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HR 4 PCS
Calendar No. 561
109th CONGRESS
2d Session
H. R. 4
IN THE SENATE OF THE UNITED
STATES
July 31, 2006
Received; deemed read the first
time on July 28 (legislative day, July 26), 2006, pursuant to the order
of July 28, 2006
July 31, 2006
Read the second time and placed on
the calendar
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AN ACT
To provide economic security for all Americans, 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 Protection Act of 2006'.
(b) Table of Contents- The table of contents for
this Act (other than so much of title XIV as follows section 1401) is
as follows:
Sec. 1. Short title and table of contents.
TITLE I--REFORM OF FUNDING RULES FOR
SINGLE-EMPLOYER DEFINED BENEFIT PENSION PLANS
Subtitle A--Amendments to Employee Retirement
Income Security Act of 1974
Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer
defined benefit pension plans.
Sec. 103. Benefit limitations under
single-employer plans.
Sec. 104. Special rules for multiple employer
plans of certain cooperatives.
Sec. 105. Temporary relief for certain PBGC
settlement plans.
Sec. 106. Special rules for plans of certain
government contractors.
Sec. 107. Technical and conforming amendments.
Subtitle B--Amendments to Internal Revenue Code
of 1986
Sec. 111. Minimum funding standards.
Sec. 112. Funding rules for single-employer
defined benefit pension plans.
Sec. 113. Benefit limitations under
single-employer plans.
Sec. 114. Technical and conforming amendments.
Sec. 115. Modification of transition rule to
pension funding requirements.
Sec. 116. Restrictions on funding of nonqualified
deferred compensation plans by employers maintaining underfunded or
terminated single-employer plans.
TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED
BENEFIT PLANS AND RELATED PROVISIONS
Subtitle A--Amendments to Employee Retirement
Income Security Act of 1974
Sec. 201. Funding rules for multiemployer defined
benefit plans.
Sec. 202. Additional funding rules for
multiemployer plans in endangered or critical status.
Sec. 203. Measures to forestall insolvency of
multiemployer plans.
Sec. 204. Withdrawal liability reforms.
Sec. 205. Prohibition on retaliation against
employers exercising their rights to petition the Federal
government.
Sec. 206. Special rule for certain benefits
funded under an agreement approved by the Pension Benefit Guaranty
Corporation.
Subtitle B--Amendments to Internal Revenue Code
of 1986
Sec. 211. Funding rules for multiemployer defined
benefit plans.
Sec. 212. Additional funding rules for
multiemployer plans in endangered or critical status.
Sec. 213. Measures to forestall insolvency of
multiemployer plans.
Sec. 214. Exemption from excise taxes for certain
multiemployer pension plans.
Subtitle C--Sunset of Additional Funding Rules
Sec. 221. Sunset of additional funding rules.
TITLE III--INTEREST RATE ASSUMPTIONS
Sec. 301. Extension of replacement of 30-year
Treasury rates.
Sec. 302. Interest rate assumption for
determination of lump sum distributions.
Sec. 303. Interest rate assumption for applying
benefit limitations to lump sum distributions.
TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS
Sec. 402. Special funding rules for certain plans
maintained by commercial airlines.
Sec. 403. Limitation on PBGC guarantee of
shutdown and other benefits.
Sec. 404. Rules relating to bankruptcy of
employer.
Sec. 405. PBGC premiums for small plans.
Sec. 406. Authorization for PBGC to pay interest
on premium overpayment refunds.
Sec. 407. Rules for substantial owner benefits in
terminated plans.
Sec. 408. Acceleration of PBGC computation of
benefits attributable to recoveries from employers.
Sec. 409. Treatment of certain plans where
cessation or change in membership of a controlled group.
Sec. 410. Missing participants.
Sec. 411. Director of the Pension Benefit
Guaranty Corporation.
Sec. 412. Inclusion of information in the PBGC
annual report.
TITLE V--DISCLOSURE
Sec. 501. Defined benefit plan funding notice.
Sec. 502. Access to multiemployer pension plan
information.
Sec. 503. Additional annual reporting
requirements.
Sec. 504. Electronic display of annual report
information.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information
to plan participants.
Sec. 507. Notice of freedom to divest employer
securities.
Sec. 508. Periodic pension benefit statements.
Sec. 509. Notice to participants or beneficiaries
of blackout periods.
