uniformly to all participants. An applicable plan
amendment shall in no event be treated as meeting the
requirements of any such subparagraph if the conversion
described in subparagraph (G)(i) is into a cash balance
plan other than a qualified cash balance plan (as
defined in subsection (b)(5)(B)).
``(B) No wearaway.--
``(i) In general.--The accrued benefit
determined under this subparagraph is 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) except as provided in clause
(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.
``(ii) Required amounts for certain
periods.--Notwithstanding clause (i)(II), the
plan shall provide that either--
``(I) the accrued benefit of all
participants for each of the first 5
plan years to which the amendment
applies shall be equal to the greater
of the accrued benefit determined under
the terms of the plan as in effect both
before and after the amendment, or
``(II) the accrued benefit for
periods after the effective date of the
amendment of all participants who, as
of the effective date of the amendment,
had attained the age of 40 and had a
combined age and years of service under
the plan of not less than 55 shall be
determined under either of the methods
described in clause (iii) which is
selected by the plan and which is
specified in the amendment.
``(iii) Applicable method.--For purposes of
clause (ii)(II), the plan shall select 1 of the
following methods:
``(I) The accrued benefit shall be
equal to the greater of the accrued
benefit determined under the terms of
the plan as in effect both before and
after the amendment.
``(II) At the election of the
participant, the accrued benefit shall
be determined under the terms of the
plan as in effect either before or
after the amendment.
``(C) Greater of old or new or election of
either.--The accrued benefit determined under this
subparagraph is the accrued benefit determined under 1
of the following methods which is selected by the plan
and which is specified in the amendment:
``(i) The accrued benefit shall be equal to
the greater of the accrued benefit determined
under the terms of the plan as in effect both
before and after the amendment.
``(ii) At the election of the participant,
the accrued benefit shall be determined under
the terms of the plan as in effect either
before or after the amendment.
``(D) Method prescribed by secretary.--The accrued
benefit determined under this subparagraph shall be
determined under regulations prescribed by the
Secretary which are consistent with the purposes of
this paragraph and which may require a plan to provide
a credit of additional amounts or increases in initial
account balances in amounts substantially equivalent to
the benefits that would be required to be provided to
meet the requirements of subparagraphs (B) or (C).
``(E) Inclusion of prior accrued benefit into
initial account balance.--
``(i) In general.--If, for purposes of
subparagraphs (B), (C), or (D), an applicable
plan amendment provides that an amount will be
initially credited to a participant's
accumulation account (or its equivalent) on the
effective date of the amendment with respect to
the participant's accrued benefit for periods
before such date, the requirements of such
subparagraph shall be treated as met with
respect to such accrued benefit if the amount
initially credited is not less than the present
value of the participant's accrued benefit
determined by using the applicable mortality
table and the lower of the applicable interest
rate under section 205(g)(3)(A), or the
interest rate used to credit interest under the
plan, as of such date.
``(ii) Adjustments for certain subsidized
benefits.--For purposes of subparagraph (B), if
any early retirement benefit or retirement-type
subsidy (within the meaning of paragraph
(6)(B)(i)) is not included in the initial
account balance under clause (i), the plan
shall credit the accumulation account with the
amount of such benefit or 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.
``(F) Requirements where participant offered
choice.--If a plan provides a participant with an
election described in subparagraph (B)(iii)(II) or
(C)(ii), the following rules shall apply:
``(i) Notice.--The plan shall not be
treated as meeting the requirements of either
such subparagraph unless the plan provides the
participant a notice of the right to make such
election which includes information (meeting
such requirements as may be prescribed by the
Secretary of the Treasury)--
``(I) by which the participant may
project benefits under the formulas
from which the participant may choose
and may model the impact of any such
choice, and
``(II) with respect to
circumstances under which a participant
may not receive the projected accrued
benefits by reason of a plan
termination or otherwise.
``(ii) Significant reduction of rate of
accrual.--The plan shall provide that if,
during any of the first 5 plan years during
which such an election is in effect, the plan
adopts an amendment which results in a
significant reduction in the rate of future
benefit accrual (within the meaning of section
204(h)), the accrued benefit of the participant
shall be determined as if the participant had
made the election which resulted in the
greatest accrued benefit.
``(iii) Benefits must not be contingent on
election.--The plan shall not be treated as
meeting the requirements of either such
subparagraph if any other benefit is
conditioned (directly or indirectly) on such
election.
``(G) Applicable plan amendment.--For purposes of
this paragraph--
``(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 a cash balance 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 clause (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 Secretary
of the Treasury shall issue regulations to
prevent the avoidance of the purposes of this
paragraph through the use of 2 or more plan
amendments rather than a single amendment.
``(iv) Cash balance plan.--For purposes of
this paragraph, the term `cash balance plan'
has the meaning given such term by subsection
(b)(5)(C).
``(v) Coordination with accrual rules.--If
a plan amendment is treated as meeting the
requirements of this paragraph with respect to
any participant because such participant is
eligible to continue to accrue benefits in the
same manner as under the terms of the plan in
effect before the amendment, the Secretary of
the Treasury shall prescribe regulations under
which the plan shall not be treated as failing
to meet the requirements of subparagraph (A),
(B), or (C) of section 204(b)(1) if the
requirements of this paragraph are met.
``(H) Application of certain rules to early-
retirement benefits.--Rules similar to the rules of
clauses (i), (ii), and (iii) of subparagraph (B) and
subparagraph (C) shall apply in the case of any early
retirement benefit or retirement-type subsidy (within
the meaning of section 204(g)(2)(A)).''.
(2) Amendment of internal revenue code.--Section 411(d) of
the Internal Revenue Code of 1986 (relating to special rules)
is amended by adding at the end the following new paragraph:
``(7) Treatment of conversions to cash balance or other
hybrid plans.--
``(A) In general.--For purposes of paragraph (6),
an applicable plan amendment shall be treated as
reducing the accrued benefit of a participant if, under
the terms of the plan as in effect after the amendment,
the accrued benefit of any participant who was a
participant as of the effective date of the amendment
may at any time be less than the accrued benefit
determined under the method under subparagraph (B),
(C), or (D) which is specified in the plan and applies
uniformly to all participants. An applicable plan
amendment shall in no event be treated as meeting the
requirements of any such subparagraph if the conversion
described in subparagraph (G)(i) is into a cash balance
plan other than a qualified cash balance plan (as
defined in subsection (b)(5)(B)).
``(B) No wearaway.--
``(i) In general.--The accrued benefit
determined under this subparagraph is 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) except as provided in clause
(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.
A similar rule shall apply in the case of any
early retirement benefit or retirement-type
subsidy (within the meaning of section
411(d)(6)(B)(i)).
``(ii) Required amounts for certain
periods.--Notwithstanding clause (i)(II), the
plan shall provide that either--
``(I) the accrued benefit of all
participants for each of the first 5
plan years to which the amendment
applies shall be equal to the greater
of the accrued benefit determined under
the terms of the plan as in effect both
before and after the amendment, or
``(II) the accrued benefit for
periods after the effective date of the
amendment of all participants who, as
of the effective date of the amendment,
had attained the age of 40 and had a
combined age and years of service under
the plan of not less than 55 shall be
determined under either of the methods
described in clause (iii) which is
selected by the plan and which is
specified in the amendment.
``(iii) Applicable method.--For purposes of
clause (ii)(II), the plan shall select 1 of the
following methods:
``(I) The accrued benefit shall be
equal to the greater of the accrued
benefit determined under the terms of
the plan as in effect both before and
after the amendment.
``(II) At the election of the
participant, the accrued benefit shall
be determined under the terms of the
plan as in effect either before or
after the amendment.
``(C) Greater of old or new or election of
either.--The accrued benefit determined under this
subparagraph is the accrued benefit determined under 1
of the following methods which is selected by the plan
and which is specified in the amendment:
``(i) The accrued benefit shall be equal to
the greater of the accrued benefit determined
under the terms of the plan as in effect both
before and after the amendment.
``(ii) At the election of the participant,
the accrued benefit shall be determined under
the terms of the plan as in effect either
before or after the amendment.
``(D) Method prescribed by secretary.--The accrued
benefit determined under this subparagraph shall be
determined under regulations prescribed by the
Secretary which are consistent with the purposes of
this paragraph and which may require a plan to provide
a credit of additional amounts or increases in initial
account balances in amounts substantially equivalent to
the benefits that would be required to be provided to
meet the requirements of subparagraphs (B) or (C).
``(E) Inclusion of prior accrued benefit into
initial account balance.--
``(i) In general.--If, for purposes of
subparagraphs (B), (C), or (D), an applicable
plan amendment provides that an amount will be
initially credited to a participant's
accumulation account (or its equivalent) on the
effective date of the amendment with respect to
the participant's accrued benefit for periods
before such date, the requirements of such
subparagraph shall be treated as met with
respect to such accrued benefit if the amount
initially credited is not less than the present
value of the participant's accrued benefit
determined by using the applicable mortality
table and the lower of the applicable interest
rate under section 417(e)(3)(A), or the
interest rate used to credit interest under the
plan, as of such date.
``(ii) Adjustments for certain subsidized
benefits.--For purposes of subparagraph (B), if
any early retirement benefit or retirement-type
subsidy (within the meaning of paragraph
(6)(B)(i)) is not included in the initial
account balance under clause (i), the plan
shall credit the accumulation account with the
amount of such benefit or 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.
``(F) Requirements where participant offered
choice.--If a plan provides a participant with an
election described in subparagraph (B)(iii)(II) or
(C)(ii), the following rules shall apply:
``(i) Notice.--The plan shall not be
treated as meeting the requirements of either
such subparagraph unless the plan provides the
participant a notice of the right to make such
election which includes information (meeting
such requirements as may be prescribed by the
Secretary)--
``(I) by which the participant may
project benefits under the formulas
from which the participant may choose
and may model the impact of any such
choice, and
``(II) with respect to
circumstances under which a participant
may not receive the projected accrued
benefits by reason of a plan
termination or otherwise.
``(ii) Significant reduction of rate of
accrual.--The plan shall provide that if,
during any of the first 5 plan years during
which such an election is in effect, the plan
adopts an amendment which results in a
significant reduction in the rate of future
benefit accrual (within the meaning of section
4980F(e)), the accrued benefit of the
participant shall be determined as if the
participant had made the election which
resulted in the greatest accrued benefit.
``(iii) Benefits must not be contingent on
election.--The plan shall not be treated as
meeting the requirements of either such
subparagraph if any other benefit is
conditioned (directly or indirectly) on such
election.
``(G) Applicable plan amendment.--For purposes of
this paragraph--
``(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 a cash balance 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 clause (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 Secretary
shall issue regulations to prevent the
avoidance of the purposes of this paragraph
through the use of 2 or more plan amendments
rather than a single amendment.
``(iv) Cash balance plan.--For purposes of
this paragraph, the term `cash balance plan'
has the meaning given such term by subsection
(b)(5)(C).
``(v) Coordination with accrual and
nondiscrimination rules.--If a plan amendment
is treated as meeting the requirements of this
paragraph with respect to any participant
because such participant is eligible to
continue to accrue benefits in the same manner
as under the terms of the plan in effect before
the amendment, the Secretary shall prescribe
regulations under which--
``(I) the plan shall not be treated
as failing to meet the requirements of
subparagraph (A), (B), or (C) of
section 411(b)(1) if the requirements
of this paragraph are met, and
``(II) the plan shall, subject to
such terms and conditions as may be
provided in such regulations, not be
treated as failing to meet the
requirements of section 401(a)(4)
merely because the plan provides any
accrual or benefit which is required to
be provided under subparagraph (B),
(C), or (D) or because only
participants as of the effective date
of the amendment are so eligible,
except that this subclause shall only
apply if the plan met the requirements
of section 401(a)(4) under the terms of
the plan as in effect before the
amendment.
``(H) Application of certain rules to early-
retirement benefits.--Rules similar to the rules of
clauses (i), (ii), and (iii) of subparagraph (B) and
subparagraph (C) shall apply in the case of any early
retirement benefit or retirement-type subsidy (within
the meaning of section 411(d)(6)(B)(i)).''.
(c) Assumptions Used in Computing Present Value of Accrued
Benefit.--
(1) Amendment of erisa.--Section 205(g)(3) of such Act (29
U.S.C. 1055(g)(3)), is amended--
(A) by striking ``or (B)'' in subparagraph (A)(i)
and inserting ``, (B), or (C)'', and
(B) by adding at the end the following new
subparagraph:
``(C) Present value of accrued benefit under cash
balance plan.--Except as provided in regulations, in
the case of a qualified cash balance plan (as defined
in section 204(g)(6)(B)), the present value of the
accrued benefit of any participant shall, for purposes
of paragraphs (1) and (2), be equal to the balance in
the participant's accumulation account (or its
equivalent) as of the time the present value
determination is being made.''.
(2) Amendment of internal revenue code.--Section 417(e)(3)
of such Code, is amended--
(A) by striking ``or (B)'' in subparagraph (A)(i)
and inserting ``, (B), or (C)'', and
(B) by adding at the end the following new
subparagraph:
``(C) Present value of accrued benefit under cash
balance plan.--Except as provided in regulations, in
the case of a qualified cash balance plan (as defined
in section 411(d)(7)(B)), the present value of the
accrued benefit of any participant shall, for purposes
of paragraphs (1) and (2), be equal to the balance in
the participant's accumulation account (or its
equivalent) as of the time the present value
determination is being made.''
(d) No Inference.--Nothing in the amendments made by this section
shall be construed to infer the proper treatment of cash balance plans
or conversions to cash balance 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.
(e) Effective Dates.--
(1) Age discrimination and lump-sum distributions.--
(A) In general.--The amendments made by subsections
(a) and (c) shall apply to periods after July 31, 2005.
(B) Vesting and interest credit requirements.--In
the case of a plan in existence on July 31, 2005, the
requirements of clauses (ii) and (iii) of section
411(b)(5)(B) of the Internal Revenue Code of 1986, and
of clauses (ii) and (iii) of 204(b)(5)(B) of the
Employee Retirement Income Security Act of 1974 shall,
for purposes of applying the amendments made by
subsections (a) and (c), apply to years beginning after
December 31, 2006, unless the plan sponsor elects the
application of such requirements for any period after
July 31, 2005, and before the first year beginning
after December 31, 2006.
(C) 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 subparagraph (B)
shall, for purposes of applying the amendments made by
subsections (a) and (c), not apply to plan years
beginning before--
(i) 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, 2007, or
(ii) January 1, 2009.
(2) Conversions.--The amendments made by subsection (b)
shall apply to plan amendments adopted after, and taking effect
after, July 31, 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. 602. 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 a
cash balance plan is made with respect to a group of employees who
become employees by reason of a merger, acquisition, or similar
transaction.
TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS
UNDER DEFINED CONTRIBUTION PLANS
SEC. 701. 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 (relating to qualified pension,
profit-sharing, and stock bonus plans), as amended by section
115 of this Act, 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 or real property.--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 or employer real property, a plan meets the
requirements of this subparagraph if the applicable
individual may elect to direct the plan to divest any
such securities or real property and to reinvest an
equivalent amount in other investment options meeting
the requirements of subparagraph (D).
``(C) Employer contributions invested in employer
securities or real property.--In the case of the
portion of the account attributable to employer
contributions other than elective deferrals which is
invested in employer securities or employer real
property, 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 or real property 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 or employer real property,
to which an applicable individual may direct
the proceeds from the divestment of employer
securities or employer real property pursuant
to this paragraph, each of which is diversified
and has materially different risk and return
characteristics.
``(ii) 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 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 or employer real property
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
``(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
paragraph--
``(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.
``(iv) Employer real property.--The term
`employer real property' has the meaning given
such term by section 407(d)(2) of the Employee
Retirement Income Security Act of 1974.
``(v) Employee stock ownership plan.--The
term `employee stock ownership plan' has the
meaning given such term by section 4975(e)(7).
``(vi) Publicly traded employer
securities.--The term `publicly traded employer
securities' means employer securities which are
readily tradable on an established securities
market.
``(vii) Year of service.--The term `year of
service' has the meaning given such term by
section 411(a)(5).
``(H) Transition rule for securities or real
property attributable to employer contributions.--
``(i) Rules phased in over 3 years.--
``(I) In general.--In the case of
the portion of an account to which
subparagraph (C) applies and which
consists of employer securities or
employer real property acquired in a
plan year beginning before January 1,
2006, subparagraph (C) shall only apply
to the applicable percentage of such
securities or real property. This
subparagraph shall be applied
separately with respect to each class
of securities and employer real
property.
``(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 which The applicable
subparagraph (C) applies: percentage is:
1st........................................... 33
2d............................................ 66
3d and following.............................. 100.''.
(2) Conforming amendments.--
(A) Section 401(a)(28)(B) of such Code (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.--
``(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 or real property.--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 or employer real
property, a plan meets the requirements of this paragraph if
the applicable individual may elect to direct the plan to
divest any such securities or real property and to reinvest an
equivalent amount in other investment options meeting the
requirements of paragraph (4).
``(3) Employer contributions invested in employer
securities or real property.--In the case of the portion of the
account attributable to employer contributions other than
elective deferrals which is invested in employer securities or
employer real property, 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 or
real property 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 or
employer real property, to which an applicable
individual may direct the proceeds from the divestment
of employer securities or employer real property
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 or
employer real property 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.
``(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.
``(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) Employer real property.--The term `employer
real property' has the meaning given such term by
section 407(d)(2).
``(E) Employee stock ownership plan.--The term
`employee stock ownership plan' has the meaning given
such term by section 4975(e)(7) of such Code.
``(F) Publicly traded employer securities.--The
term `publicly traded employer securities' means
employer securities which are readily tradable on an
established securities market.
``(G) Year of service.--The term `year of service'
has the meaning given such term by section 203(b)(2).