TITLE VI--INVESTMENT ADVICE, PROHIBITED
TRANSACTIONS, AND FIDUCIARY RULES
Subtitle A--Investment Advice
Sec. 601. Prohibited transaction exemption for
provision of investment advice.
Subtitle B--Prohibited Transactions
Sec. 611. Prohibited transaction rules relating
to financial investments.
Sec. 612. Correction period for certain
transactions involving securities and commodities.
Subtitle C--Fiduciary and Other Rules
Sec. 621. Inapplicability of relief from
fiduciary liability during suspension of ability of participant or
beneficiary to direct investments.
Sec. 622. Increase in maximum bond amount.
Sec. 623. Increase in penalties for coercive
interference with exercise of ERISA rights.
Sec. 624. Treatment of investment of assets by
plan where participant fails to exercise investment election.
Sec. 625. Clarification of fiduciary rules.
TITLE VII--BENEFIT ACCRUAL STANDARDS
Sec. 701. Benefit accrual standards.
Sec. 702. Regulations relating to mergers and
acquisitions.
TITLE VIII--PENSION RELATED REVENUE PROVISIONS
Subtitle A--Deduction Limitations
Sec. 801. Increase in deduction limit for
single-employer plans.
Sec. 802. Deduction limits for multiemployer
plans.
Sec. 803. Updating deduction rules for
combination of plans.
Subtitle B--Certain Pension Provisions Made
Permanent
Sec. 811. Pensions and individual retirement
arrangement provisions of Economic Growth and Tax Relief
Reconciliation Act of 2001 made permanent.
Sec. 812. Saver's credit.
Subtitle C--Improvements in Portability,
Distribution, and Contribution Rules
Sec. 821. Clarifications regarding purchase of
permissive service credit.
Sec. 822. Allow rollover of after-tax amounts in
annuity contracts.
Sec. 823. Clarification of minimum distribution
rules for governmental plans.
Sec. 824. Allow direct rollovers from retirement
plans to Roth IRAs.
Sec. 825. Eligibility for participation in
retirement plans.
Sec. 826. Modifications of rules governing
hardships and unforseen financial emergencies.
Sec. 827. Penalty-free withdrawals from
retirement plans for individuals called to active duty for at least
179 days.
Sec. 828. Waiver of 10 percent early withdrawal
penalty tax on certain distributions of pension plans for public
safety employees.
Sec. 829. Allow rollovers by nonspouse
beneficiaries of certain retirement plan distributions.
Sec. 830. Direct payment of tax refunds to
individual retirement plans.
Sec. 831. Allowance of additional IRA payments in
certain bankruptcy cases.
Sec. 832. Determination of average compensation
for section 415 limits.
Sec. 833. Inflation indexing of gross income
limitations on certain retirement savings incentives.
Subtitle D--Health and Medical Benefits
Sec. 841. Use of excess pension assets for future
retiree health benefits and collectively bargained retiree health
benefits.
Sec. 842. Transfer of excess pension assets to
multiemployer health plan.
Sec. 843. Allowance of reserve for medical
benefits of plans sponsored by bona fide associations.
Sec. 844. Treatment of annuity and life insurance
contracts with a long-term care insurance feature.
Sec. 845. Distributions from governmental
retirement plans for health and Long-Term care insurance for public
safety officers.
Subtitle E--United States Tax Court Modernization
Sec. 851. Cost-of-living adjustments for Tax
Court judicial survivor annuities.
Sec. 852. Cost of life insurance coverage for Tax
Court judges age 65 or over.
Sec. 853. Participation of Tax Court judges in
the Thrift Savings Plan.
Sec. 854. Annuities to surviving spouses and
dependent children of special trial judges of the Tax Court.
Sec. 855. Jurisdiction of Tax Court over
collection due process cases.
Sec. 856. Provisions for recall.
Sec. 857. Authority for special trial judges to
hear and decide certain employment status cases.
Sec. 858. Confirmation of authority of Tax Court
to apply doctrine of equitable recoupment.
Sec. 859. Tax Court filing fee in all cases
commenced by filing petition.
Sec. 860. Expanded use of Tax Court practice fee
for pro se taxpayers.
Subtitle F--Other Provisions
Sec. 861. Extension to all governmental plans of
current moratorium on application of certain nondiscrimination rules
applicable to State and local plans.
Sec. 862. Elimination of aggregate limit for
usage of excess funds from black lung disability trusts.
Sec. 863. Treatment of death benefits from
corporate-owned life insurance.
Sec. 864. Treatment of test room supervisors and
proctors who assist in the administration of college entrance and
placement exams.
Sec. 865. Grandfather rule for church plans which
self-annuitize.
Sec. 866. Exemption for income from leveraged
real estate held by church plans.
Sec. 867. Church plan rule.
Sec. 868. Gratuitous transfer for benefits of
employees.
TITLE IX--INCREASE IN PENSION PLAN
DIVERSIFICATION AND PARTICIPATION AND OTHER PENSION PROVISIONS
Sec. 901. Defined contribution plans required to
provide employees with freedom to invest their plan assets.
Sec. 902. Increasing participation through
automatic contribution arrangements.
Sec. 903. Treatment of eligible combined defined
benefit plans and qualified cash or deferred arrangements.
Sec. 904. Faster vesting of employer nonelective
contributions.
Sec. 905. Distributions during working
retirement.
Sec. 906. Treatment of certain pension plans of
Indian tribal governments.
TITLE X--PROVISIONS RELATING TO SPOUSAL PENSION
PROTECTION
Sec. 1001. Regulations on time and order of
issuance of domestic relations orders.
Sec. 1002. Entitlement of divorced spouses to
railroad retirement annuities independent of actual entitlement of
employee.
Sec. 1003. Extension of tier II railroad
retirement benefits to surviving former spouses pursuant to divorce
agreements.
Sec. 1004. Requirement for additional survivor
annuity option.
TITLE XI--ADMINISTRATIVE PROVISIONS
Sec. 1101. Employee plans compliance resolution
system.
Sec. 1102. Notice and consent period regarding
distributions.
Sec. 1103. Reporting simplification.
Sec. 1104. Voluntary early retirement incentive
and employment retention plans maintained by local educational
agencies and other entities.
Sec. 1105. No reduction in unemployment
compensation as a result of pension rollovers.
Sec. 1106. Revocation of election relating to
treatment as multiemployer plan.
Sec. 1107. Provisions relating to plan
amendments.
TITLE XII--PROVISIONS RELATING TO EXEMPT
ORGANIZATIONS
Subtitle A--Charitable Giving Incentives
Sec. 1201. Tax-free distributions from individual
retirement plans for charitable purposes.
Sec. 1202. Extension of modification of
charitable deduction for contributions of food inventory.
Sec. 1203. Basis adjustment to stock of S
corporation contributing property.
Sec. 1204. Extension of modification of
charitable deduction for contributions of book inventory.
Sec. 1205. Modification of tax treatment of
certain payments to controlling exempt organizations.
Sec. 1206. Encouragement of contributions of
capital gain real property made for conservation purposes.
Sec. 1207. Excise taxes exemption for blood
collector organizations.
Subtitle B--Reforming Exempt Organizations
Part 1--General Reforms
Sec. 1211. Reporting on certain acquisitions of
interests in insurance contracts in which certain exempt
organizations hold an interest.
Sec. 1212. Increase in penalty excise taxes
relating to public charities, social welfare organizations, and
private foundations.
Sec. 1213. Reform of charitable contributions of
certain easements in registered historic districts and reduced
deduction for portion of qualified conservation contribution
attributable to rehabilitation credit.
Sec. 1214. Charitable contributions of taxidermy
property.
Sec. 1215. Recapture of tax benefit for
charitable contributions of exempt use property not used for an
exempt use.
Sec. 1216. Limitation of deduction for charitable
contributions of clothing and household items.
Sec. 1217. Modification of recordkeeping
requirements for certain charitable contributions.
Sec. 1218. Contributions of fractional interests
in tangible personal property.
Sec. 1219. Provisions relating to substantial and
gross overstatements of valuations.
Sec. 1220. Additional standards for credit
counseling organizations.
Sec. 1221. Expansion of the base of tax on
private foundation net investment income.
Sec. 1222. Definition of convention or
association of churches.
Sec. 1223. Notification requirement for entities
not currently required to file.
Sec. 1224. Disclosure to State officials relating
to exempt organizations.
Sec. 1225. Public disclosure of information
relating to unrelated business income tax returns.
Sec. 1226. Study on donor advised funds and
supporting organizations.
Part 2--Improved Accountability of Donor Advised
Funds
Sec. 1231. Excise taxes relating to donor advised
funds.