``(7) Transition rule for securities or real property
attributable to employer contributions.--
``(A) Rules phased in over 3 years.--
``(i) In general.--In the case of the
portion of an account to which paragraph (3)
applies and which consists of employer
securities or employer real property acquired
in a plan year beginning before January 1,
2006, paragraph (3) shall only apply to the
applicable percentage of such securities or
real property. This subparagraph shall be
applied separately with respect to each class
of securities and employer real property.
``(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 which The applicable
paragraph (3) applies: percentage is:
1st........................................... 33
2d............................................ 66
3d and following.............................. 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 and qualifying real property held in
certain individual account plans, see section 204(j).''
(c) 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, 2005.
(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, 2005'' the earlier of--
(A) the later of--
(i) December 31, 2006, 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, 2007.
(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, 2006, 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. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES OR REAL
PROPERTY.
(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:
``(m) 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 or employer real property 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) 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) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
(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. 703. 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).
``(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 or employer real property,
without regard to whether such securities or
real property 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,
and
``(II) a notice that investments in
any individual account may not be
adequately diversified if the value of
any investment in the account exceeds
20 percent of the fair market value of
all investments in the account.
``(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) Model Statements.--
(1) In general.--The Secretary of Labor shall, within 180
days 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.
(d) 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. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.
(a) Amendments of ERISA.--
(1) In general.--Section 101(i) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021(i)) is amended--
(A) by striking clauses (i) through (iv) of
paragraph (8)(B) and inserting:
``(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'',
and
(B) in paragraph (8)(B), by redesignating clause
(v) as clause (ii).
(2) 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.).
SEC. 705. ALLOWANCE OF, AND CREDIT FOR, 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 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 clause (i) 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) Saver's Credit Expanded To Include Catchup Contributions.--
(1) In general.--Section 25B of the Internal Revenue Code
of 1986 (relating to credit for elective deferrals and IRA
contributions by certain individuals) is amended by
redesignating subsection (h) as subsection (i) and by inserting
after subsection (g) the following new subsection:
``(h) Additional Credit for Certain Catchup Contributions.--
``(1) In general.--In the case of an eligible individual
who is an applicable individual under section 219(b)(5)(C) for
any taxable year, the amount of the credit allowable under
subsection (a) for the taxable year shall be increased by 50
percent of so much of the qualified retirement contributions
(as defined in section 219(e)) of the individual for the
taxable year as exceeds the deductible amount for the taxable
year under section 219(b)(5) (without regard to subparagraphs
(B) and (C) thereof).
``(2) Coordination with other contributions.--For purposes
of this section--
``(A) any contribution to which this subsection
applies shall not be taken into account in determining
the amount of the credit allowable under subsection (a)
without regard to this subsection, and
``(B) in applying any reduction in qualified
retirement savings contributions under subsection
(d)(2), the reduction shall be applied first to
qualified retirement savings contributions other than
contributions to which this subsection applies.''.
(2) Extension of termination date for catchup credit.--
Section 25B(i) of such Code, as redesignated by paragraph (1),
is amended by inserting ``(December 31, 2007, in the case of
the portion of the credit allowed under subsection (h))'' after
``2006''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2004.
SEC. 706. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING
SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO
DIRECT INVESTMENTS.
(a) In General.--Section 404(c)(1) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1104(c)(1)) is amended--
(1) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively, and by inserting ``(A)'' after
``(c)(1)'',
(2) 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
(3) by adding at the end the following new subparagraphs:
``(B)(i) 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 as a result of any exercise by the participant or
beneficiary of control over assets in his or her account before the
period. Matters to be considered in determining whether such person has
satisfied the requirements of this title include, but are not limited
to, whether such person--
``(I) has considered the reasonableness of the expected
blackout period,
``(II) has provided the notice required under section
101(i)(1), and
``(III) has acted in accordance with the requirements of
subsection (a) in determining whether to enter into the
blackout period.
``(ii) For purposes of this subsection, if a blackout period arises
in connection with a change in the investment options offered under the
plan, a participant or beneficiary shall be deemed to have exercised
control over the assets in his or her account prior to the blackout
period if, after notice of the change in investment options is given to
such participant or beneficiary, assets in the account of the
participant or beneficiary are transferred--
``(I) to plan investment options in accordance with the
affirmative election of the participant or beneficiary; or
``(II) in the absence of such an election and in the case
in which fiduciary relief was provided under this subsection
for the prior investment options, to plan investment options in
the manner set forth in such notice.
``(C) For purposes of this paragraph, the term `blackout period'
has the meaning given such term by section 101(i)(7).''
(b) Guidance.--Not later than 180 days after the date of enactment
of this Act, the Secretary of Labor, in consultation with the Secretary
of the Treasury, shall issue interim final regulations providing
guidance, including safe harbors, on how plan sponsors or any other
affected fiduciaries can satisfy their fiduciary responsibilities
during any blackout period during which the ability of a participant or
beneficiary to direct the investment of assets in his or her individual
account is suspended.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
(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, 2005'' the earlier of--
(A) the later of--
(i) December 31, 2006, 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, 2007.
SEC. 707. 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) 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) Effective Date.--The amendment made by this section shall apply
to plan years beginning after December 31, 2005.
TITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS
SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE ADEQUATE
INVESTMENT EDUCATION TO PARTICIPANTS.
(a) Adequate Investment Education.--
(1) In general.--Section 101 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024), as amended by
this Act, is amended by redesignating subsection (n) as
subsection (o) and by inserting after subsection (m) the
following:
``(n) Basic Investment Guidelines.--
``(1) In general.--The administrator of an individual
account plan (other than a one-participant retirement plan
described in subsection (i)(8)(B)) shall furnish at least once
each year to each participant or beneficiary who has the right
to direct the investment of assets in his or her account the
model form relating to basic investment guidelines which is
described in paragraph (2).
``(2) Model form.--
``(A) In general.--The Secretary shall, in
consultation with the Secretary of Treasury, develop
and make available to individual account plans for
distribution under paragraph (1) a model form
containing basic guidelines for investing for
retirement. Except as otherwise provided by the
Secretary, such guidelines shall include--
``(i) information on the benefits of
diversification,
``(ii) information on the essential
differences, in terms of risk and return, of
pension plan investments, including stocks,
bonds, mutual funds, and money market
investments,
``(iii) information on how an individual's
pension plan investment allocations may differ
depending on the individual's age and years to
retirement and on other factors determined by
the Secretary,
``(iv) sources of information where
individuals may learn more about pension
rights, individual investing, and investment
advice, and
``(v) such other information related to
individual investing as the Secretary
determines appropriate.
``(B) Calculation information.--The model form
under subparagraph (A) shall include addresses for
Internet sites, and a worksheet, which a participant or
beneficiary may use to calculate--
``(i) the retirement age value of the
participant's or beneficiary's nonforfeitable
pension benefits under the plan (expressed as
an annuity amount and determined by reference
to varied historical annual rates of return and
annuity interest rates), and
``(ii) other important amounts relating to
retirement savings, including the amount which
a participant or beneficiary would be required
to save annually to provide a retirement income
equal to various percentages of their current
salary (adjusted for expected growth prior to
retirement).
The Secretary shall develop an Internet site which an
individual may use in making such calculations and the
address for such site shall be included with the form.
``(C) Public comment.--The Secretary of Labor shall
provide at least 90 days for public comment before
publishing final notice of the model form.
``(3) Rules relating to form and statement.--The model form
under paragraph (2)--
``(A) shall be written in a manner calculated to be
understood by the average plan participant, and
``(B) may be delivered in written, electronic, or
other appropriate form to the extent such form is
reasonably accessible to participants and
beneficiaries.''
(2) Enforcement.--Section 502(c)(7) of such Act (29 U.S.C.
1132(c)(7)), as amended by this Act, is amended by striking
``or (l)'' and inserting ``, (l), or (n)''.
(c) 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. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED TO PLAN PARTICIPANTS.
(a) In General.--Section 404 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end
the following new subsection:
``(e) Independent Investment Adviser.--
``(1) In general.--In the case of an individual account
plan which permits a plan participant or beneficiary to direct
the investment of the assets in his or her account, if a plan
sponsor or other person who is a fiduciary designates and
monitors a qualified investment adviser pursuant to the
requirements of paragraph (3), such fiduciary--
``(A) shall be deemed to have satisfied the
requirements under this section for the prudent
designation and periodic review of an investment
adviser with whom the plan sponsor or other person who
is a fiduciary enters into an arrangement for the
provision of advice referred to in section
3(21)(A)(ii),
``(B) shall not be liable under this section for
any loss, or by reason of any breach, with respect to
the provision of investment advice given by such
adviser to any plan participant or beneficiary, and
``(C) shall not be liable for any co-fiduciary
liability under subsections (a)(2) and (b) of section
405 with respect to the provision of investment advice
given by such adviser to any plan participant or
beneficiary.
``(2) Qualified investment adviser.--
``(A) In general.--For purposes of this subsection,
the term `qualified investment adviser' means, with
respect to a plan, a person--
``(i) who is a fiduciary of the plan by
reason of the provision of investment advice by
such person to a plan participant or
beneficiary;
``(ii) who--
``(I) is registered as an
investment adviser under the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1
et seq.),
``(II) is registered as an
investment adviser under the laws of
the State in which such adviser
maintains the principal office and
place of business of such adviser, but
only if such State laws are consistent
with section 203A of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-
3a),
``(III) is a bank or similar
financial institution referred to in
section 408(b)(4),
``(IV) is an insurance company
qualified to do business under the laws
of a State, or
``(V) is any other comparably
qualified entity which satisfies such
criteria as the Secretary determines
appropriate, consistent with the
purposes of this subsection, and
``(iii) who meets the requirements of
subparagraph (B).
``(B) Adviser requirements.--The requirements of
this subparagraph are met if every individual employed
(or otherwise compensated) by a person described in
subparagraph (A)(ii) who provides investment advice on
behalf of such person to any plan participant or
beneficiary is--
``(i) an individual described in subclause
(I) of subparagraph (A)(ii),
``(ii) an individual described in subclause
(II) of subparagraph (A)(ii), but only if such
State has an examination requirement to qualify
for registration,
``(iii) registered as a broker or dealer
under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.),
``(iv) a registered representative as
described in section 3(a)(18) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or
section 202(a)(17) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
``(v) any other comparably qualified
individual who satisfies such criteria as the
Secretary determines appropriate, consistent
with the purposes of this subsection.
``(3) Verification requirements.--The requirements of this
paragraph are met if--
``(A) the plan sponsor or other person who is a
fiduciary in designating a qualified investment adviser
receives at the time of the designation, and annually
thereafter, a written verification from the qualified
investment adviser that the investment adviser--
``(i) is and remains a qualified investment
adviser,
``(ii) acknowledges that the investment
adviser is a fiduciary with respect to the plan
and is solely responsible for its investment
advice,
``(iii) has reviewed the plan documents
(including investment options) and has
determined that its relationship with the plan
and the investment advice provided to any plan
participant or beneficiary, including any fees
or other compensation it will receive, will not
constitute a violation of section 406,
``(iv) will, in providing investment advice
to any participant or beneficiary, consider any
employer securities or employer real property
allocated to his or her account, and
``(v) has the necessary insurance coverage
(as determined by the Secretary) for any claim
by any plan participant or beneficiary,
``(B) the plan sponsor or other person who is a
fiduciary in designating a qualified investment adviser
reviews the documents described in paragraph (4)
provided by such adviser and determines that there is
no material reason not to enter into an arrangement for
the provision of advice by such qualified investment
adviser, and
``(C) the plan sponsor or other person who is a
fiduciary in designating a qualified investment
adviser, within 30 days of having information brought
to its attention that the investment adviser is no
longer qualified or that a substantial number of plan
participants or beneficiaries have raised concerns
about the services being provided by the investment
adviser--
``(i) investigates such information and
concerns, and
``(ii) determines that there is no material
reason not to continue the designation of the
adviser as a qualified investment adviser.
``(4) Documentation.--A qualified investment adviser shall
provide the following documents to the plan sponsor or other
person who is a fiduciary in designating the adviser:
``(A) The contract with the plan sponsor or other
person who is a fiduciary for the services to be
provided by the investment adviser to the plan
participants and beneficiaries.
``(B) A disclosure as to any fees or other
compensation that will be received by the investment
adviser for the provision of such investment advice and
as to any fees and other compensation that will be
received as a result of a participant's investment
election.
``(C) The Uniform Application for Investment
Adviser Registration as filed with the Securities and
Exchange Commission or a substantially similar
disclosure application as determined by and filed with
the Secretary.
``(5) Treatment as fiduciary.--Any qualified investment
adviser that acknowledges it is a fiduciary pursuant to
paragraph (3)(A)(ii) shall be deemed a fiduciary under this
part with respect to the provision of investment advice to a
plan participant or beneficiary.''
(b) Fiduciary Liability.--Section 404(c)(1)(B) of such Act is
amended by inserting ``(other than a qualified investment adviser)''
after ``fiduciary''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to investment advisers designated after the date of
the enactment of this Act.
SEC. 803. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.
(a) In General.--Subsection (m) of section 132 of the Internal
Revenue Code of 1986 (defining qualified retirement services) is
amended by adding at the end the following new paragraph:
``(4) No constructive receipt.--
``(A) In general.--No amount shall be included in
the gross income of any employee solely because the
employee may choose between any qualified retirement
planning services provided by an eligible investment
advisor and compensation which would otherwise be
includible in the gross income of such employee. The
preceding sentence shall apply to highly compensated
employees only if the choice described in such sentence
is available on substantially the same terms to each
member of the group of employees normally provided
education and information regarding the employer's
qualified employer plan.
``(B) Limitation.--The maximum amount which may be
excluded under subparagraph (A) with respect to any
employee for any taxable year shall not exceed $1,000.
``(C) Eligible investment adviser.--For purposes of
this paragraph, the term `eligible investment adviser'
means, with respect to a plan, a person--
``(i) who--
``(I) is registered as an
investment adviser under the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1
et seq.),
``(II) is registered as an
investment adviser under the laws of
the State in which such adviser
maintains the principal office and
place of business of such adviser, but
only if such State laws are consistent
with section 203A of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-
3a),
``(III) is a bank or similar
financial institution referred to in
section 408(b)(4),
``(IV) is an insurance company
qualified to do business under the laws
of a State, or
``(V) is any other comparably
qualified entity which satisfies such
criteria as the Secretary determines
appropriate, consistent with the
purposes of this subsection, and
``(ii) who meets the requirements of
subparagraph (D).
``(D) Adviser requirements.--The requirements of
this subparagraph are met if every individual employed
(or otherwise compensated) by a person described in
subparagraph (C)(i) who provides investment advice on
behalf of such person to any plan participant or
beneficiary is--
``(i) an individual described in subclause
(I) of subparagraph (C)(i),
``(ii) an individual described in subclause
(II) of subparagraph (C)(i), but only if such
State has an examination requirement to qualify
for registration,
``(iii) registered as a broker or dealer
under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.),
``(iv) a registered representative as
described in section 3(a)(18) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) or
section 202(a)(17) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-2(a)(17)), or
``(v) any other comparably qualified
individual who satisfies such criteria as the
Secretary determines appropriate, consistent
with the purposes of this paragraph.
``(E) Termination.--This paragraph shall not apply
to taxable years beginning after December 31, 2010.''.
(b) Conforming Amendments.--
(1) Section 403(b)(3)(B) of such Code is amended by
inserting ``132(m)(4),'' after ``132(f)(4),''.
(2) Section 414(s)(2) of such Code is amended by inserting
``132(m)(4),'' after ``132(f)(4),''.
(3) Section 415(c)(3)(D)(ii) of such Code is amended by
inserting ``132(m)(4),'' after ``132(f)(4),''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.
SEC. 804. 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) Effective Date.--The amendments made by this section shall
apply to violations occurring on and after the date of the enactment of
this Act.
SEC. 805. ADMINISTRATIVE PROVISION.
The Secretary of the Treasury shall have the authority to prescribe
rules applicable to the statements required under sections 101(j) and
101(m) of the Employee Retirement Income Security Act of 1974 (as added
by this Act).
TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION
SEC. 901. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF DOMESTIC
RELATIONS ORDERS.
Not later than 1 year after the date of the enactment of this Act,
the Secretary of Labor shall issue regulations under section 206(d)(3)
of the Employee Retirement Security Act of 1974 and section 414(p) of
the Internal Revenue Code of 1986 which clarify that--
(1) a domestic relations order otherwise meeting the
requirements to be a qualified domestic relations order,
including the requirements of section 206(d)(3)(D) of such Act
and section 414(p)(3) of such Code, shall not fail to be
treated as a qualified domestic relations order solely
because--
(A) the order is issued after, or revises, another
domestic relations order or qualified domestic
relations order; or
(B) of the time at which it is issued; and
(2) any order described in paragraph (1) shall be subject
to the same requirements and protections which apply to
qualified domestic relations orders, including the provisions
of section 206(d)(3)(H) of such Act and section 414(p)(7) of
such Code.
SEC. 902. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD RETIREMENT
ANNUITIES INDEPENDENT OF ACTUAL ENTITLEMENT OF EMPLOYEE.
(a) In General.--Section 2 of the Railroad Retirement Act of 1974
(45 U.S.C. 231a) is amended--
(1) in subsection (c)(4)(i), by striking ``(A) is entitled
to an annuity under subsection (a)(1) and (B)''; and
(2) in subsection (e)(5), by striking ``or divorced wife''
the second place it appears.
(b) Effective Date.--The amendments made by this section shall take
effect 1 year after the date of the enactment of this Act.
SEC. 903. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS TO
SURVIVING FORMER SPOUSES PURSUANT TO DIVORCE AGREEMENTS.