Sec. 1232. Excess benefit transactions involving
donor advised funds and sponsoring organizations.
Sec. 1233. Excess business holdings of donor
advised funds.
Sec. 1234. Treatment of charitable contribution
deductions to donor advised funds.
Sec. 1235. Returns of, and applications for
recognition by, sponsoring organizations.
Part 3--Improved Accountability of Supporting
Organizations
Sec. 1241. Requirements for supporting
organizations.
Sec. 1242. Excess benefit transactions involving
supporting organizations.
Sec. 1243. Excess business holdings of supporting
organizations.
Sec. 1244. Treatment of amounts paid to
supporting organizations by private foundations.
Sec. 1245. Returns of supporting organizations.
TITLE XIII--OTHER PROVISIONS
Sec. 1301. Technical corrections relating to mine
safety.
Sec. 1302. Going-to-the-sun road.
Sec. 1303. Exception to the local furnishing
requirement of the tax-exempt bond rules.
Sec. 1304. Qualified tuition programs.
TITLE XIV--TARIFF PROVISIONS
Sec. 1401. Short title; table of contents.
TITLE I--REFORM OF FUNDING RULES FOR
SINGLE-EMPLOYER DEFINED BENEFIT PENSION PLANS
Subtitle A--Amendments to Employee Retirement
Income Security Act of 1974
SEC. 101. MINIMUM FUNDING STANDARDS.
(a) Repeal of Existing Funding Rules- Sections 302
through 308 of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082 through 1086) are repealed.
(b) New Minimum Funding Standards- Part 3 of
subtitle B of title I of such Act (as amended by subsection (a)) is
amended by inserting after section 301 the following new section:
`SEC. 302. MINIMUM FUNDING STANDARDS.
`(a) Requirement to Meet Minimum Funding Standard-
`(1) IN GENERAL- A plan to which this part
applies shall satisfy the minimum funding standard applicable to the
plan for any plan year.
`(2) MINIMUM FUNDING STANDARD- For purposes of
paragraph (1), a plan shall be treated as satisfying the minimum
funding standard for a plan year if--
`(A) in the case of a defined benefit plan
which is a single-employer plan, the employer makes contributions
to or under the plan for the plan year which, in the aggregate,
are not less than the minimum required contribution determined
under section 303 for the plan for the plan year,
`(B) in the case of a money purchase plan which
is a single-employer plan, the employer makes contributions to or
under the plan for the plan year which are required under the
terms of the plan, and
`(C) in the case of a multiemployer plan, the
employers make contributions to or under the plan for any plan
year which, in the aggregate, are sufficient to ensure that the
plan does not have an accumulated funding deficiency under section
304 as of the end of the plan year.
`(b) Liability for Contributions-
`(1) IN GENERAL- Except as provided in paragraph
(2), the amount of any contribution required by this section
(including any required installments under paragraphs (3) and (4) of
section 303(j)) shall be paid by the employer responsible for making
contributions to or under the plan.
`(2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER
MEMBER OF CONTROLLED GROUP- If the employer referred to in paragraph
(1) is a member of a controlled group, each member of such group
shall be jointly and severally liable for payment of such
contributions.
`(c) Variance From Minimum Funding Standards-
`(1) WAIVER IN CASE OF BUSINESS HARDSHIP-
`(i) an employer is (or in the case of a
multiemployer plan, 10 percent or more of the number of
employers contributing to or under the plan is) unable to
satisfy the minimum funding standard for a plan year without
temporary substantial business hardship (substantial business
hardship in the case of a multiemployer plan), and
`(ii) application of the standard would be
adverse to the interests of plan participants in the aggregate,
the Secretary of the Treasury may, subject to
subparagraph (C), waive the requirements of subsection (a) for
such year with respect to all or any portion of the minimum
funding standard. The Secretary of the Treasury shall not waive
the minimum funding standard with respect to a plan for more than
3 of any 15 (5 of any 15 in the case of a multiemployer plan)
consecutive plan years.
`(B) EFFECTS OF WAIVER- If a waiver is granted
under subparagraph (A) for any plan year--
`(i) in the case of a single-employer plan,
the minimum required contribution under section 303 for the plan
year shall be reduced by the amount of the waived funding
deficiency and such amount shall be amortized as required under
section 303(e), and
`(ii) in the case of a multiemployer plan,
the funding standard account shall be credited under section
304(b)(3)(C) with the amount of the waived funding deficiency
and such amount shall be amortized as required under section
304(b)(2)(C).
`(C) WAIVER OF AMORTIZED PORTION NOT ALLOWED-
The Secretary of the Treasury may not waive under subparagraph (A)
any portion of the minimum funding standard under subsection (a)
for a plan year which is attributable to any waived funding
deficiency for any preceding plan year.
`(2) DETERMINATION OF BUSINESS HARDSHIP- For
purposes of this subsection, the factors taken into account in
determining temporary substantial business hardship (substantial
business hardship in the case of a multiemployer plan) shall include
(but shall not be limited to) whether or not--
`(A) the employer is operating at an economic
loss,
`(B) there is substantial unemployment or
underemployment in the trade or business and in the industry
concerned,
`(C) the sales and profits of the industry
concerned are depressed or declining, and
`(D) it is reasonable to expect that the plan
will be continued only if the waiver is granted.
`(3) WAIVED FUNDING DEFICIENCY- For purposes of
this part, the term `waived funding deficiency' means the portion of
the minimum funding standard under subsection (a) (determined
without regard to the waiver) for a plan year waived by the
Secretary of the Treasury and not satisfied by employer
contributions.
`(4) SECURITY FOR WAIVERS FOR SINGLE-EMPLOYER
PLANS, CONSULTATIONS-
`(A) SECURITY MAY BE REQUIRED-
`(i) IN GENERAL- Except as provided in
subparagraph (C), the Secretary of the Treasury may require an
employer maintaining a defined benefit plan which is a
single-employer plan (within the meaning of section 4001(a)(15))
to provide security to such plan as a condition for granting or
modifying a waiver under paragraph (1).
`(ii) SPECIAL RULES- Any security provided
under clause (i) may be perfected and enforced only by the
Pension Benefit Guaranty Corporation, or at the direction of the
Corporation, by a contributing sponsor (within the meaning of
section 4001(a)(13)), or a member of such sponsor's controlled
group (within the meaning of section 4001(a)(14)).
`(B) CONSULTATION WITH THE PENSION BENEFIT
GUARANTY CORPORATION- Except as provided in subparagraph (C), the
Secretary of the Treasury shall, before granting or modifying a
waiver under this subsection with respect to a plan described in
subparagraph (A)(i)--
`(i) provide the Pension Benefit Guaranty
Corporation with--
`(I) notice of the completed application
for any waiver or modification, and
`(II) an opportunity to comment on such
application within 30 days after receipt of such notice, and
`(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),
`(ii) TREATMENT OF WAIVERS FOR WHICH
APPLICATIONS ARE PENDING- The amount described in clause (i)(I)
shall include any increase in such amount which would result if
all applications for waivers of the minimum funding standard
under this subsection which are pending with respect to such
plan were denied.
`(iii) UNPAID MINIMUM REQUIRED CONTRIBUTION-
For purposes of this subparagraph--
`(I) IN GENERAL- The term `unpaid minimum
required contribution' means, with respect to any plan year,
any minimum required contribution under section 303 for the
plan year which is not paid on or before the due date (as
determined under section 303(j)(1)) for the plan year.
`(II) ORDERING RULE- For purposes of
subclause (I), any payment to or under a plan for any plan
year shall be allocated first to unpaid minimum required
contributions for all preceding plan years on a first-in,
first-out basis and then to the minimum required contribution
under section 303 for the plan year.
`(5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS-
`(A) APPLICATION MUST BE SUBMITTED BEFORE DATE
2 1/2 MONTHS AFTER CLOSE OF YEAR- In the case of a single-employer
plan, no waiver may be granted under this subsection with respect
to any plan for any plan year unless an application therefor is
submitted to the Secretary of the Treasury not later than the 15th
day of the 3rd month beginning after the close of such plan year.
`(B) SPECIAL RULE IF EMPLOYER IS MEMBER OF
CONTROLLED GROUP- In the case of a single-employer plan, if an
employer is a member of a controlled group, the temporary
substantial business hardship requirements of paragraph (1) shall
be treated as met only if such requirements are met--
`(i) with respect to such employer, and
`(ii) with respect to the controlled group of
which such employer is a member (determined by treating all
members of such group as a single employer).
The Secretary of the Treasury may provide that
an analysis of a trade or business or industry of a member need
not be conducted if such Secretary determines such analysis is not
necessary because the taking into account of such member would not
significantly affect the determination under this paragraph.