(a) In General.--Section 5 of the Railroad Retirement Act of 1974
(45 U.S.C. 231d) is amended by adding at the end the following:
``(d) Notwithstanding any other provision of law, the payment of
any portion of an annuity computed under section 3(b) to a surviving
former spouse in accordance with a court decree of divorce, annulment,
or legal separation or the terms of any court-approved property
settlement incident to any such court decree shall not be terminated
upon the death of the individual who performed the service with respect
to which such annuity is so computed unless such termination is
otherwise required by the terms of such court decree.''
(b) Effective Date.--The amendment made by this section shall take
effect 1 year after the date of the enactment of this Act.
SEC. 904. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY OPTION.
(a) Amendments to Internal Revenue Code.--
(1) Election of survivor annuity.--Section 417(a)(1)(A) of
the Internal Revenue Code of 1986 is amended--
(A) in clause (i), by striking ``, and'' and
inserting a comma;
(B) by redesignating clause (ii) as clause (iii);
and
(C) by inserting after clause (i) the following:
``(ii) if the participant elects a waiver under
clause (i), may elect the qualified optional survivor
annuity at any time during the applicable election
period, and''.
(2) Definition.--Section 417 of such Code is amended by
adding at the end the following:
``(g) Definition of Qualified Optional Survivor Annuity.--
``(1) In general.--For purposes of this section, the term
`qualified optional survivor annuity' means an annuity--
``(A) for the life of the participant with a
survivor annuity for the life of the spouse which is
equal to the applicable percentage of the amount of the
annuity which is payable during the joint lives of the
participant and the spouse, and
``(B) which is the actuarial equivalent of a single
annuity for the life of the participant.
Such term also includes any annuity in a form having the effect
of an annuity described in the preceding sentence.
``(2) Applicable percentage.--
``(A) In general.--For purposes of paragraph (1),
if the survivor annuity percentage--
``(i) is less than 75 percent, the
applicable percentage is 75 percent, and
``(ii) is greater than or equal to 75
percent, the applicable percentage is 50
percent.
``(B) Survivor annuity percentage.--For purposes of
subparagraph (A), the term `survivor annuity
percentage' means the percentage which the survivor
annuity under the plan's qualified joint and survivor
annuity bears to the annuity payable during the joint
lives of the participant and the spouse.''.
(3) Notice.--Section 417(a)(3)(A)(i) of such Code is
amended by inserting ``and of the qualified optional survivor
annuity'' after ``annuity''.
(b) Amendments to ERISA.--
(1) Election of survivor annuity.--Section 205(c)(1)(A) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1055(c)(1)(A)) is amended--
(A) in clause (i), by striking ``, and'' and
inserting a comma;
(B) by redesignating clause (ii) as clause (iii);
and
(C) by inserting after clause (i) the following:
``(ii) if the participant elects a waiver under
clause (i), may elect the qualified optional survivor
annuity at any time during the applicable election
period, and''.
(2) Definition.--Section 205(d) of such Act (29 U.S.C.
1055(d)) is amended--
(A) by inserting ``(1)'' after ``(d)'';
(B) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively; and
(C) by adding at the end the following:
``(2)(A) For purposes of this section, the term `qualified optional
survivor annuity' means an annuity--
``(i) for the life of the participant with a survivor
annuity for the life of the spouse which is equal to the
applicable percentage of the amount of the annuity which is
payable during the joint lives of the participant and the
spouse, and
``(ii) which is the actuarial equivalent of a single
annuity for the life of the participant.
Such term also includes any annuity in a form having the effect of an
annuity described in the preceding sentence.
``(B)(i) For purposes of subparagraph (A), if the survivor annuity
percentage--
``(I) is less than 75 percent, the applicable percentage is
75 percent, and
``(II) is greater than or equal to 75 percent, the
applicable percentage is 50 percent.
``(ii) For purposes of clause (i), the term `survivor annuity
percentage' means the percentage which the survivor annuity under the
plan's qualified joint and survivor annuity bears to the annuity
payable during the joint lives of the participant and the spouse.''.
(3) Notice.--Section 205(c)(3)(A)(i) of such Act (29 U.S.C.
1055(c)(3)(A)(i)) is amended by inserting ``and of the
qualified optional survivor annuity'' after ``annuity''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
(2) 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 amendments made by this section shall apply to
the first plan year beginning on or after the earlier of--
(A) the later of--
(i) January 1, 2006, or
(ii) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof after the date of enactment of this
Act), or
(B) January 1, 2007.
TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES
SEC. 1001. 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) 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'' 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''.
(d) 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. 1002. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.
(a) In General.--Subparagraph (A) of section 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) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2005.
SEC. 1003. 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. 1004. 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
(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) Effective Date.--The amendment made by this section shall apply
to distributions after the date of the enactment of this Act.
SEC. 1005. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN
RETIREMENT PLAN DISTRIBUTIONS.
(a) In General.--
(1) Qualified plans.--Section 402(c) of the Internal
Revenue Code of 1986 (relating to rollovers from exempt trusts)
is amended by adding at the end the following new paragraph:
``(11) Distributions to inherited individual retirement
plan of nonspouse beneficiary.--
``(A) In general.--If, with respect to any portion
of a distribution from an eligible retirement plan of a
deceased employee, a direct trustee-to-trustee transfer
is made to an individual retirement plan described in
clause (i) or (ii) of paragraph (8)(B) established for
the purposes of receiving the distribution on behalf of
an individual who is a designated beneficiary (as
defined by section 401(a)(9)(E)) of the employee and
who is not the surviving spouse of the employee--
``(i) the transfer shall be treated as an
eligible rollover distribution for purposes of
this subsection,
``(ii) the individual retirement plan shall
be treated as an inherited individual
retirement account or individual retirement
annuity (within the meaning of section
408(d)(3)(C)) for purposes of this title, and
``(iii) section 401(a)(9)(B) (other than
clause (iv) thereof) shall apply to such plan.
``(B) Certain trusts treated as beneficiaries.--For
purposes of this paragraph, to the extent provided in
rules prescribed by the Secretary, a trust maintained
for the benefit of one or more designated beneficiaries
shall be treated in the same manner as a designated
beneficiary.''.
(2) Section 403(a) plans.--Subparagraph (B) of section
403(a)(4) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(3) Section 403(b) plans.--Subparagraph (B) of section
403(b)(8) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(4) Section 457 plans.--Subparagraph (B) of section
457(e)(16) of such Code (relating to rollover amounts) is
amended by striking ``and (9)'' and inserting ``, (9), and
(11)''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2005.
SEC. 1006. 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 (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:
The nonforfeitable
``Years of service:
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 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:
The nonforfeitable
``Years of service:
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
an employee has a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer contributions
determined under the following table:
The nonforfeitable
``Years of service:
percentage is:
3......................................... 20
4......................................... 40
5......................................... 60
6......................................... 80
7 or more................................. 100.
``(B)(i) In the case of an individual account 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 3 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
an employee has a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer contributions
determined under the following table:
The nonforfeitable
``Years of service:
percentage is:
2......................................... 20
3......................................... 40
4......................................... 60
5......................................... 80
6 or more................................. 100.''.
(2) Conforming amendment.--Section 203(a) of such Act is
amended by striking paragraph (4).
(c) Effective Dates.--
(1) In general.--Except as provided in paragraphs (2) and
(4), the amendments made by this section shall apply to
contributions for plan years beginning after December 31, 2005.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to one or more collective bargaining
agreements between employee representatives and one or more
employers ratified before the date of the enactment of this
Act, the amendments made by this section shall not apply to
contributions on behalf of employees covered by any such
agreement for plan years beginning before the earlier of--
(A) the later 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 the
enactment); or
(ii) January 1, 2006; or
(B) January 1, 2008.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any employee
before the date that such employee has 1 hour of service under
such plan in any plan year to which the amendments made by this
section apply.
(4) Special rule for stock ownership plans.--
Notwithstanding paragraph (1) or (2), in the case of an
employee stock ownership plan (as defined in section 4975(e)(7)
of the Internal Revenue Code of 1986) which had outstanding on
September 26, 2005, a loan incurred for the purpose of
acquiring qualifying employer securities (as defined in section
4975(e)(8) of such Code), the amendments made by this section
shall not apply to any plan year beginning before the earlier
of--
(A) the date on which the loan is fully repaid, or
(B) the date on which the loan was, as of September
26, 2005, scheduled to be fully repaid.
SEC. 1007. 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) Section 408A(c)(3)(B) of such Code is amended--
(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'' and
inserting ``Eligible Retirement Plan''.
(2) Section 408A(d)(3) of such Code 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'' and
inserting ``Eligible Retirement Plan''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2005.
SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE PLAN
DISTRIBUTIONS.
(a) In General.--Subsection (t) of section 72 of the Internal
Revenue Code of 1986 (relating to 10-percent additional tax on early
distributions from qualified retirement plans), as amended by section
1004, is amended by striking paragraph (6) and redesignating paragraphs
(7), (8), (9), and (10) as paragraphs (6), (7), (8), and (9),
respectively.
(b) Conforming Amendments.--
(1) Section 72(t)(2)(E) of such Code is amended by striking
``paragraph (7)'' and inserting ``paragraph (6)''.
(2) Section 72(t)(2)(F) of such Code is amended by striking
``paragraph (8)'' and inserting ``paragraph (7)''.
(3) Section 408(d)(3)(G) of such Code is amended by
striking ``applies'' and inserting ``applied on the day before
the date of the enactment of the Pension Security and
Transparency Act of 2005)''.
(4) Section 457(a)(2) of such Code is amended by striking
``section 72(t)(9)'' and inserting ``section 72(t)(8)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2005.
SEC. 1009. SIMPLE PLAN PORTABILITY.
(a) Repeal of Limitation.--Paragraph (3) of section 408(d) of the
Internal Revenue Code of 1986 (relating to rollover contributions), as
amended by this Act, is amended by striking subparagraph (G) and
redesignating subparagraphs (H) and (I) as subparagraphs (G) and (H),
respectively.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2005.
SEC. 1010. 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. 1011. TRANSFERS TO THE PBGC.
(a) Mandatory Distributions to PBGC.--Clause (i) of section
401(a)(31)(B) of the Internal Revenue Code of 1986 (relating to general
rule for certain mandatory distributions) is amended by inserting ``to
the Pension Benefit Guaranty Corporation in accordance with section
4050(e) of the Employee Retirement Income Security Act of 1974 or''
after ``such transfer''.
(b) Tax Treatment of Distributions.--Subparagraph (B) of section
401(a)(31) of such Code is amended by adding at the end the following
new clause:
``(iii) Income tax treatment of transfers
to pbgc.--For purposes of determining the
income tax treatment relating to transfers to
the Pension Benefit Guaranty Corporation under
clause (i)--
``(I) the transfer of amounts to
the Pension Benefit Guaranty
Corporation pursuant to clause (i)
shall be treated as a transfer to an
individual retirement plan under such
clause, and
``(II) the distribution of such
amounts from the Pension Benefit
Guaranty Corporation shall be treated
as a distribution from an individual
retirement plan.''.
(c) Missing Participants and Beneficiaries.--Section 4050 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1350), as
amended by section 1012, is amended by redesignating subsection (e) as
subsection (g) and by inserting after subsection (d) the following new
subsections:
``(e) Involuntary Cashouts.--
``(1) Payment by the corporation.--If benefits under a plan
described in paragraph (3) were transferred to the corporation
under section 401(a)(31)(B) of the Internal Revenue Code of
1986, the corporation shall, upon application filed by the
participant or beneficiary with the corporation in such form
and manner as may be prescribed in regulations of the
corporation, 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.
``(2) Information to the corporation.--To the extent
provided in regulations, the plan administrator of a plan
described in paragraph (3) shall, upon a transfer of benefits
to the corporation under section 401(a)(31)(B) of such Code,
provide the corporation information with respect to benefits of
the participant or beneficiary so transferred.
``(3) Plans described.--A plan is described in this
paragraph if the plan is a pension plan (within the meaning of
section 3(2))--
``(A) which provides for mandatory distributions
under section 401(a)(31)(B) of the Internal Revenue
Code of 1986, and
``(B) which is not a plan described in paragraphs
(2) through (11) of section 4021(b).
``(4) Certain provisions not to apply.--Subsections (a)(1)
and (a)(3) shall not apply to a plan described in paragraph
(3).
``(f) Authority To Charge Fee.--The corporation may charge a
reasonable fee for costs incurred in connection with the transfer and
management of amounts transferred to the corporation under this
section. Such fee may be imposed on the transferor and may be deducted
from amounts so transferred.''.
(d) Effective Dates.--
(1) Internal revenue code provisions.--The amendments made
by subsections (a) and (b) shall take effect as if included in
the amendments made by section 657 of the Economic Growth and
Tax Relief Reconciliation Act of 2001.
(2) Employee retirement income security act of 1974
provisions.--The amendments made by subsection (c) shall apply
to distributions made after final regulations implementing
subsections (e) and (f) of section 4050 of the Employee
Retirement Income Security Act of 1974 (as added by subsection
(c)) are prescribed.
(3) Regulations.--The Pension Benefit Guaranty Corporation
shall issue regulations necessary to carry out the amendments
made by subsection (c) not later than December 31, 2006.
SEC. 1012. 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 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 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 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. 1013. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND UNFORSEEN
FINANCIAL EMERGENCIES.
Within 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.
TITLE XI--ADMINISTRATIVE PROVISIONS
SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.
(a) In General.--The Secretary of the Treasury shall have full
authority to establish and implement the Employee Plans Compliance
Resolution System (or any successor program) and any other employee
plans correction policies, including the authority to waive income,
excise, or other taxes to ensure that any tax, penalty, or sanction is
not excessive and bears a reasonable relationship to the nature,
extent, and severity of the failure.
(b) Improvements.--The Secretary of the Treasury shall continue to
update and improve the Employee Plans Compliance Resolution System (or
any successor program), giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program;
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures;
(3) extending the duration of the self-correction period
under the Self-Correction Program for significant compliance
failures;
(4) expanding the availability to correct insignificant
compliance failures under the Self-Correction Program during
audit; and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive and
bears a reasonable relationship to the nature, extent, and
severity of the failure.
SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment of internal revenue code.--
(A) In general.--Section 417(a)(6)(A) of the
Internal Revenue Code of 1986 is amended by striking
``90-day'' and inserting ``180-day''.
(B) Modification of regulations.--The Secretary of
the Treasury shall modify the regulations under
sections 402(f), 411(a)(11), and 417 of the Internal
Revenue Code of 1986 by substituting ``180 days'' for
``90 days'' each place it appears in Treasury
Regulations sections 1.402(f)-1, 1.411(a)-11(c), and
1.417(e)-1(b).
(2) Amendment of erisa.--
(A) In general.--Section 205(c)(7)(A) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1055(c)(7)(A)) is amended by striking ``90-day''
and inserting ``180-day''.
(B) Modification of regulations.--The Secretary of
the Treasury shall modify the regulations under part 2
of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 relating to sections 203(e)
and 205 of such Act by substituting ``180 days'' for
``90 days'' each place it appears.
(3) Effective date.--The amendments and modifications made
or required by this subsection shall apply to years beginning
after December 31, 2005.
(b) Notification of Right To Defer.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 411(a)(11) of the Internal
Revenue Code of 1986 and under section 205 of the Employee
Retirement Income Security Act of 1974 to provide that the
description of a participant's right, if any, to defer receipt
of a distribution shall also describe the consequences of
failing to defer such receipt.
(2) Effective date.--
(A) In general.--The modifications required by
paragraph (1) shall apply to years beginning after
December 31, 2005.
(B) Reasonable notice.--A plan shall not be treated
as failing to meet the requirements of section
411(a)(11) of such Code or section 205 of such Act with
respect to any description of consequences described in
paragraph (1) made within 90 days after the Secretary
of the Treasury issues the modifications required by
paragraph (1) if the plan administrator makes a
reasonable attempt to comply with such requirements.
SEC. 1103. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and Their
Spouses.--
(1) In general.--The Secretary of the Treasury shall modify
the requirements for filing annual returns with respect to one-
participant retirement plans to ensure that such plans with
assets of $250,000 or less as of the close of the plan year
need not file a return for that year.
(2) One-participant retirement plan defined.--For purposes
of this subsection, the term ``one-participant retirement
plan'' means a retirement plan with respect to which the
following requirements are met:
(A) on the first day of the plan year--
(i) the plan 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
(ii) the plan covered only one or more
partners (or partners and their spouses) in the
plan sponsor;
(B) the plan meets the minimum coverage
requirements of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any other plan
of the business that covers the employees of the
business;
(C) the plan does not provide benefits to anyone
except the individual (and the individual's spouse) or
the partners (and their spouses);
(D) the plan 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
(E) the plan does not cover a business that uses
the services of leased employees (within the meaning of
section 414(n) of such Code).
For purposes of this paragraph, the term ``partner'' includes a
2-percent shareholder (as defined in section 1372(b) of such
Code) of an S corporation.
(3) Other definitions.--Terms used in paragraph (2) which
are also used in section 414 of the Internal Revenue Code of
1986 shall have the respective meanings given such terms by
such section.
(4) Effective date.--The provisions of this subsection
shall apply to plan years beginning on or after January 1,
2006.
(b) Simplified Annual Filing Requirement for Plans With Fewer Than
25 Participants.--In the case of plan years beginning after December
31, 2006, the Secretary of the Treasury and the Secretary of Labor
shall provide for the filing of a simplified annual return for any
retirement plan which covers less than 25 participants on the first day
of a plan year and which meets the requirements described in
subparagraphs (B), (D), and (E) of subsection (a)(2).
SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT
RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES
AND OTHER ENTITIES.