`(A) IN GENERAL- The Secretary of the Treasury
shall, before granting a waiver under this subsection, require
each applicant to provide evidence satisfactory to such Secretary
that the applicant has provided notice of the filing of the
application for such waiver to each affected party (as defined in
section 4001(a)(21)). Such notice shall include a description of
the extent to which the plan is funded for benefits which are
guaranteed under title IV and for benefit liabilities.
`(B) CONSIDERATION OF RELEVANT INFORMATION- The
Secretary of the Treasury shall consider any relevant information
provided by a person to whom notice was given under subparagraph
(A).
`(7) RESTRICTION ON PLAN AMENDMENTS-
`(A) IN GENERAL- No amendment of a plan which
increases the liabilities of the plan by reason of any increase in
benefits, any change in the accrual of benefits, or any change in
the rate at which benefits become nonforfeitable under the plan
shall be adopted if a waiver under this subsection or an extension
of time under section 304(d) is in effect with respect to the
plan, or if a plan amendment described in subsection (d)(2) has
been made at any time in the preceding 12 months (24 months in the
case of a multiemployer plan). If a plan is amended in violation
of the preceding sentence, any such waiver, or extension of time,
shall not apply to any plan year ending on or after the date on
which such amendment is adopted.
`(B) EXCEPTION- Subparagraph (A) shall not
apply to any plan amendment which--
`(i) the Secretary of the Treasury determines
to be reasonable and which provides for only de minimis
increases in the liabilities of the plan,
`(ii) only repeals an amendment described in
subsection (d)(2), or
`(iii) is required as a condition of
qualification under part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986.
`(8) CROSS REFERENCE- For corresponding duties of
the Secretary of the Treasury with regard to implementation of the
Internal Revenue Code of 1986, see section 412(c) of such Code.
`(d) Miscellaneous Rules-
`(1) CHANGE IN METHOD OR YEAR- If the funding
method, the valuation date, or a plan year for a plan is changed,
the change shall take effect only if approved by the Secretary of
the Treasury.
`(2) CERTAIN RETROACTIVE PLAN AMENDMENTS- For
purposes of this section, any amendment applying to a plan year
which--
`(A) 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 2007.
SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER
DEFINED BENEFIT PENSION PLANS.
(a) In General- Part 3 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974 (as amended by
section 101 of this Act) is amended by inserting after section 302 the
following new section:
`SEC. 303. MINIMUM FUNDING STANDARDS FOR
SINGLE-EMPLOYER DEFINED BENEFIT PENSION PLANS.
`(a) Minimum Required Contribution- For purposes of
this section and section 302(a)(2)(A), except as provided in
subsection (f), the term `minimum required contribution' means, with
respect to any plan year of a single-employer plan--
`(1) in any case in which the value of plan
assets of the plan (as reduced under subsection (f)(4)(B)) is less
than the funding target of the plan for the plan year, the sum of--
`(A) the target normal cost of the plan for the
plan year,
`(B) the shortfall amortization charge (if any)
for the plan for the plan year determined under subsection (c),
and
`(C) the waiver amortization charge (if any)
for the plan for the plan year as determined under subsection (e);
or
`(2) in any case in which the value of plan
assets of the plan (as reduced under subsection (f)(4)(B)) equals or
exceeds the funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced (but not below
zero) by such excess.
`(b) Target Normal Cost- For purposes of this
section, except as provided in subsection (i)(2) with respect to plans
in at-risk status, the term `target normal cost' means, for any plan
year, the present value of all benefits which are expected to accrue
or to be earned under the plan during the plan year. For purposes of
this subsection, if any benefit attributable to services performed in
a preceding plan year is increased by reason of any increase in
compensation during the current plan year, the increase in such
benefit shall be treated as having accrued during the current plan
year.
`(c) Shortfall Amortization Charge-
`(1) IN GENERAL- For purposes of this section,
the shortfall amortization charge for a plan for any plan year is
the aggregate total (not less than zero) of the shortfall
amortization installments for such plan year with respect to the
shortfall amortization bases for such plan year and each of the 6
preceding plan years.
`(2) SHORTFALL AMORTIZATION INSTALLMENT- For
purposes of paragraph (1)--
`(A) DETERMINATION- The shortfall amortization
installments are the amounts necessary to amortize the shortfall
amortization base of the plan for any plan year in level annual
installments over the 7-plan-year period beginning with such plan
year.