(a) Voluntary Early Retirement Incentive Plans.--
(1) Treatment as plan providing severance pay.--Section
457(e)(11) of the Internal Revenue Code of 1986 (relating to
certain plans excluded) is amended by adding at the end the
following new subparagraph:
``(D) Certain voluntary early retirement incentive
plans.--
``(i) In general.--If an applicable
voluntary early retirement incentive plan--
``(I) makes payments or supplements
as an early retirement benefit, a
retirement-type subsidy, or a benefit
described in the last sentence of
section 411(a)(9), and
``(II) such payments or supplements
are made in coordination with a defined
benefit plan which is described in
section 401(a) and includes a trust
exempt from tax under section 501(a)
and which is maintained by an eligible
employer described in paragraph (1)(A)
or by an education association
described in clause (ii)(II),
such applicable plan shall be treated for
purposes of subparagraph (A)(i) as a bona fide
severance pay plan with respect to such
payments or supplements to the extent such
payments or supplements could otherwise have
been provided under such defined benefit plan
(determined as if section 411 applied to such
defined benefit plan).
``(ii) Applicable voluntary early
retirement incentive plan.--For purposes of
this subparagraph, the term `applicable
voluntary early retirement incentive plan'
means a voluntary early retirement incentive
plan maintained by--
``(I) a local educational agency
(as defined in section 9101 of the
Elementary and Secondary Education Act
of 1965 (20 U.S.C. 7801)), or
``(II) an education association
which principally represents employees
of 1 or more agencies described in
subclause (I) and which is described in
section 501(c) (5) or (6) and exempt
from tax under section 501(a).''
(2) Age discrimination in employment act.--Section 4(l)(1)
of the Age Discrimination in Employment Act of 1967 (29 U.S.C.
623(l)(1)) is amended--
(A) by inserting ``(A)'' after ``(1)'',
(B) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively,
(C) by redesignating clauses (i) and (ii) of
subparagraph (B) (as in effect before the amendments
made by subparagraph (B)) as subclauses (I) and (II),
respectively, and
(D) by adding at the end the following:
``(B) A voluntary early retirement incentive plan that--
``(i) is maintained by--
``(I) a local educational agency (as
defined in section 9101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C.
7801), or
``(II) an education association which
principally represents employees of 1 or more
agencies described in subclause (I) and which
is described in section 501(c) (5) or (6) of
the Internal Revenue Code of 1986 and exempt
from taxation under section 501(a) of such
Code, and
``(ii) makes payments or supplements described in
subclauses (I) and (II) of subparagraph (A)(ii) in
coordination with a defined benefit plan (as so
defined) maintained by an eligible employer described
in section 457(e)(1)(A) of such Code or by an education
association described in clause (i)(II),
shall be treated solely for purposes of subparagraph (A)(ii) as
if it were a part of the defined benefit plan with respect to
such payments or supplements. Payments or supplements under
such a voluntary early retirement incentive plan shall not
constitute severance pay for purposes of section 4(l)(2) of the
Age Discrimination in Employment Act (29 U.S.C. 623(l)(2)).''.
(b) Employment Retention Plans.--
(1) In general.--Section 457(f)(2) of the Internal Revenue
Code of 1986 (relating to exceptions) is amended by striking
``and'' at the end of subparagraph (D), by striking the period
at the end of subparagraph (E) and inserting ``, and'', and by
adding at the end the following:
``(F) that portion of any applicable employment
retention plan described in paragraph (4) with respect
to any participant.''
(2) Definitions and rules relating to employment retention
plans.--Section 457(f) of such Code is amended by adding at the
end the following new paragraph:
``(4) Employment retention plans.--For purposes of
paragraph (2)(F)--
``(A) In general.--The portion of an applicable
employment retention plan described in this paragraph
with respect to any participant is that portion of the
plan which provides benefits payable to the participant
not in excess of twice the applicable dollar limit
determined under subsection (e)(15).
``(B) Other rules.--
``(i) Limitation.--Paragraph (2)(F) shall
only apply to the portion of the plan described
in subparagraph (A) for years preceding the
year in which such portion is paid or otherwise
made available to the participant.
``(ii) Treatment.--A plan shall not be
treated for purposes of this title as providing
for the deferral of compensation for any year
with respect to the portion of the plan
described in subparagraph (A).
``(C) Applicable employment retention plan.--The
term `applicable employment retention plan' means an
employment retention plan maintained by--
``(i) a local educational agency (as
defined in section 9101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C.
7801), or
``(ii) an education association which
principally represents employees of 1 or more
agencies described in clause (i) and which is
described in section 501(c) (5) or (6) and
exempt from taxation under section 501(a).
``(D) Employment retention plan.--The term
`employment retention plan' means a plan to pay, upon
termination of employment, compensation to an employee
of a local educational agency or education association
described in subparagraph (C) for purposes of--
``(i) retaining the services of the
employee, or
``(ii) rewarding such employee for the
employee's service with 1 or more such agencies
or associations.''.
(c) Coordination With ERISA.--Section 3(2)(B) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)) is
amended by adding at the end the following: ``An applicable voluntary
early retirement incentive plan (as defined in section
457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) making payments
or supplements described in section 457(e)(11)(D)(i) of such Code, and
an applicable employment retention plan (as defined in section
457(f)(4)(C) of such Code) making payments of benefits described in
section 457(f)(4)(A) of such Code, shall, for purposes of this title,
be treated as a welfare plan (and not a pension plan) with respect to
such payments and supplements.''
(d) Effective Dates.--
(1) In general.--The amendments made by this Act shall take
effect on the date of the enactment of this Act.
(2) Tax amendments.--The amendments made by subsections
(a)(1) and (b) shall apply to taxable years ending after the
date of the enactment of this Act.
(3) ERISA amendments.--The amendment made by subsection (c)
shall apply to plan years ending after the date of the
enactment of this Act.
(4) Construction.--Nothing in the amendments made by this
section shall alter or affect the construction of the Internal
Revenue Code of 1986, the Employee Retirement Income Security
Act of 1974, or the Age Discrimination in Employment Act of
1967 as applied to any plan, arrangement, or conduct to which
such amendments do not apply.
SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS A RESULT OF
PENSION ROLLOVERS.
(a) In General.--Section 3304(a) of the Internal Revenue Code of
1986 (relating to requirements for State unemployment laws) is amended
by adding at the end the following new flush sentence:
``Compensation shall not be reduced under paragraph (15) for any
pension, retirement or retired pay, annuity, or similar payment which
is not includible in gross income of the individual for the taxable
year in which paid because it was part of a rollover distribution.''.
(b) Effective Date.--The amendment made by this section shall apply
to weeks beginning on or after the date of the enactment of this Act.
SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOVERNMENTAL SECTION 457
PLANS.
(a) In General.--Section 641(f) of the Economic Growth and Tax
Relief Reconciliation Act of 2001 is amended by adding at the end the
following new paragraph:
``(4) Transition rule for certain governmental plans.--In
the case of distributions from an eligible deferred
compensation plan of an employer described in section
457(e)(1)(A) of the Internal Revenue Code of 1986 which are
made after December 31, 2001, and which are part of a series of
distributions which--
``(A) began before January 1, 2002, and
``(B) are payable for 10 years or less, the
Internal Revenue Code of 1986 may be applied to such
distributions without regard to the amendments made by
subsection (a)(1)(D).''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect as if included in the provisions of section 641 of the
Economic Growth and Tax Relief Reconciliation Act of 2001.
SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS GOVERNMENTAL PLAN.
(a) In General.--For purposes of the Internal Revenue Code of 1986
and the Employee Retirement Income Security Act of 1974, an eligible
defined benefit plan shall be treated as a governmental plan (within
the meaning of section 414(d) of such Code and section 3(32) of such
Act).
(b) Eligible Defined Benefit Plan.--For purposes of this section,
an eligible defined benefit plan is a defined benefit plan maintained
by a nonprofit corporation which was--
(1) incorporated on September 16, 1998, under a State
nonprofit corporation statute; and
(2) organized for the express purpose of supporting the
missions and goals of a public corporation which--
(A) was created by a State statute effective on
July 1, 1995;
(B) is a governmental entity under State law; and
(C) is a member of the nonprofit corporation.
(c) Effective Date.--The amendments made by this section shall
apply to any year beginning before, on, or after the date of the
enactment of this Act.
SEC. 1108. INCREASING PARTICIPATION IN CASH OR DEFERRED PLANS THROUGH
AUTOMATIC CONTRIBUTION ARRANGEMENTS.
(a) In General.--Section 401(k) of the Internal Revenue Code of
1986 (relating to cash or deferred arrangement) is amended by adding at
the end the following new paragraph:
``(13) Nondiscrimination requirements for automatic
contribution trusts.--
``(A) In general.--A cash or deferred arrangement
shall be treated as meeting the requirements of
paragraph (3)(A)(ii) if such arrangement constitutes an
automatic contribution trust.
``(B) Automatic contribution trust.--
``(i) In general.--For purposes of this
paragraph, the term `automatic contribution
trust' means an arrangement--
``(I) except as provided in clauses
(ii) and (iii), under which 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 the applicable percentage of
the employee's compensation, and
``(II) which meets the requirements
of subparagraphs (C), (D), (E), and
(F).
``(ii) Exception for existing employees.--
In the case of any employee--
``(I) who was eligible to
participate in the arrangement (or a
predecessor arrangement) immediately
before the first date on which the
arrangement is an automatic
contribution trust, and
``(II) whose rate of contribution
immediately before such first date was
less than the applicable percentage for
the employee,
clause (i)(I) shall not apply to such employee
until the date which is 1 year after such first
date (or such earlier date as the employee may
elect).
``(iii) Election out.--Each employee
eligible to participate in the arrangement may
specifically elect not to have contributions
made under clause (i), and such clause shall
cease to apply to compensation paid on or after
the effective date of the election.
``(iv) Applicable percentage.--For purposes
of this subparagraph--
``(I) In general.--The term
`applicable percentage' means, with
respect to any employee, the uniform
percentage (not less than 3 percent)
determined under the arrangement. In
the case of an employee who was
eligible to participate in the
arrangement (or a predecessor
arrangement) immediately before the
first date on which the arrangement is
an automatic contribution trust, the
initial applicable percentage shall in
no event be less than the percentage in
effect with respect to the employee
under the arrangement immediately
before the employee first begins
participation in the automatic
contribution trust.
``(II) Increase in percentage.--In
the case of the second plan year
beginning after the first date on which
the election under clause (i)(I) is in
effect with respect to the employee and
any succeeding plan year, the
applicable percentage shall be a
percentage (not greater than 10 percent
or such higher uniform percentage
determined under the arrangement) equal
to the sum of the applicable percentage
for the employee as of the close of the
preceding plan year plus 1 percentage
point (or such higher percentage
specified by the plan). A plan may
elect to provide that, in lieu of any
increase under the preceding sentence,
the increase in the applicable
percentage required under this
subclause shall occur after each
increase in compensation an employee
receives on or after the first day of
such second plan year and that the
applicable percentage after each such
increase in compensation shall be equal
to the applicable percentage for the
employee immediately before such
increase in compensation plus 1
percentage point (or such higher
percentage specified by the plan).
``(C) Matching or nonelective contributions.--
``(i) In general.--The requirements of this
subparagraph are met if, under the arrangement,
the employer--
``(I) makes matching contributions
on behalf of each employee who is not a
highly compensated employee in an
amount equal to 50 percent of the
elective contributions of the employee
to the extent such elective
contributions do not exceed 7 percent
of compensation; or
``(II) is required, without regard
to whether the employee makes an
elective contribution or employee
contribution, to make a contribution to
a defined contribution plan on behalf
of each employee who is not a highly
compensated employee and who is
eligible to participate in the
arrangement in an amount equal to at
least 3 percent of the employee's
compensation,
The rules of clauses (ii) and (iii) of
paragraph (12)(B) shall apply for purposes of
subclause (I). The rules of paragraph
(12)(E)(ii) shall apply for purposes of
subclauses (I) and (II).
``(ii) Other plans.--An arrangement shall
be treated as meeting the requirements under
clause (i) if any other plan maintained by the
employer meets such requirements with respect
to employees eligible under the arrangement.
``(D) 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
(B)(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, and how
contributions made under the
arrangement will be invested in the
absence of any investment election by
the employee, 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 (or if the
plan elects to change the applicable percentage
after any increase in compensation, before the
increase), given notice of the employee's
rights and obligations under the arrangement.
The requirements of clauses (i) and (ii) of paragraph
(12)(D) shall be met with respect to the notices
described in clauses (ii) and (iii) of this
subparagraph.
``(E) Participation, withdrawal, and vesting
requirements.--The requirements of this subparagraph
are met if--
``(i) the arrangement requires that each
employee eligible to participate in the
arrangement (determined without regard to any
minimum service requirement otherwise
applicable under section 410(a) or the plan)
commences participation in the arrangement no
later than the 1st day of the 1st calendar
quarter beginning after the date on which
employee first becomes so eligible,
``(ii) the withdrawal requirements of
paragraph (2)(B) are met with respect to all
employer contributions (including matching and
elective contributions) taken into account in
determining whether the arrangement meets the
requirements of subparagraph (C), and
``(iii) the arrangement requires that an
employee's right to the accrued benefit derived
from employer contributions described in clause
(ii) (other than elective contributions) is
nonforfeitable after the employee has completed
at least 2 years of service.
``(F) Certain withdrawals must be allowed.--
Notwithstanding any other provision of this subsection,
the requirements of this subparagraph are met if the
arrangement allows employees to elect to make
permissible withdrawals in accordance with section
414(w).''
(b) Matching Contributions.--Section 401(m) of the Internal Revenue
Code of 1986 (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by redesignating
paragraph (12) as paragraph (13) and by inserting after paragraph (11)
the following new paragraph:
``(12) Alternate method for automatic contribution
trusts.--A defined contribution plan shall be treated as
meeting the requirements of paragraph (2) with respect to
matching contributions if the plan--
``(A) meets the contribution requirements of
subparagraphs (B)(i) and (C) of subsection (k)(13);
``(B) meets the notice requirements of subparagraph
(D) of subsection (k)(13); and
``(C) meets the requirements of paragraph (11)(B)
(ii) and (iii).''.
(c) Exclusion From Definition of Top-Heavy Plans.--
(1) Elective contribution rule.--Clause (i) of section
416(g)(4)(H) of the Internal Revenue Code of 1986 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) Section 403(b) contracts.--Paragraph (11) of section 401(m) of
the Internal Revenue Code of 1986 is amended by adding at the end the
following:
``(C) Section 403(b) contracts.--An annuity
contract under section 403(b) shall be treated as
meeting the requirements of paragraph (2) with respect
to matching contributions if such contract meets
requirements similar to the requirements under
subparagraph (A).''.
(e) Preemption of Conflicting State Regulation.--Section 514 of the
Employee Retirement Income Security of 1974 (29 U.S.C. 1144) is amended
by inserting at the end the following new subsection:
``(e) Automatic Contribution Arrangements.--
``(1) In general.--Notwithstanding any other provision of
this section, any law of a State shall be superseded if it
would directly or indirectly prohibit or restrict the inclusion
in any plan of an eligible automatic contribution arrangement.
``(2) Eligible automatic contribution arrangement.--For
purposes of this subsection, the term `eligible automatic
contribution arrangement' means an arrangement--
``(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 contributions described in
subparagraph (B) are invested in accordance with
regulations prescribed by the Secretary under section
404(c)(4), and
``(D) which meets the requirements of paragraph
(3).
``(3) Notice requirements.--
``(A) In general.--The administrator of an
individual account plan shall, within a reasonable
period before each plan year, give to each employee to
whom an arrangement described in paragraph (2) 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 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 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.''.
(f) Treatment of Withdrawals of Contributions During First 60
Days.--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
subsection--
``(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 60
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 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--
``(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 contributions described in
subparagraph (B) are invested in accordance with
regulations prescribed by the Secretary of Labor under
section 404(c)(4) 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 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 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.''.
(g) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to plan years
beginning after December 31, 2005.
(2) Section 403(b) contracts.--The amendments made by
subsection (d) shall apply to years ending after the date of
the enactment of this Act.
SEC. 1109. 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)) is amended by adding at the
end the following new paragraph:
``(4) 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,
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 requirements of
clauses (i) and (ii) of section 401(k)(12)(D)
of the Internal Revenue Code of 1986 shall be
met with respect to the notices described in
this subparagraph.''.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
(2) Regulations.--Final regulations under section
404(c)(4)(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. 1110. 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 C.F.R. 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.
TITLE XII--UNITED STATES TAX COURT MODERNIZATION
SEC. 1200. 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. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO ARE
ASSASSINATED.
(a) Eligibility in Case of Death by Assassination.--Subsection (h)
of section 7448 (relating to annuities to surviving spouses and
dependent children of judges) is amended to read as follows:
``(h) Entitlement to Annuity.--
``(1) In general.--
``(A) Annuity to surviving spouse.--If a judge
described in paragraph (2) is survived by a surviving
spouse but not by a dependent child, there shall be
paid to such surviving spouse an annuity beginning with
the day of the death of the judge or following the
surviving spouse's attainment of the age of 50 years,
whichever is the later, in an amount computed as
provided in subsection (m).
``(B) Annuity to child.--If such a judge is
survived by a surviving spouse and a dependent child or
children, there shall be paid to such surviving spouse
an immediate annuity in an amount computed as provided
in subsection (m), and there shall also be paid to or
on behalf of each such child an immediate annuity equal
to the lesser of--
``(i) 10 percent of the average annual
salary of such judge (determined in accordance
with subsection (m)), or
``(ii) 20 percent of such average annual
salary, divided by the number of such children.
``(C) Annuity to surviving dependent children.--If
such a judge leaves no surviving spouse but leaves a
surviving dependent child or children, there shall be
paid to or on behalf of each such child an immediate
annuity equal to the lesser of--
``(i) 20 percent of the average annual
salary of such judge (determined in accordance
with subsection (m)), or
``(ii) 40 percent of such average annual
salary, divided by the number of such children.
``(2) Covered judges.--Paragraph (1) applies to any judge
electing under subsection (b)--
``(A) who dies while a judge after having rendered
at least 5 years of civilian service computed as
prescribed in subsection (n), for the last 5 years of
which the salary deductions provided for by subsection
(c)(1) or the deposits required by subsection (d) have
actually been made or the salary deductions required by
the civil service retirement laws have actually been
made, or
``(B) who dies by assassination after having
rendered less than 5 years of civilian service computed
as prescribed in subsection (n) if, for the period of
such service, the salary deductions provided for by
subsection (c)(1) or the deposits required by
subsection (d) have actually been made.
``(3) Termination of annuity.--
``(A) In the case of a surviving spouse.--The
annuity payable to a surviving spouse under this
subsection shall be terminable upon such surviving
spouse's death or such surviving spouse's remarriage
before attaining age 55.
``(B) In the case of a child.--The annuity payable
to a child under this subsection shall be terminable
upon (i) the child attaining the age of 18 years, (ii)
the child's marriage, or (iii) the child's death,
whichever first occurs, except that if such child is
incapable of self-support by reason of mental or
physical disability the child's annuity shall be
terminable only upon death, marriage, or recovery from
such disability.
``(C) In the case of a dependent child after death
of surviving spouse.--In case of the death of a
surviving spouse of a judge leaving a dependent child
or children of the judge surviving such spouse, the
annuity of such child or children shall be recomputed
and paid as provided in paragraph (1)(C).
``(D) Recomputation.--In any case in which the
annuity of a dependent child is terminated under this
subsection, the annuities of any remaining dependent
child or children, based upon the service of the same
judge, shall be recomputed and paid as though the child
whose annuity was so terminated had not survived such
judge.
``(4) Special rule for assassinated judges.--In the case of
a survivor or survivors of a judge described in paragraph
(2)(B), there shall be deducted from the annuities otherwise
payable under this section an amount equal to--
``(A) the amount of salary deductions provided for
by subsection (c)(1) that would have been made if such
deductions had been made for 5 years of civilian
service computed as prescribed in subsection (n) before
the judge's death, reduced by
``(B) the amount of such salary deductions that
were actually made before the date of the judge's
death.'.'
(b) Definition of Assassination.--Section 7448(a) (relating to
definitions) is amended by adding at the end the following new
paragraph:
``(8) The terms `assassinated' and `assassination' mean the
killing of a judge that is motivated by the performance by that
judge of his or her official duties.''.
(c) Determination of Assassination.--Subsection (i) of section 7448
is amended--
(1) by striking the subsection heading and inserting the
following:
``(i) Determinations by Chief Judge.--
``(1) Dependency and disability.--'',
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new paragraph:
``(2) Assassination.--The chief judge shall determine
whether the killing of a judge was an assassination, subject to
review only by the Tax Court. The head of any Federal agency
that investigates the killing of a judge shall provide
information to the chief judge that would assist the chief
judge in making such a determination.''.
(d) Computation of Annuities.--Subsection (m) of section 7448 is
amended--
(1) by striking the subsection heading and inserting the
following:
``(m) Computation of Annuities.--
``(1) In general.--'',
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new paragraph:
``(2) Assassinated judges.--In the case of a judge who is
assassinated and who has served less than 3 years, the annuity
of the surviving spouse of such judge shall be based upon the
average annual salary received by such judge for judicial
service.''.
(e) Other Benefits.--Section 7448 is amended by adding at the end
the following:
``(u) Other Benefits.--In the case of a judge who is assassinated,
an annuity shall be paid under this section notwithstanding a
survivor's eligibility for or receipt of benefits under chapter 81 of
title 5, United States Code, except that the annuity for which a
surviving spouse is eligible under this section shall be reduced to the
extent that the total benefits paid under this section and chapter 81
of that title for any year would exceed the current salary for that
year of the office of the judge.''.
SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR
ANNUITIES.
(a) In General.--Subsection (s) of section 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) 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. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.
(a) In General.--Section 7447 (relating to retirement of judges) is
amended by adding at the end the following new subsection:
``(j) Life Insurance Coverage.--For purposes of chapter 87 of title
5, United States Code (relating to life insurance), any individual who
is serving as a judge of the Tax Court or who is retired under this
section is deemed to be an employee who is continuing in active
employment.''.
(b) Effective Date.--The amendment made by this section shall apply
to any individual serving as a judge of the United States Tax Court or
to any retired judge of the United States Tax Court on the date of the
enactment of this Act.
SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65
OR OVER.
Section 7472 (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 April 24, 1999,
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. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF JUDGES'
ACCRUED ANNUAL LEAVE.
(a) In General.--Section 7443 (relating to membership of the Tax
Court) is amended by adding at the end the following new subsection:
``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
Notwithstanding the provisions of sections 5551 and 6301 of title 5,
United States Code, when an individual subject to the leave system
provided in chapter 63 of that title is appointed by the President to
be a judge of the Tax Court, the individual shall be entitled to
receive, upon appointment to the Tax Court, a lump-sum payment from the
Tax Court of the accumulated and accrued current annual leave standing
to the individual's credit as certified by the agency from which the
individual resigned.''.
(b) Effective Date.--The amendment made by this section shall apply
to any judge of the United States Tax Court who has an outstanding
leave balance on the date of the enactment of this Act and to any
individual appointed by the President to serve as a judge of the United
States Tax Court after such date.
SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS
PLAN.
(a) In General.--Section 7447 (relating to retirement of judges),
as amended by this Act, is amended by adding at the end the following
new subsection:
``(k) 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.--
``(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) 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 Office of Personnel
Management prescribes by regulation, the Executive
Director shall pay the nonforfeitable account balance
to the participant in a single payment.''.
(b) 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. 1207. EXEMPTION OF TEACHING COMPENSATION OF RETIRED JUDGES FROM
LIMITATION ON OUTSIDE EARNED INCOME.
(a) In General.--Section 7447 (relating to retirement of judges),
as amended by this Act, is amended by adding at the end the following
new subsection:
``(l) Teaching Compensation of Retired Judges.--For purposes of the
limitation under section 501(a) of the Ethics in Government Act of 1978
(5 U.S.C. App.), any compensation for teaching approved under section
502(a)(5) of such Act shall not be treated as outside earned income
when received by a judge of the Tax Court who has retired under
subsection (b) for teaching performed during any calendar year for
which such a judge has met the requirements of subsection (c), as
certified by the chief judge of the Tax Court.''.
(b) Effective Date.--The amendment made by this section shall apply
to any individual serving as a retired judge of the United States Tax
Court on or after the date of the enactment of this Act.
SEC. 1208. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES OF THE TAX
COURT.
(a) Title of Special Trial Judge Changed to Magistrate Judge of the
Tax Court.--The heading of section 7443A is amended to read as follows:
``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''
(b) Appointment, Tenure, and Removal.--Subsection (a) of section
7443A is amended to read as follows:
``(a) Appointment, Tenure, and Removal.--
``(1) Appointment.--The chief judge may, from time to time,
appoint and reappoint magistrate judges of the Tax Court for a
term of 8 years. The magistrate judges of the Tax Court shall
proceed under such rules as may be promulgated by the Tax
Court.
``(2) Removal.--Removal of a magistrate judge of the Tax
Court during the term for which he or she is appointed shall be
only for incompetency, misconduct, neglect of duty, or physical
or mental disability, but the office of a magistrate judge of
the Tax Court shall be terminated if the judges of the Tax
Court determine that the services performed by the magistrate
judge of the Tax Court are no longer needed. Removal shall not
occur unless a majority of all the judges of the Tax Court
concur in the order of removal. Before any order of removal
shall be entered, a full specification of the charges shall be
furnished to the magistrate judge of the Tax Court, and he or
she shall be accorded by the judges of the Tax Court an
opportunity to be heard on the charges.''.
(c) Salary.--Section 7443A(d) (relating to salary) is amended by
striking ``90'' and inserting ``92''.
(d) Exemption From Federal Leave Provisions.--Section 7443A is
amended by adding at the end the following new subsection:
``(f) Exemption From Federal Leave Provisions.--
``(1) In general.--A magistrate judge of the Tax Court
appointed under this section shall be exempt from the
provisions of subchapter I of chapter 63 of title 5, United
States Code.
``(2) Treatment of unused leave.--
``(A) After service as magistrate judge.--If an
individual who is exempted under paragraph (1) from the
subchapter referred to in such paragraph was previously
subject to such subchapter and, without a break in
service, again becomes subject to such subchapter on
completion of the individual's service as a magistrate
judge, the unused annual leave and sick leave standing
to the individual's credit when such individual was
exempted from this subchapter is deemed to have
remained to the individual's credit.
``(B) Computation of annuity.--In computing an
annuity under section 8339 of title 5, United States
Code, the total service of an individual specified in
subparagraph (A) who retires on an immediate annuity or
dies leaving a survivor or survivors entitled to an
annuity includes, without regard to the limitations
imposed by subsection (f) of such section 8339, the
days of unused sick leave standing to the individual's
credit when such individual was exempted from
subchapter I of chapter 63 of title 5, United States
Code, except that these days will not be counted in
determining average pay or annuity eligibility.
``(C) Lump sum payment.--Any accumulated and
current accrued annual leave or vacation balances
credited to a magistrate judge as of the date of the
enactment of this subsection shall be paid in a lump
sum at the time of separation from service pursuant to
the provisions and restrictions set forth in section
5551 of title 5, United States Code, and related
provisions referred to in such section.''.
(e) Conforming Amendments.--
(1) The heading of subsection (b) of section 7443A is
amended by striking ``Special Trial Judges'' and inserting
``Magistrate Judges of the Tax Court''.
(2) Section 7443A(b) is amended by striking ``special trial
judges of the court'' and inserting ``magistrate judges of the
Tax Court''.
(3) Subsections (c) and (d) of section 7443A are amended by
striking ``special trial judge'' and inserting ``magistrate
judge of the Tax Court'' each place it appears.
(4) Section 7443A(e) is amended by striking ``special trial
judges'' and inserting ``magistrate judges of the Tax Court''.
(5) Section 7456(a) is amended by striking ``special trial
judge'' each place it appears and inserting ``magistrate
judge''.
(6) Subsection (c) of section 7471 is amended--
(A) by striking the subsection heading and
inserting ``Magistrate Judges of the Tax Court.--'',
and
(B) by striking ``special trial judges'' and
inserting ``magistrate judges''.
SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF
MAGISTRATE JUDGES OF THE TAX COURT.
(a) Definitions.--Section 7448(a) (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 `magistrate judge' means a judicial officer
appointed pursuant to section 7443A, including any individual
receiving an annuity under section 7443B, or chapters 83 or 84,
as the case may be, of title 5, United States Code, whether or
not performing judicial duties under section 7443C.
``(6) The term `magistrate judge's salary' means the salary
of a magistrate judge received under section 7443A(d), any
amount received as an annuity under section 7443B, or chapters
83 or 84, as the case may be, of title 5, United States Code,
and compensation received under section 7443C.''.
(b) Election.--Subsection (b) of section 7448 (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) Magistrate judges.--Any magistrate judge may by
written election filed with the chief judge bring himself or
herself within the purview of this section. 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 is amended by inserting
``and magistrate judges'' after ``judges''.
(2) The item relating to section 7448 in the table of
sections for part I of subchapter C of chapter 76 is amended by
inserting ``and magistrate judges'' after ``judges''.
(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n),
and (u) of section 7448, as amended by this Act, are each
amended--
(A) by inserting ``or magistrate judge'' after
``judge'' each place it appears other than in the
phrase ``chief judge'', and
(B) by inserting ``or magistrate judge's'' after
``judge's'' each place it appears.
(4) Section 7448(c) is amended--
(A) in paragraph (1), by striking ``Tax Court
judges'' and inserting ``Tax Court judicial officers'',
(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
``subsections (a)(4) and (a)(6)''.
(5) Section 7448(g) is amended by inserting ``or section
7443B'' after ``section 7447'' each place it appears, and by
inserting ``or an annuity'' after ``retired pay''.
(6) Section 7448(j)(1) is amended--
(A) in subparagraph (A), by striking ``service or
retired'' and inserting ``service, retired'', and by
inserting ``, or receiving any annuity under section
7443B or chapters 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)''.
(7) Section 7448(m)(1), as amended by this Act, is
amended--
(A) by inserting ``or any annuity under section
7443B or chapters 83 or 84 of title 5, United States
Code'' after ``7447(d)'', and
(B) by inserting ``or 7443B(m)(1)(B) after
``7447(f)(4)''.
(8) Section 7448(n) is amended by inserting ``his years of
service pursuant to any appointment under section 7443A,''
after ``of the Tax Court,''.
(9) Section 3121(b)(5)(E) is amended by inserting ``or
magistrate judge'' before ``of the United States Tax Court''.
(10) Section 210(a)(5)(E) of the Social Security Act is
amended by inserting ``or magistrate judge'' before ``of the
United States Tax Court''.
SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.
(a) Retirement and Annuity Program.--Part I of subchapter C of
chapter 76 is amended by inserting after section 7443A the following
new section:
``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX COURT.
``(a) Retirement Based on Years of Service.--A magistrate judge of
the Tax Court to whom this section applies and who retires from office
after attaining the age of 65 years and serving at least 14 years,
whether continuously or otherwise, as such magistrate judge shall,
subject to subsection (f), be entitled to receive, during the remainder
of the magistrate judge's lifetime, an annuity equal to the salary
being received at the time the magistrate judge leaves office.
``(b) Retirement Upon Failure of Reappointment.--A magistrate judge
of the Tax Court to whom this section applies who is not reappointed
following the expiration of the term of office of such magistrate judge
and who retires upon the completion of the term shall, subject to
subsection (f), be entitled to receive, upon attaining the age of 65
years and during the remainder of such magistrate judge's lifetime, an
annuity equal to that portion of the salary being received at the time
the magistrate judge leaves office which the aggregate number of years
of service, not to exceed 14, bears to 14, if--
``(1) such magistrate judge has served at least 1 full term
as a magistrate judge, and
``(2) not earlier than 9 months before the date on which
the term of office of such magistrate judge expires, and not
later than 6 months before such date, such magistrate judge
notified the chief judge of the Tax Court in writing that such
magistrate judge was willing to accept reappointment to the
position in which such magistrate judge was serving.
``(c) Service of at Least 8 Years.--A magistrate judge of the Tax
Court to whom this section applies and who retires after serving at
least 8 years, whether continuously or otherwise, as such a magistrate
judge shall, subject to subsection (f), be entitled to receive, upon
attaining the age of 65 years and during the remainder of the
magistrate judge's lifetime, an annuity equal to that portion of the
salary being received at the time the magistrate judge leaves office
which the aggregate number of years of service, not to exceed 14, bears
to 14. Such annuity shall be reduced by \1/6\ of 1 percent for each
full month such magistrate judge was under the age of 65 at the time
the magistrate judge left office, except that such reduction shall not
exceed 20 percent.
``(d) Retirement for Disability.--A magistrate judge of the Tax
Court to whom this section applies, who has served at least 5 years,
whether continuously or otherwise, as such a magistrate judge and who
retires or is removed from office upon the sole ground of mental or
physical disability shall, subject to subsection (f), be entitled to
receive, during the remainder of the magistrate judge's lifetime, an
annuity equal to 40 percent of the salary being received at the time of
retirement or removal or, in the case of a magistrate judge who has
served for at least 10 years, an amount equal to that proportion of the
salary being received at the time of retirement or removal which the
aggregate number of years of service, not to exceed 14, bears to 14.
``(e) Cost-of-Living Adjustments.--A magistrate judge of the Tax
Court who is entitled to an annuity under this section is also entitled
to a cost-of-living adjustment in such annuity, calculated and payable
in the same manner as adjustments under section 8340(b) of title 5,
United States Code, except that any such annuity, as increased under
this subsection, may not exceed the salary then payable for the
position from which the magistrate judge retired or was removed.
``(f) Election; Annuity in Lieu of Other Annuities.--
``(1) In general.--A magistrate judge of the Tax Court
shall be entitled to an annuity under this section if the
magistrate judge elects an annuity under this section by
notifying the chief judge of the Tax Court not later than the
later of--
``(A) 5 years after the magistrate judge of the Tax
Court begins judicial service, or
``(B) 5 years after the date of the enactment of
this subsection.
Such notice shall be given in accordance with procedures
prescribed by the Tax Court.
``(2) Annuity in lieu of other annuity.--A magistrate judge
who elects to receive an annuity under this section shall not
be entitled to receive--
``(A) any annuity to which such magistrate judge
would otherwise have been entitled under subchapter III
of chapter 83, or under chapter 84 (except for
subchapters III and VII), of title 5, United States
Code, for service performed as a magistrate or
otherwise,
``(B) an annuity or salary in senior status or
retirement under section 371 or 372 of title 28, United
States Code,
``(C) retired pay under section 7447, or
``(D) retired pay under section 7296 of title 38,
United States Code.
``(3) Coordination with title 5.--A magistrate judge of the
Tax Court who elects to receive an annuity under this section--
``(A) shall not be subject to deductions and
contributions otherwise required by section 8334(a) of
title 5, United States Code,
``(B) shall be excluded from the operation of
chapter 84 (other than subchapters III and VII) of such
title 5, and
``(C) is entitled to a lump-sum credit under
section 8342(a) or 8424 of such title 5, as the case
may be.
``(g) Calculation of Service.--For purposes of calculating an
annuity under this section--
``(1) service as a magistrate judge of the Tax Court to
whom this section applies may be credited, and
``(2) each month of service shall be credited as \1/12\ of
a year, and the fractional part of any month shall not be
credited.
``(h) Covered Positions and Service.--This section applies to any
magistrate judge of the Tax Court or special trial judge of the Tax
Court appointed under this subchapter, but only with respect to service
as such a magistrate judge or special trial judge after a date not
earlier than 9\1/2\ years before the date of the enactment of this
subsection.