`(B) SHORTFALL INSTALLMENT- The shortfall
amortization installment for any plan year in the 7-plan-year
period under subparagraph (A) with respect to any shortfall
amortization base is the annual installment determined under
subparagraph (A) for that year for that base.
`(C) SEGMENT RATES- In determining any
shortfall amortization installment under this paragraph, the plan
sponsor shall use the segment rates determined under subparagraph
(C) of subsection (h)(2), applied under rules similar to the rules
of subparagraph (B) of subsection (h)(2).
`(3) SHORTFALL AMORTIZATION BASE- For purposes of
this section, the shortfall amortization base of a plan for a plan
year is--
`(A) the funding shortfall of such plan for
such plan year, minus
`(B) the present value (determined using the
segment rates determined under subparagraph (C) of subsection
(h)(2), applied under rules similar to the rules of subparagraph
(B) of subsection (h)(2)) of the aggregate total of the shortfall
amortization installments and waiver amortization installments
which have been determined for such plan year and any succeeding
plan year with respect to the shortfall amortization bases and
waiver amortization bases of the plan for any plan year preceding
such plan year.
`(4) FUNDING SHORTFALL- For purposes of this
section, the funding shortfall of a plan for any plan year is the
excess (if any) of--
`(A) the funding target of the plan for the
plan year, over
`(B) the value of plan assets of the plan (as
reduced under subsection (f)(4)(B)) for the plan year which are
held by the plan on the valuation date.
`(5) EXEMPTION FROM NEW SHORTFALL AMORTIZATION
BASE-
`(A) IN GENERAL- In any case in which the value
of plan assets of the plan (as reduced under subsection (f)(4)(A))
is equal to or greater than the funding target of the plan for the
plan year, the shortfall amortization base of the plan for such
plan year shall be zero.
`(i) IN GENERAL- Except as provided in
clauses (iii) and (iv), in the case of plan years beginning
after 2007 and before 2011, only the applicable percentage of
the funding target shall be taken into account under paragraph
(3)(A) in determining the funding shortfall for the plan year
for purposes of subparagraph (A).
`(ii) APPLICABLE PERCENTAGE- For purposes of
subparagraph (A), the applicable percentage shall be determined
in accordance with the following table:
`In the case of a plan year
The applicable
beginning in calendar year:
percentage is
2008
--92
2009
--94
2010
--96.
`(iii) LIMITATION- Clause (i) shall not apply
with respect to any plan year after 2008 unless the shortfall
amortization base for each of the preceding years beginning
after 2007 was zero (determined after application of this
subparagraph).
`(iv) TRANSITION RELIEF NOT AVAILABLE FOR NEW
OR DEFICIT REDUCTION PLANS- Clause (i) shall not apply to a
plan--
`(I) which was not in effect for a plan
year beginning in 2007, or
`(II) which was in effect for a plan year
beginning in 2007 and which was subject to section 302(d) (as
in effect for plan years beginning in 2007), determined after
the application of paragraphs (6) and (9) thereof.
`(6) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF
FUNDING TARGET- In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the shortfall
amortization charge for such plan year and succeeding plan years,
the shortfall amortization bases for all preceding plan years (and
all shortfall amortization installments determined with respect to
such bases) shall be reduced to zero.
`(d) Rules Relating to Funding Target- For purposes
of this section--
`(1) FUNDING TARGET- Except as provided in
subsection (i)(1) with respect to plans in at-risk status, the
funding target of a plan for a plan year is the present value of all
benefits accrued or earned under the plan as of the beginning of the
plan year.
`(2) FUNDING TARGET ATTAINMENT PERCENTAGE- The
`funding target attainment percentage' of a plan for a plan year is
the ratio (expressed as a percentage) which--
`(A) the value of plan assets for the plan year
(as reduced under subsection (f)(4)(B)), bears to
`(B) the funding target of the plan for the
plan year (determined without regard to subsection (i)(1)).
`(e) Waiver Amortization Charge-
`(1) DETERMINATION OF WAIVER AMORTIZATION CHARGE-
The waiver amortization charge (if any) for a plan for any plan year
is the aggregate total of the waiver amortization installments for
such plan year with respect to the waiver amortization bases for
each of the 5 preceding plan years.