``(i) Payments Pursuant to Court Order.--
``(1) In general.--Payments under this section which would
otherwise be made to a magistrate judge of the Tax Court based
upon his or her service shall be paid (in whole or in part) by
the chief judge of the Tax Court to another person if and to
the extent expressly provided for in the terms of any court
decree of divorce, annulment, or legal separation, or the terms
of any court order or court-approved property settlement
agreement incident to any court decree of divorce, annulment,
or legal separation. Any payment under this paragraph to a
person bars recovery by any other person.
``(2) Requirements for payment.--Paragraph (1) shall apply
only to payments made by the chief judge of the Tax Court after
the date of receipt by the chief judge of written notice of
such decree, order, or agreement, and such additional
information as the chief judge may prescribe.
``(3) Court defined.--For purposes of this subsection, the
term `court' means any court of any State, the District of
Columbia, the Commonwealth of Puerto Rico, Guam, the Northern
Mariana Islands, or the Virgin Islands, and any Indian tribal
court or courts of Indian offense.
``(j) Deductions, Contributions, and Deposits.--
``(1) Deductions.--Beginning with the next pay period after
the chief judge of the Tax Court receives a notice under
subsection (f) that a magistrate judge of the Tax Court has
elected an annuity under this section, the chief judge shall
deduct and withhold 1 percent of the salary of such magistrate
judge. Amounts shall be so deducted and withheld in a manner
determined by the chief judge. Amounts deducted and withheld
under this subsection shall be deposited in the Treasury of the
United States to the credit of the Tax Court Judicial Officers'
Retirement Fund. Deductions under this subsection from the
salary of a magistrate judge shall terminate upon the
retirement of the magistrate judge or upon completion of 14
years of service for which contributions under this section
have been made, whether continuously or otherwise, as
calculated under subsection (g), whichever occurs first.
``(2) Consent to deductions; discharge of claims.--Each
magistrate judge of the Tax Court who makes an election under
subsection (f) shall be deemed to consent and agree to the
deductions from salary which are made under paragraph (1).
Payment of such salary less such deductions (and any deductions
made under section 7448) is a full and complete discharge and
acquittance of all claims and demands for all services rendered
by such magistrate judge during the period covered by such
payment, except the right to those benefits to which the
magistrate judge is entitled under this section (and section
7448).
``(k) Deposits for Prior Service.--Each magistrate judge of the Tax
Court who makes an election under subsection (f) may deposit, for
service performed before such election for which contributions may be
made under this section, an amount equal to 1 percent of the salary
received for that service. Credit for any period covered by that
service may not be allowed for purposes of an annuity under this
section until a deposit under this subsection has been made for that
period.
``(l) Individual Retirement Records.--The amounts deducted and
withheld under subsection (j), and the amounts deposited under
subsection (k), shall be credited to individual accounts in the name of
each magistrate judge of the Tax Court from whom such amounts are
received, for credit to the Tax Court Judicial Officers' Retirement
Fund.
``(m) Annuities Affected in Certain Cases.--
``(1) 1-year forfeiture for failure to perform judicial
duties.--Subject to paragraph (3), any magistrate judge of the
Tax Court who retires under this section and who fails to
perform judicial duties required of such individual by section
7443C shall forfeit all rights to an annuity under this section
for a 1-year period which begins on the 1st day on which such
individual fails to perform such duties.
``(2) Permanent forfeiture of retired pay where certain
non-government services performed.--Subject to paragraph (3),
any magistrate judge of the Tax Court who retires under this
section and who thereafter performs (or supervises or directs
the performance of) legal or accounting services in the field
of Federal taxation for the individual's client, the
individual's employer, or any of such employer's clients, shall
forfeit all rights to an annuity under this section for all
periods beginning on or after the first day on which the
individual performs (or supervises or directs the performance
of) such services. The preceding sentence shall not apply to
any civil office or employment under the Government of the
United States.
``(3) Forfeitures not to apply where individual elects to
freeze amount of annuity.--
``(A) In general.--If a magistrate judge of the Tax
Court makes an election under this paragraph--
``(i) paragraphs (1) and (2) (and section
7443C) shall not apply to such magistrate judge
beginning on the date such election takes
effect, and
``(ii) the annuity payable under this
section to such magistrate judge, for periods
beginning on or after the date such election
takes effect, shall be equal to the annuity to
which such magistrate judge is entitled on the
day before such effective date.
``(B) Election requirements.--An election under
subparagraph (A)--
``(i) may be made by a magistrate judge of
the Tax Court eligible for retirement under
this section, and
``(ii) shall be filed with the chief judge
of the Tax Court.
Such an election, once it takes effect, shall be
irrevocable.
``(C) Effective date of election.--Any election
under subparagraph (A) shall take effect on the first
day of the first month following the month in which the
election is made.
``(4) Accepting other employment.--Any magistrate judge of
the Tax Court who retires under this section and thereafter
accepts compensation for civil office or employment under the
United States Government (other than for the performance of
functions as a magistrate judge of the Tax Court under section
7443C) shall forfeit all rights to an annuity under this
section for the period for which such compensation is received.
For purposes of this paragraph, the term `compensation'
includes retired pay or salary received in retired status.
``(n) Lump-Sum Payments.--
``(1) Eligibility.--
``(A) In general.--Subject to paragraph (2), an
individual who serves as a magistrate judge of the Tax
Court and--
``(i) who leaves office and is not
reappointed as a magistrate judge of the Tax
Court for at least 31 consecutive days,
``(ii) who files an application with the
chief judge of the Tax Court for payment of a
lump-sum credit,
``(iii) is not serving as a magistrate
judge of the Tax Court at the time of filing of
the application, and
``(iv) will not become eligible to receive
an annuity under this section within 31 days
after filing the application,
is entitled to be paid the lump-sum credit. Payment of
the lump-sum credit voids all rights to an annuity
under this section based on the service on which the
lump-sum credit is based, until that individual resumes
office as a magistrate judge of the Tax Court.
``(B) Payment to survivors.--Lump-sum benefits
authorized by subparagraphs (C), (D), and (E) of this
paragraph shall be paid to the person or persons
surviving the magistrate judge of the Tax Court and
alive on the date title to the payment arises, in the
order of precedence set forth in subsection (o) of
section 376 of title 28, United States Code, and in
accordance with the last 2 sentences of paragraph (1)
of that subsection. For purposes of the preceding
sentence, the term `judicial official' as used in
subsection (o) of such section 376 shall be deemed to
mean `magistrate judge of the Tax Court' and the terms
`Administrative Office of the United States Courts' and
`Director of the Administrative Office of the United
States Courts' shall be deemed to mean `chief judge of
the Tax Court'.
``(C) Payment upon death of judge before receipt of
annuity.--If a magistrate judge of the Tax Court dies
before receiving an annuity under this section, the
lump-sum credit shall be paid.
``(D) Payment of annuity remainder.--If all annuity
rights under this section based on the service of a
deceased magistrate judge of the Tax Court terminate
before the total annuity paid equals the lump-sum
credit, the difference shall be paid.
``(E) Payment upon death of judge during receipt of
annuity.--If a magistrate judge of the Tax Court who is
receiving an annuity under this section dies, any
accrued annuity benefits remaining unpaid shall be
paid.
``(F) Payment upon termination.--Any accrued
annuity benefits remaining unpaid on the termination,
except by death, of the annuity of a magistrate judge
of the Tax Court shall be paid to that individual.
``(G) Payment upon accepting other employment.--
Subject to paragraph (2), a magistrate judge of the Tax
Court who forfeits rights to an annuity under
subsection (m)(4) before the total annuity paid equals
the lump-sum credit shall be entitled to be paid the
difference if the magistrate judge of the Tax Court
files an application with the chief judge of the Tax
Court for payment of that difference. A payment under
this subparagraph voids all rights to an annuity on
which the payment is based.
``(2) Spouses and former spouses.--
``(A) In general.--Payment of the lump-sum credit
under paragraph (1)(A) or a payment under paragraph
(1)(G)--
``(i) may be made only if any current
spouse and any former spouse of the magistrate
judge of the Tax Court are notified of the
magistrate judge's application, and
``(ii) shall be subject to the terms of a
court decree of divorce, annulment, or legal
separation, or any court or court approved
property settlement agreement incident to such
decree, if--
``(I) the decree, order, or
agreement expressly relates to any
portion of the lump-sum credit or other
payment involved, and
``(II) payment of the lump-sum
credit or other payment would
extinguish entitlement of the
magistrate judge's spouse or former
spouse to any portion of an annuity
under subsection (i).
``(B) Notification.--Notification of a spouse or
former spouse under this paragraph shall be made in
accordance with such procedures as the chief judge of
the Tax Court shall prescribe. The chief judge may
provide under such procedures that subparagraph (A)(i)
may be waived with respect to a spouse or former spouse
if the magistrate judge establishes to the satisfaction
of the chief judge that the whereabouts of such spouse
or former spouse cannot be determined.
``(C) Resolution of 2 or more orders.--The chief
judge shall prescribe procedures under which this
paragraph shall be applied in any case in which the
chief judge receives 2 or more orders or decrees
described in subparagraph (A).
``(3) Definition.--For purposes of this subsection, the
term `lump-sum credit' means the unrefunded amount consisting
of--
``(A) retirement deductions made under this section
from the salary of a magistrate judge of the Tax Court,
``(B) amounts deposited under subsection (k) by a
magistrate judge of the Tax Court covering earlier
service, and
``(C) interest on the deductions and deposits
which, for any calendar year, shall be equal to the
overall average yield to the Tax Court Judicial
Officers' Retirement Fund during the preceding fiscal
year from all obligations purchased by the Secretary
during such fiscal year under subsection (o); but does
not include interest--
``(i) if the service covered thereby
aggregates 1 year or less, or
``(ii) for the fractional part of a month
in the total service.
``(o) Tax Court Judicial Officers' Retirement Fund.--
``(1) Establishment.--There is established in the Treasury
a fund which shall be known as the `Tax Court Judicial
Officers' Retirement Fund'. Amounts in the Fund are authorized
to be appropriated for the payment of annuities, refunds, and
other payments under this section.
``(2) Investment of fund.--The Secretary shall invest, in
interest bearing securities of the United States, such
currently available portions of the Tax Court Judicial
Officers' Retirement Fund as are not immediately required for
payments from the Fund. The income derived from these
investments constitutes a part of the Fund.
``(3) Unfunded liability.--
``(A) In general.--There are authorized to be
appropriated to the Tax Court Judicial Officers'
Retirement Fund amounts required to reduce to zero the
unfunded liability of the Fund.
``(B) Unfunded liability.--For purposes of
subparagraph (A), the term `unfunded liability' means
the estimated excess, determined on an annual basis in
accordance with the provisions of section 9503 of title
31, United States Code, of the present value of all
benefits payable from the Tax Court Judicial Officers'
Retirement Fund over the sum of--
``(i) the present value of deductions to be
withheld under this section from the future
basic pay of magistrate judges of the Tax
Court, plus
``(ii) the balance in the Fund as of the
date the unfunded liability is determined.
``(p) Participation in Thrift Savings Plan.--
``(1) Election to contribute.--
``(A) In general.--A magistrate judge of the Tax
Court who elects to receive an annuity under this
section or under section 611 of the Pension Security
and Transparency Act of 2005 may elect to contribute an
amount of such individual's basic pay 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 magistrate judge who makes
an election under paragraph (1).
``(3) Special rules.--
``(A) Amount contributed.--The amount contributed
by a magistrate judge to the Thrift Savings Fund in any
pay period shall not exceed the maximum percentage of
such judge's basic pay for such pay period as allowable
under section 8440f of title 5, United States Code.
``(B) Contributions for benefit of judge.--No
contributions may be made for the benefit of a
magistrate judge under section 8432(c) of title 5,
United States Code.
``(C) Applicability of section 8433(b) of title
5.--Section 8433(b) of title 5, United States Code,
applies with respect to a magistrate judge who makes an
election under paragraph (1) and--
``(i) who retires entitled to an immediate
annuity under this section (including a
disability annuity under subsection (d) of this
section) or section 611 of the Pension Security
and Transparency Act of 2005,
``(ii) who retires before attaining age 65
but is entitled, upon attaining age 65, to an
annuity under this section or section 611 of
the Pension Security and Transparency Act of
2005, or
``(iii) who retires before becoming
entitled to an immediate annuity, or an annuity
upon attaining age 65, under this section or
section 611 of the Pension Security and
Transparency Act of 2005.
``(D) Separation from service.--With respect to a
magistrate judge to whom this subsection applies,
retirement under this section or section 611 of the
Pension Security and Transparency Act of 2005 is a
separation from service for purposes of subchapters III
and VII of chapter 84 of title 5, United States Code.
``(4) Definitions.--For purposes of this subsection, the
terms `retirement' and `retire' include removal from office
under section 7443A(a)(2) on the sole ground of mental or
physical disability.
``(5) Offset.--In the case of a magistrate judge who
receives a distribution from the Thrift Savings Fund and who
later receives an annuity under this section, that annuity
shall be offset by an amount equal to the amount which
represents the Government's contribution to that person's
Thrift Savings Account, without regard to earnings attributable
to that amount. Where such an offset would exceed 50 percent of
the annuity to be received in the first year, the offset may be
divided equally over the first 2 years in which that person
receives the annuity.
``(6) Exception.--Notwithstanding clauses (i) and (ii) of
paragraph (3)(C), if any magistrate judge retires under
circumstances making such magistrate judge eligible to make an
election under subsection (b) of section 8433 of title 5,
United States Code, and such magistrate judge's nonforfeitable
account balance is less than an amount that the Executive
Director of the Office of Personnel Management prescribes by
regulation, the Executive Director shall pay the nonforfeitable
account balance to the participant in a single payment.''.
(b) Conforming Amendment.--The table of sections for part I of
subchapter C of chapter 76 is amended by inserting after the item
relating to section 7443A the following new item:
``Sec. 7443B. Retirement for magistrate judges of the Tax Court.''.
SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.
(a) Retirement Annuity Under Title 5 and Section 7443B of the
Internal Revenue Code of 1986.--A magistrate judge of the United States
Tax Court in active service on the date of the enactment of this Act
shall, subject to subsection (b), be entitled, in lieu of the annuity
otherwise provided under the amendments made by this title, to--
(1) an annuity under subchapter III of chapter 83, or under
chapter 84 (except for subchapters III and VII), of title 5,
United States Code, as the case may be, for creditable service
before the date on which service would begin to be credited for
purposes of paragraph (2), and
(2) an annuity calculated under subsection (b) or (c) and
subsection (g) of section 7443B of the Internal Revenue Code of
1986, as added by this Act, for any service as a magistrate
judge of the United States Tax Court or special trial judge of
the United States Tax Court but only with respect to service as
such a magistrate judge or special trial judge after a date not
earlier than 9\1/2\ years prior to the date of the enactment of
this Act (as specified in the election pursuant to subsection
(b)) for which deductions and deposits are made under
subsections (j) and (k) of such section 7443B, as applicable,
without regard to the minimum number of years of service as
such a magistrate judge of the United States Tax Court, except
that--
(A) in the case of a magistrate judge who retired
with less than 8 years of service, the annuity under
subsection (c) of such section 7443B shall be equal to
that proportion of the salary being received at the
time the magistrate judge leaves office which the years
of service bears to 14, subject to a reduction in
accordance with subsection (c) of such section 7443B if
the magistrate judge is under age 65 at the time he or
she leaves office, and
(B) the aggregate amount of the annuity initially
payable on retirement under this subsection may not
exceed the rate of pay for the magistrate judge which
is in effect on the day before the retirement becomes
effective.
(b) Filing of Notice of Election.--A magistrate judge of the United
States Tax Court shall be entitled to an annuity under this section
only if the magistrate judge files a notice of that election with the
chief judge of the United States Tax Court specifying the date on which
service would begin to be credited under section 7443B of the Internal
Revenue Code of 1986, as added by this Act, in lieu of chapter 83 or
chapter 84 of title 5, United States Code. Such notice shall be filed
in accordance with such procedures as the chief judge of the United
States Tax Court shall prescribe.
(c) Lump-Sum Credit Under Title 5.--A magistrate judge of the
United States Tax Court who makes an election under subsection (b)
shall be entitled to a lump-sum credit under section 8342 or 8424 of
title 5, United States Code, as the case may be, for any service which
is covered under section 7443B of the Internal Revenue Code of 1986, as
added by this Act, pursuant to that election, and with respect to which
any contributions were made by the magistrate judge under the
applicable provisions of title 5, United States Code.
(d) Recall.--With respect to any magistrate judge of the United
States Tax Court receiving an annuity under this section who is
recalled to serve under section 7443C of the Internal Revenue Code of
1986, as added by this Act--
(1) the amount of compensation which such recalled
magistrate judge receives under such section 7443C shall be
calculated on the basis of the annuity received under this
section, and
(2) such recalled magistrate judge of the United States Tax
Court may serve as a reemployed annuitant to the extent
otherwise permitted under title 5, United States Code.
Section 7443B(m)(4) of the Internal Revenue Code of 1986, as added by
this Act, shall not apply with respect to service as a reemployed
annuitant described in paragraph (2).
SEC. 1212. PROVISIONS FOR RECALL.
(a) In General.--Part I of subchapter C of chapter 76, as amended
by this Act, is amended by inserting after section 7443B the following
new section:
``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.
``(a) Recalling of Retired Magistrate Judges.--Any individual who
has retired pursuant to section 7443B or 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 magistrate judge of the Tax
Court.
``(b) Compensation.--For the year in which a period of recall
occurs, the magistrate judge shall receive, in addition to the annuity
provided under the provisions of section 7443B or 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 magistrate judge is recalled. The annuity of the magistrate
judge who completes that period of service, who is not recalled in a
subsequent year, and who retired under section 7443B, shall be equal to
the salary in effect at the end of the year in which the period of
recall occurred for the office from which such individual retired.
``(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, as amended by this Act, is amended by
inserting after the item relating to section 7443B the following new
item:
``Sec. 7443C. Recall of magistrate judges of the Tax Court.''.
SEC. 1213. EFFECTIVE DATE.
Except as otherwise provided, the amendments made by this subtitle
shall take effect on the date of the enactment of this Act.
TITLE XIII--OTHER PROVISIONS
Subtitle A--Administrative Provision
SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or contract
amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 and section
204(g) of the Employee Retirement Income Security Act of 1974
by reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act or
the Economic Growth and Tax Relief Reconciliation Act
of 2001, or pursuant to any regulation issued by the
Secretary of the Treasury or the Secretary of Labor
under such Acts, and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2007, or such
later date as the Secretary of the Treasury may
prescribe.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), subparagraph (B)
shall be applied by substituting the date which is 2 years
after the date otherwise applied under subparagraph (B).
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative
or regulatory amendment described in paragraph
(1)(A) takes effect (or in the case of a plan
or contract amendment not required by such
legislative or regulatory amendment, the
effective date specified by the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan or
contract amendment were in effect; and
(B) such plan or contract amendment applies
retroactively for such period.
SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SECRETARY OF THE
TREASURY, AND THE PENSION BENEFIT GUARANTY CORPORATION TO
POSTPONE CERTAIN DEADLINES.
The Secretary of Labor, the Secretary of the Treasury, and the
Executive Director of the Pension Benefit Guaranty Corporation shall
exercise their authority under section 518 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1148) and section 7508A of the
Internal Revenue Code of 1986 to postpone certain deadlines by reason
of the Presidentially declared disaster areas in Louisiana,
Mississippi, Alabama, Texas, Florida, or elsewhere, due to the effect
of Hurricane Katrina, Rita, or Wilma. The Secretaries and the Executive
Director of the Corporation shall issue guidance as soon as is
practicable to plan sponsors and participants regarding extension of
deadlines and rules applicable to these extraordinary circumstances.
Nothing in this section shall be construed to relieve any plan sponsor
from any requirement to pay benefits or make contributions under the
plan of the sponsor.
Subtitle B--Governmental Pension Plan Equalization
SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.
(a) Amendment to Internal Revenue Code of 1986.--Section 414(d) of
the Internal Revenue Code of 1986 (definition of governmental plan) is
amended by adding at the end the following: ``The term `governmental
plan' includes a plan established or maintained for its employees by an
Indian tribal government (as defined in section 7701(a)(40)), a
subdivision of an Indian tribal government (determined in accordance
with section 7871(d)), an agency instrumentality (or subdivision) of an
Indian tribal government, or an entity established under Federal,
State, or tribal law which is wholly owned or controlled by any of the
foregoing.''.
(b) Amendment to Employee Retirement Income Security Act of 1974.--
Section 3(32) of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1002(32)) is amended by adding at the end the following:
``The term `governmental plan' includes a plan established or
maintained for its employees by an Indian tribal government (as defined
in section 7701(a)(40)), a subdivision of an Indian tribal government
(determined in accordance with section 7871(d)), an agency
instrumentality (or subdivision) of an Indian tribal government, or an
entity established under Federal, State, or tribal law that is wholly
owned or controlled by any of the foregoing.''.
SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE
TO STATE AND LOCAL PLANS.
(a) In General.--
(1) Subparagraph (G) of section 401(a)(5) and subparagraph
(G) of section 401(a)(26) of the Internal Revenue Code of 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) 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)''.
SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS ARE SUBJECT TO THE
SAME DEFINED BENEFIT PLAN RULES AND REGULATIONS APPLIED
TO STATE AND OTHER LOCAL GOVERNMENTS, THEIR POLICE AND
FIREFIGHTERS.
(a) Amendments to Internal Revenue Code of 1986.--
(1) Police and firefighters.--Subparagraph (H) section
415(b)(2) of the Internal Revenue Code of 1986 (defining
participant) is amended--
(A) in clause (i), by striking ``State or political
subdivision'' and inserting ``State, Indian tribal
government (as defined in section 7701(a)(40)), or any
political subdivision''; and
(B) in clause (ii)(I), by striking ``State or
political subdivision'' each place it appears and
inserting ``State, Indian tribal government (as so
defined), or any political subdivision''.
(2) State and local government plans.--
(A) In general.--Subparagraph (A) of section
415(b)(10) of such Code (relating to limitation to
equal accrued benefit) is amended--
(i) by inserting ``, Indian tribal
government (as defined in section
7701(a)(40)),'' after ``State'';
(ii) by inserting ``any'' before
``political subdivision''; and
(iii) by inserting ``any of'' before ``the
foregoing''.
(B) Conforming amendment.--The heading of paragraph
(1) of section 415(b) of such Code is amended by
striking ``Special rule for state and'' and inserting
``Special rule for state, indian tribal, and''.
(3) Government pick up contributions.--Paragraph (2) of
section 414(h) of such Code (relating to designation by units
of government) is amended by striking ``State or political
subdivision'' and inserting ``State, Indian tribal government
(as defined in section 7701(a)(40)), or any political
subdivision''.
(b) Amendments to Employee Retirement Income Security Act of
1974.--Section 4021(b) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1321(b)) is amended--
(1) in paragraph (12), by striking ``or'' at the end;
(2) in paragraph (13), by striking ``plan.'' and inserting
``plan; or''; and
(3) by adding at the end the following:
``(14) established and maintained for its employees by an
Indian tribal government (as defined in section 7701(a)(40) of
the Internal Revenue Code of 1986), a subdivision of an Indian
tribal government (determined in accordance with section
7871(d) of such Code), an agency or instrumentality of an
Indian tribal government or subdivision thereof, or an entity
established under Federal, State, or tribal law that is wholly
owned or controlled by any of the foregoing.''.
SEC. 1314. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to any year
beginning before, on, or after the date of the enactment of this Act.
Subtitle C--Miscellaneous Provisions
SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK LUNG DISABILITY TRUSTS
TO UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND.
(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) Transfer.--Section 9705 of such Code (relating to transfer) is
amended by adding at the end the following new subsection:
``(c) Transfer From Black Lung Disability Trusts.--
``(1) In general.--The Secretary shall transfer each fiscal
year to the Fund from the general fund of the Treasury an
amount which the Secretary estimates to be the additional
amounts received in the Treasury for that fiscal year by reason
of the amendment made by section 1321(a) of the Pension
Security and Transparency Act of 2005. The Secretary shall
adjust the amount transferred for any year to the extent
necessary to correct errors in any estimate for any prior year.
``(2) Use of funds.--Any amount transferred to the Combined
Fund under paragraph (1) shall be used to proportionately
reduce the unassigned beneficiary premium under section
9704(a)(3) of each assigned operator for any plan year
beginning after December 31, 2002.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
SEC. 1322. 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:
``(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 (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. RETURNS AND RECORDS WITH RESPECT TO EMPLOYER-OWNED LIFE
INSURANCE CONTRACTS.
``(a) 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.
``(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 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) 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.
Subtitle D--Other Related Pension Provisions
PART I--HEALTH AND MEDICAL BENEFITS
SEC. 1331. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE HEALTH
BENEFITS.
(a) In General.--Section 420 of the Internal Revenue Code of 1986
(relating to transfers of excess pension assets to retiree health
accounts), as amended by this Act, is amended by adding at the end the
following new subsection:
``(f) Qualified Transfer To Cover Future Retiree Health Costs.--
``(1) In general.--An employer maintaining a defined
benefit plan (other than a multiemployer plan) may elect for
any taxable year to have the plan make a qualified future
transfer rather than a qualified transfer for the taxable year.
Except as provided in this subsection, a qualified future
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 transfer.--For purposes of this
subsection--
``(A) In general.--The term `qualified future
transfer' means 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 made under subparagraph
(C), and
``(iii) the minimum cost requirements of
subsection (c)(3) shall be modified as provided
under subparagraph (D).
``(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 `115 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.
``(C) Limitation on amount transferred.--
Notwithstanding subsection (b)(3), the amount of the
excess pension assets which may be transferred in 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.
``(D) Minimum cost requirements.--
``(i) In general.--The requirements of
subsection (c)(3) shall be treated as met if
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 benefits
provided during such period is not less than
the applicable employer cost determined under
subsection (c)(3)(A) with respect to the
transfer.
``(ii) Election to maintain benefits.--An
employer may elect, in lieu of the requirements
of clause (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).
``(3) Coordination with other transfers.--In applying
subsection (b)(3) to any subsequent transfer during a taxable
year in a transfer period, qualified current retiree health
liabilities shall be reduced by any such liabilities taken into
account with respect to the qualified future transfer to which
such period relates.
``(4) Transfer period.--For purposes of this subsection,
the term `transfer period' means, with respect to any transfer,
a period of consecutive taxable years 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.''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers after the date of the enactment of this Act.
SEC. 1332. SPECIAL RULES FOR FUNDING OF COLLECTIVELY BARGAINED RETIREE
HEALTH BENEFITS.
(a) Collectively Bargained Transfer Treated as a Qualified
Transfer.--
(1) In general.--Section 420(b) of the Internal Revenue
Code of 1986 (defining qualified transfer) is amended by
redesignating paragraph (5) as paragraph (6) and by inserting
after paragraph (4) the following new paragraph:
``(5) A collectively bargained transfer (as defined in
subsection (e)(5)) shall be treated as a qualified transfer.''.
(2) Conforming amendments.--
(A) Subparagraph (B) of section 420(b)(2) of such
Code is amended by inserting ``or a collectively
bargained transfer'' after ``paragraph (4)''.
(B) Paragraph (3) of section 420(b) of such Code is
amended to read as follows:
``(3) Limitation on amount transferred.--
``(A) In general.--The amount of excess pension
assets which may be transferred in a qualified transfer
(other than a collectively bargained transfer) shall
not exceed the amount which is reasonably estimated to
be the amount the employer maintaining the plan will
pay (whether directly or through reimbursement) out of
such account during the taxable year of the transfer
for qualified current retiree health liabilities.
``(B) Exception for collectively bargained
transfers.--The amount of excess pension assets which
may be transferred in 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.''.
(b) Requirements of Plans Making Collectively Bargained
Transfers.--
(1) In general.--Paragraph (1) of section 420(c) of the
Internal Revenue Code of 1986 (relating to requirements of plan
transferring assets) is amended to read as follows:
``(1) Use of transferred assets.--
``(A) In general.--Except in the case of a
collectively bargained transfer, any assets transferred
to a health benefits account in a qualified transfer
(and any income allocable thereto) shall be used only
to pay qualified current retiree health liabilities
(other than liabilities of key employees not taken into
account under subsection (e)(1)(D)) for the taxable
year of the transfer (whether directly or through
reimbursement).
``(B) Collectively bargained transfer.--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 subsection (e)(6)(D)) 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).
``(C) Amounts not used to pay for health
benefits.--
``(i) In general.--Any assets transferred
to a health benefits account in a qualified
transfer (and any income allocable thereto)
which are not used as provided in subparagraph
(A) (in the case of a qualified transfer other
than a collectively bargained transfer) or
cannot be used as provided in subparagraph (B)
(in the case of a collectively bargained
transfer) shall be transferred out of the
account to the transferor plan.
``(ii) Tax treatment of amounts.--Any
amount transferred out of an account under
clause (i)--
``(I) shall not be includible in
the gross income of the employer, but
``(II) shall be treated as an
employer reversion for purposes of
section 4980 (without regard to
subsection (d) thereof).
``(D) Ordering rule.--For purposes of this section,
any amount paid out of a health benefits account shall
be treated as paid first out of the assets and income
described in subparagraph (A) (in the case of a
qualified transfer other than a collectively bargained
transfer) or subparagraph (B) (in the case of a
collectively bargained transfer).''.
(2) Conforming amendments.--
(A) Subparagraph (A) of section 420(c)(3) of such
Code is amended to read as follows:
``(A) In general.--The requirements of this
paragraph are met if--
``(i) except as provided in clause (ii),
each group health plan or arrangement under
which applicable health benefits are provided
provides that the applicable employer cost for
each taxable year during the cost maintenance
period shall not be less than the higher of the
applicable employer costs for each of the 2
taxable years immediately preceding the taxable
year of the qualified 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.''.
(B) Section 420(c)(3) of such Code is amended by
redesignating subparagraphs (C), (D), and (E) as
subparagraphs (D), (E), and (F), respectively, and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) Collectively bargained employer cost.--For
purposes of this paragraph, the term `collectively
bargained employer cost' means the average cost 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.''.
(C) Subparagraph (E) of section 420(c)(3) of such
Code (as redesignated by subparagraph (B)) is amended
to read as follows:
``(E) Maintenance period.--For purposes of this
paragraph--
``(i) Cost maintenance period.--The term
`cost maintenance period' means the period of 5
taxable years beginning with the taxable year
in which the qualified transfer occurs. If a
taxable year is in 2 or more overlapping cost
maintenance periods, this paragraph shall be
applied by taking into account the highest
applicable employer cost required to be
provided under subparagraph (A)(i) for such
taxable year.
``(ii) 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.''.
(c) Limitations on Employer.--Subsection (d) of section 420 of the
Internal Revenue Code of 1986 is amended to read as follows:
``(d) Limitations on Employer.--For purposes of this title--
``(1) Deduction limitations.--No deduction shall be
allowed--
``(A) for the transfer of any amount to a health
benefits account in a qualified transfer (or any
retransfer to the plan under subsection (c)(1)(C)),
``(B) for qualified current retiree health
liabilities or collectively bargained retiree health
liabilities paid out of the assets (and income)
described in subsection (c)(1), or
``(C) except in the case of a collectively
bargained transfer, for any amounts to which
subparagraph (B) does not apply and which are paid for
qualified current retiree health liabilities for the
taxable year to the extent such amounts are not greater
than the excess (if any) of--
``(i) the amount determined under
subparagraph (A) (and income allocable
thereto), over
``(ii) the amount determined under
subparagraph (B).
``(2) Other limitations.--
``(A) No contributions allowed.--Except as provided
in subparagraph (B), an employer may not contribute
after December 31, 1990, any amount to a health
benefits account or welfare benefit fund (as defined in
section 419(e)(1)) with respect to qualified current
retiree health liabilities for which transferred assets
are required to be used under subsection (c)(1)(A).
``(B) Exception.--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 Secretary shall
provide rules to ensure that the application of this
section 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.''.
(d) Definitions.--Section 420(e) of the Internal Revenue Code of
1986 (relating to definition and special rules) is amended by adding at
the end the following new paragraphs:
``(5) Collectively bargained transfer.--The term
`collectively bargained transfer' means a transfer--
``(A) of excess pension assets to a health benefits
account which is part of such plan in a taxable year
beginning after December 31, 2005, and
``(B) which does not contravene any other provision
of law,
``(C) with respect to which are met in connection
with the plan--
``(i) the use requirements of subsection
(c)(1),
``(ii) the vesting requirements of
subsection (c)(2), and
``(iii) the minimum cost requirements of
subsection (c)(3),
``(D) which is made in accordance with a collective
bargaining agreement,
``(E) which, 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
``(F) which involves--
``(i) 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,
``(ii) or a plan maintained by a successor
to such employer.
Such term shall not include a transfer after December
31, 2013.
``(6) Collectively bargained retiree health liabilities.--
``(A) 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.
``(B) Reduction for amounts previously set aside.--
The amount determined under subparagraph (A) 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)) set aside to pay for the collectively
bargained retiree health liabilities.
``(C) 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).
``(7) Collectively bargained health benefits.--The term
`collectively bargained health benefits' means health benefits
or coverage which are provided to--
``(A) 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
``(B) 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.
``(8) 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.''.
(e) Conforming Amendment.--The last sentence of section 401(h) of
the Internal Revenue Code of 1986 is amended by inserting ``(other than
contributions with respect to collectively bargained retiree health
liabilities within the meaning of section 420(e)(6))'' after ``medical
benefits''.
(f) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2004.
SEC. 1333. 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 (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) Effective Date.--The amendment made by this section shall apply
to taxable years ending after December 31, 2005.
PART II--CASH OR DEFERRED ARRANGEMENTS
SEC. 1336. 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 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) 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
subsection--
``(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 cash balance
plans.--If the defined benefit plan under
clause (i) is a qualified cash balance plan
(within the meaning of section 411(b)(5)), 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 participant's age as of
the
beginning of the year is-- The percentage 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 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 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 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 purposes of this subparagraph, the rules of
section 411 shall apply to the extent not
inconsistent with this subparagraph.
``(E) Uniform provision of 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 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).
``(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).''.
(b) Amendments of ERISA.--
(1) In general.--Section 210 of the Employee Retirement
Income Security Act of 1974 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) 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
subsection--
``(A) In general.--The term `eligible combined
plan' means a plan--
``(i) which, at the time the plan is
established, is maintained by 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 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 cash balance
plans.--If the defined benefit plan under
clause (i) is a qualified cash balance plan
(within the meaning of section 204(b)(5)), 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 participant's age as of
the
beginning of the year is-- The percentage 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 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 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--
``(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 purposes of this subparagraph, the rules of
section 203 shall apply to the extent not
inconsistent with this subparagraph.
``(E) Uniform provision of 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
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
subparagraph (C) are met with respect to such
arrangement.
``(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 clauses (i) and (ii) of section
401(k)(12)(D) of the Internal Revenue Code of 1986
shall be 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.--Section 414(k)
of the Internal Revenue Code of 1986 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--
``(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 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) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2008.
SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO MAINTAIN SECTION
401(K) PLANS.
(a) In General.--Clause (ii) of section 401(k)(4)(B) of the
Internal Revenue Code of 1986 (relating to governments ineligible) is
amended to read as follows:
``(ii) Governments eligible.--A State or
local government or political subdivision
thereof, or any agency or instrumentality
thereof, may include a qualified cash or
deferred arrangement as part of a plan
maintained by it.''
(b) Coordination With Section 457 Limits.--Section 402(g) of the
Internal Revenue Code of 1986 is amended by adding at the end the
following:
``(9) Coordination of section 457 limits for state and
local governmental plans.--
``(A) In general.--Except as provided in
subparagraph (B), in the case of an individual who is a
participant in 1 or more qualified cash or deferred
arrangements maintained by a governmental entity
described in section 401(k)(4)(B)(ii), the amount
excludable from gross income under paragraph (1) with
respect to the individual for any taxable year with
respect to elective deferrals under such arrangements
shall be reduced by the aggregate amounts deferred
under section 457 with respect to the individual for
the taxable year under 1 or more eligible deferred
compensation plans (as defined in section 457(b))
maintained by an employer described in section
457(e)(1)(A).
``(B) Special rule for pre-1986 grandfathered
plans.--Subparagraph (A) shall not apply to any
qualified cash or deferred arrangement maintained by a
governmental entity described in section
401(k)(4)(B)(ii) if the arrangement (or any
predecessor) was adopted by the entity before May 6,
1986, or treated as so adopted under section
1116(f)(2)(B) of the Tax Reform Act of 1986.''
(c) Effective Dates.--The amendments made by this section shall
apply to plan years beginning after December 31, 2005.
PART III--EXCESS CONTRIBUTIONS
SEC. 1339. EXCESS CONTRIBUTIONS.
(a) Expansion of Corrective Distribution Period for Automatic
Contribution Arrangements.--Subsection (f) of section 4979 of the
Internal Revenue Code of 1986 is amended--
(1) by and 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
(2) by striking ``2\1/2\ Months of'' in the heading and
inserting ``Specified Period After''.
(b) 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.''.
(c) Simplification of Allocable Earnings.--
(1) Section 4979.--Subsection (f) of section 4979 of such
Code is amended--
(A) by adding ``through the end of the plan year
for which the contribution was made'' after ``thereto''
in paragraph (1), and
(B) by adding ``through the end of the plan year
for which the contributions were made'' after
``thereto'' in paragraph (2)(B).
(2) Section 401(k) and 401(m).--
(A) Clause (i) of section 401(k)(8)(A) is amended
by adding ``through the end of such year'' after ``such
contributions''.
(B) Subparagraph (A) of section 401(m)(6) of such
Code is amended by adding ``through the end of such
year'' after ``to such contributions''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2005.
PART IV--OTHER PROVISIONS
SEC. 1341. AMENDMENTS RELATING TO PROHIBITED TRANSACTIONS.
(a) Exemption for Block Trading.--
(1) In general.--Section 408(b) of the Employee Retirement
Income Security Act (29 U.S.C. 1108(b)) is amended by adding at
the end the following new paragraph:
``(14) Block trading.--
``(A) In general.--Any transaction involving the
purchase or sale of securities between a plan and a
party in interest (other than a fiduciary who has
investment discretion or control with respect to the
assets involved in the transaction or is providing
investment advice as a fiduciary for purposes of this
title to enter into the transaction) 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) compensation associated with the
purchase and sale is not greater than an arm's
length transaction with an unrelated party.
``(B) Block trade.--For purposes of this paragraph,
the term `block trade' includes 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) Conforming amendments.--
(A) Section 4975(d) of such Code is amended--
(i) by striking ``or'' at the end of
paragraph (15),
(ii) by striking the period at the end of
paragraph (16)(F) and inserting ``; or'', and
(iii) by adding at the end the following
new paragraph:
``(17) any transaction involving the purchase or sale of
securities between a plan and a disqualified person (other than
a fiduciary who has investment discretion or control over the
transaction or is providing investment advice as a fiduciary
for purposes of title I of the Employee Retirement Income
Security Act to enter into the transaction) 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) compensation associated with the purchase and
sale is not greater than an arm's length transaction
with an unrelated party.''.
(B) Section 4975(e) of such Code is amended by
adding at the end the following new paragraph:
``(11) Block trade.--The term `block trade' includes 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 Financial Markets Trading Systems.--
(1) In general.--Section 408(b) of such Act, as amended by
subsection (b)(1), is amended by adding at the end the
following new paragraph:
``(15) Financial markets trading systems.--Any transaction
involving the purchase and sale of securities between a plan
and a fiduciary or a party in interest if--
``(A) the transaction is executed through--
``(i) a national securities exchange or a
trading system owned by a national securities
association registered with the Securities and
Exchange Commission, regardless of whether such
fiduciary or party in interest (or any
affiliate of either) has an interest in such
exchange or trading system,
``(ii) an alternative trading system or
electronic communication network subject to
regulation and oversight by the Securities and
Exchange Commission, regardless of whether such
fiduciary or party in interest (or any
affiliate of either) has an interest in such
alternative trading system or electronic
communications network, or
``(iii) any other trading system for
securities or other property approved by the
Secretary through regulatory or exemptive
relief,
``(B) the price associated with the purchase and
sale is at least as favorable as an arm's length
transaction with an unrelated party,
``(C) the compensation associated with the purchase
and sale is not greater than an arm's length
transaction with an unrelated party,
``(D) in the event the fiduciary or party in
interest directing the transaction (or any affiliate of
either) has an ownership interest in the trading system
(other than an exchange or trading system described in
subparagraph (A)(i)), the execution of transactions on
such system is annually authorized by a plan fiduciary,
``(E) the transaction is executed in accordance
with the nondiscretionary rules and procedures adopted
by such trading system to match offsetting orders, and
``(F) in the event the transaction is not executed
on an exchange or trading system described in
subparagraph (A)(i)--
``(i) neither the trading system nor the
parties to the transaction take into account
the identity of the parties in the execution of
trades, and the parties to the transaction do
not actually know the identity of the other at
the time that the terms and price of the
transaction are agreed to, or
``(ii) the transaction is effected pursuant
to rules designed to match purchases and sales
at the best price available through the trading
system.''.
(2) Conforming amendment.--Section 4975(d) of such Code (as
amended by subsection (b)(2)) is amended--
(A) by striking ``or'' at the end of paragraph
(16),
(B) by striking the period at the end of paragraph
(17)(E) and inserting ``; or'', and
(C) by adding at the end the following new
paragraph:
``(18) any transaction involving the purchase and sale of
securities or other property between a plan and a fiduciary or
a disqualified person if--
``(A) the transaction is executed through--
``(i) a national securities exchange or a
trading system owned by a national securities
association registered with the Securities and
Exchange Commission, regardless of whether such
fiduciary or disqualified person (or any
affiliate of either) has an interest in such
exchange or trading system,
``(ii) an alternative trading system or
electronic communication network subject to
regulation and oversight by the Securities and
Exchange Commission, regardless of whether such
fiduciary or disqualified person (or any
affiliate of either) has an interest in such
alternative trading system or electronic
communications network, or
``(iii) any other trading system for
securities or other property approved by the
Secretary through regulatory or exemptive
relief,
``(B) the price associated with the purchase and
sale is at least as favorable as an arm's length
transaction with an unrelated party,
``(C) the compensation associated with the purchase
and sale is not greater than an arm's length
transaction with an unrelated party,
``(D) in the event the fiduciary or disqualified
person directing the transaction (or any affiliate of
either) has an ownership interest in the trading system
(other than an exchange or trading system described in
subparagraph (A)(i)), the execution of transactions on
such system is annually authorized by a plan fiduciary,
``(E) the transaction is executed in accordance
with the nondiscretionary rules and procedures adopted
by such trading system to match offsetting orders, and
``(F) in the event the transaction is not executed
on an exchange or trading system described in
subparagraph (A)(i)--
``(i) neither the trading system nor the
parties to the transaction take into account
the identity of the parties in the execution of
trades, and the parties to the transaction do
not actually know the identity of the other at
the time that the terms and price of the
transaction are agreed to, or
``(ii) the transaction is effected pursuant
to rules designed to match purchases and sales
at the best price available through the trading
system.''.
(d) Relief for Foreign Exchange Transactions.--
(1) In general.--Section 408(b) of such Act (29 U.S.C.
1108(b)), as amended by subsection (c)(1), is amended by adding
at the end the following new paragraph:
``(16) Any foreign exchange transactions, between a bank or
broker-dealer (or any affiliate of either), and a plan or an
individual retirement account (within the meaning of section
408 of the Internal Revenue Code of 1986) 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,
``(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
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) Conforming amendment.--Section 4975(d) of such Code, as
amended by subsection (c)(2), is amended--
(A) by striking ``or'' at the end of paragraph
(17)(E),
(B) by striking the period at the end of paragraph
(18)(F)(ii) and inserting ``; or'', and
(C) by adding at the end the following new
paragraph:
``(19) any foreign exchange transactions, between a bank or
broker-dealer (or any affiliate of either) and a plan or an
individual retirement account (within the meaning of section
408) with respect to which such bank or broker-dealer (or
affiliate) is a trustee, custodian, fiduciary, or disqualified
person, if--
``(A) the transaction is in connection with the
purchase, holding, or sale of securities,
``(B) at the time the foreign exchange transaction
is entered into, the terms of the transaction are not
less favorable to the plan than the terms generally
available in comparable arm's length foreign exchange
transactions between unrelated parties, or the terms
afforded by the bank or 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
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.''.
(e) Correction Period for Certain Transactions Involving Securities
and Commodities.--
(1) In general.--Section 408(b) of such Act (29 U.S.C.
1108(b)), as amended by subsection (d)(1), is amended by adding
at the end the following new paragraph:
``(17) Correction period for certain transactions involving
securities and commodities.--
``(A) In general.--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) Exception for employer securities and real
property.--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) Exception for knowing violations.--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
prohibited transaction if, at the time such transaction
occurs, such fiduciary or party in interest (or other
person) knew that the transaction would (without regard
to this paragraph) constitute a violation of section
406(a).
``(D) Correction period.--For purposes of this
paragraph, the term `correction period' means the 14-
day period beginning on the date on which such
transaction occurs.
``(E) Other definitions.--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), and
``(iii) the terms `correction' and
`correct' mean, with respect to a transaction,
undoing the transaction to the extent possible,
but in any case, making good to the plan or
affected account any losses resulting from the
transaction and restoring to the plan or
affected account any profits made through use
of the plan.''.
(2) Conforming amendments.--
(A) Section 4975(d) of such Code, as amended by
subsection (d)(2), is amended--
(i) by striking ``or'' at the end of
paragraph (18)(F)(2),
(ii) by striking the period at the end of
paragraph (19)(D) and inserting ``; or'', and
(iii) by adding at the end the following
new paragraph:
``(20) except as provided in subparagraph (B) or (C) of
subsection (f)(8), 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.''.
(B) Section 4975(f) of such Code is amended by
adding at the end the following new paragraph:
``(8) Correction period.--
``(A) In general.--For purposes of subsection
(d)(20), the term `correction period' means the 14-day
period beginning on the date on which such transaction
occurs.
``(B) Exception for employer securities and real
property.--Subsection (d)(20) 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) of
the Employee Retirement Income Security Act) or the
acquisition, sale, or lease of employer real property
(as defined in section 407(d)(2) of such Act).
``(C) Exception for knowing violations.--In the
case of any fiduciary or other disqualified person (or
any other person knowingly participating in such
transaction), subsection (d)(20) does not apply to any
prohibited transaction if, at the time such transaction
occurs, such fiduciary or disqualified person (or other
person) knew that the transaction would (without regard
to subsection (d)(20) or this paragraph) constitute a
violation of subparagraph (A), (B), (C), or (D) of
subsection (c)(1).
``(D) Abatement of tax where there is a
correction.--If a transaction is not treated as a
prohibited transaction by reason of subsection (d)(20),
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.
``(E) Other definitions.--For purposes of this
paragraph and subsection (d)(20)--
``(i) 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) the term `commodity' has the meaning
given such term by section 475(e)(2) (without
regard to subparagraph (D)(iii) thereof), and
``(iii) the terms `correction' and
`correct' mean, with respect to a transaction,
undoing the transaction to the extent possible,
but in any case, making good to the plan or
affected account any losses resulting from the
transaction and restoring to the plan or
affected account any profits made through use
of the plan.''.
(C) Section 4975(f)(5) of such Code is amended by
striking ``The terms'' and inserting ``Except as
provided in paragraph (8)(E)(iii), the terms''.
(f) Cross Trades Study.--Not later than 2 years after the date of
the enactment of this Act, the Secretary of Labor, in consultation with
the President's Working Group on Financial Markets, shall report to the
President and Congress the results of a study on the implications for
pension plans, plan sponsors, plan fiduciaries, and plan participants
of a prohibited transaction exemption for active cross trades and the
impact that such a prohibited transaction exemption could have on the
safety and security of pension plan assets. The study shall review and
include recommendations regarding--
(1) the regulation and practice of passive and active cross
trades in United States securities markets,
(2) the potential benefits and drawbacks of permitting
active cross trades for retirement funds, and
(3) the ease or difficulty in policing cross trading
activities for plan sponsors, plan fiduciaries, and any Federal
agency charged with safeguarding the Nation's retirement funds.
(g) GAO Study.--The Comptroller General of the United States shall
prepare a preliminary report not later than 2 years after the date of
the enactment of this Act and a final report not later than 3 years
after such date regarding the effects of the amendments made by this
section, focusing on the effect of electronic communication networks
and block trading on plan investments and on the oversight and
enforcement activities of the Department of Labor to protect the rights
of plan participants and beneficiaries. The Comptroller General of the
United States shall submit the reports required under the preceding
sentence to the Committees on Finance and Health, Education, Labor, and
Pensions of the Senate and the Committees on Ways and Means and
Education and the Workforce of the House of Representatives.
(h) Effective Date.--The amendments made by this section shall
apply to any transaction after the date of the enactment of this Act.
SEC. 1342. FEDERAL TASK FORCE ON OLDER WORKERS.
(a) Establishment.--Not later than 90 days after the date of
enactment of this section, the Secretary of Labor shall establish a
Federal Task Force on Older Workers (referred to in this section as the
``Task Force'').
(b) Membership.--The Task Force established pursuant to subsection
(a) shall be composed of representatives from all relevant Federal
agencies that have regulatory jurisdiction over, or a clear policy
interest in, pension issues relating to older workers, including the
Internal Revenue Service and the Equal Employment Opportunity
Commission.
(c) Activities.--
(1) In general.--Not later than 1 year after the date of
establishment of the Task Force, the Task Force shall--
(A) identify statutory and regulatory provisions in
current pension law that are disincentives to work and
develop legislative and regulatory proposals to address
such disincentives; and
(B) identify best pension practices in the private
sector for hiring and retaining older workers, and
serve as a clearinghouse of such information.
(2) Report.--Not later than 1 year after the date of
establishment of the Task Force, the Task Force shall submit a
report to Congress on the activities of the Task Force pursuant
to paragraph (1). Such report shall be made available to the
public.
(d) Consultation.--In carrying out activities pursuant to this
section, the Task Force shall consult with senior, business, labor, and
other interested organizations.
(e) Applicability of FACA; Termination of Task Force.--
(1) FACA.--The Federal Advisory Committee Act (5 U.S.C.
App.) shall not apply to the Task Force established pursuant to
this section.
(2) Termination.--The Task Force shall terminate 30 days
after the date the Task Force completes all of its duties under
this section.
SEC. 1343. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on or
after September 1 of each year involved'' and inserting ``2006
and 2010'';
(2) in subsection (b), by adding at the end the following
new sentence: ``To effectuate the purposes of this paragraph,
the Secretary may enter into a cooperative agreement, pursuant
to the Federal Grant and Cooperative Agreement Act of 1977 (31
U.S.C. 6301 et seq.), with any appropriate, qualified
entity.'';
(3) in subsection (e)(2)--
(A) by striking ``Committee on Labor and Human
Resources'' in subparagraph (D) and inserting
``Committee on Health, Education, Labor, and
Pensions'';
(B) by striking subparagraph (F) and inserting the
following:
``(F) the Chairman and Ranking Member of the
Subcommittee on Labor, Health and Human Services, and
Education of the Committee on Appropriations of the
House of Representatives and the Chairman and Ranking
Member of the Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the Senate;'';
(C) by redesignating subparagraph (G) as
subparagraph (J); and
(D) by inserting after subparagraph (F) the
following new subparagraphs:
``(G) the Chairman and Ranking Member of the
Committee on Finance of the Senate;
``(H) the Chairman and Ranking Member of the
Committee on Ways and Means of the House of
Representatives;
``(I) the Chairman and Ranking Member of the
Subcommittee on Employer-Employee Relations of the
Committee on Education and the Workforce of the House
of Representatives; and'';
(4) in subsection (e)(3)(B), by striking ``January 31,
1998'' and inserting ``3 months before the convening of each
summit;'';
(5) in subsection (f)(1)(C), by inserting ``, no later than
90 days prior to the date of the commencement of the National
Summit,'' after ``comment'';
(6) in subsection (g), by inserting ``, in consultation
with the congressional leaders specified in subsection
(e)(2),'' after ``report'' the first place it appears in the
text;
(7) in subsection (i)--
(A) by striking ``for fiscal years beginning on or
after October 1, 1997,''; and
(B) by adding at the end the following new
paragraph:
``(3) Reception and representation authority.--The Secretary is
hereby granted reception and representation authority limited
specifically to the events at the National Summit. The Secretary shall
use any private contributions accepted in connection with the National
Summit prior to using funds appropriated for purposes of the National
Summit pursuant to this paragraph.''; and
(8) in subsection (k)--
(A) by striking ``shall enter into a contract on a
sole-source basis'' and inserting ``may enter into a
contract on a sole-source basis''; and
(B) by striking ``in fiscal year 1998''.
Passed the Senate November 16, 2005.
Attest:
Secretary.
109th CONGRESS
1st Session
S. 1783
_______________________________________________________________________
AN ACT
To amend the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 to reform the pension funding rules, and
for other purposes.
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December 22, 2005
Ordered to be printed as passed