`(2) WAIVER AMORTIZATION INSTALLMENT- For
purposes of paragraph (1)--
`(A) DETERMINATION- The waiver amortization
installments are the amounts necessary to amortize the waiver
amortization base of the plan for any plan year in level annual
installments over a period of 5 plan years beginning with the
succeeding plan year.
`(B) WAIVER INSTALLMENT- The waiver
amortization installment for any plan year in the 5-year period
under subparagraph (A) with respect to any waiver amortization
base is the annual installment determined under subparagraph (A)
for that year for that base.
`(3) INTEREST RATE- In determining any waiver
amortization installment under this subsection, the plan sponsor
shall use the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules of
subparagraph (B) of subsection (h)(2).
`(4) WAIVER AMORTIZATION BASE- The waiver
amortization base of a plan for a plan year is the amount of the
waived funding deficiency (if any) for such plan year under section
302(c).
`(5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF
FUNDING TARGET- In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the waiver
amortization charge for such plan year and succeeding plan years,
the waiver amortization bases for all preceding plan years (and all
waiver amortization installments determined with respect to such
bases) shall be reduced to zero.
`(f) Reduction of Minimum Required Contribution by
Prefunding Balance and Funding Standard Carryover Balance-
`(1) ELECTION TO MAINTAIN BALANCES-
`(A) PREFUNDING BALANCE- The plan sponsor of a
single-employer plan may elect to maintain a prefunding balance.
`(B) FUNDING STANDARD CARRYOVER BALANCE-
`(i) IN GENERAL- In the case of a
single-employer plan described in clause (ii), the plan sponsor
may elect to maintain a funding standard carryover balance,
until such balance is reduced to zero.
`(ii) PLANS MAINTAINING FUNDING STANDARD
ACCOUNT IN 2007- A plan is described in this clause if the
plan--
`(I) was in effect for a plan year
beginning in 2007, and
`(II) had a positive balance in the funding
standard account under section 302(b) as in effect for such
plan year and determined as of the end of such plan year.
`(2) APPLICATION OF BALANCES- A prefunding
balance and a funding standard carryover balance maintained pursuant
to this paragraph--
`(A) shall be available for crediting against
the minimum required contribution, pursuant to an election under
paragraph (3),
`(B) shall be applied as a reduction in the
amount treated as the value of plan assets for purposes of this
section, to the extent provided in paragraph (4), and
`(C) may be reduced at any time, pursuant to an
election under paragraph (5).
`(3) ELECTION TO APPLY BALANCES AGAINST MINIMUM
REQUIRED CONTRIBUTION-
`(A) IN GENERAL- Except as provided in
subparagraphs (B) and (C), in the case of any plan year in which
the plan sponsor elects to credit against the minimum required
contribution for the current plan year all or a portion of the
prefunding balance or the funding standard carryover balance for
the current plan year (not in excess of such minimum required
contribution), the minimum required contribution for the plan year
shall be reduced as of the first day of the plan year by the
amount so credited by the plan sponsor. For purposes of the
preceding sentence, the minimum required contribution shall be
determined after taking into account any waiver under section
302(c).
`(B) COORDINATION WITH FUNDING STANDARD
CARRYOVER BALANCE- To the extent that any plan has a funding
standard carryover balance greater than zero, no amount of the
prefunding balance of such plan may be credited under this
paragraph in reducing the minimum required contribution.
`(C) LIMITATION FOR UNDERFUNDED PLANS- The
preceding provisions of this paragraph shall not apply for any
plan year if the ratio (expressed as a percentage) which--
`(i) the value of plan assets for the
preceding plan year (as reduced under paragraph (4)(C)), bears
to
`(ii) the funding target of the plan for the
preceding plan year (determined without regard to subsection (i)(1)),
is less than 80 percent. In the case of plan
years beginning in 2008, the ratio under this subparagraph may be
determined using such methods of estimation as the Secretary of
the Treasury may prescribe.
`(4) EFFECT OF BALANCES ON AMOUNTS TREATED AS
VALUE OF PLAN ASSETS- In the case of any plan maintaining a
prefunding balance or a funding standard carryover balance pursuant
to this subsection, the amount treated as the value of plan assets
shall be deemed to be such amount, reduced as provided in the
following subparagraphs:
`(A) APPLICABILITY OF SHORTFALL AMORTIZATION
BASE- For purposes of subsection (c)(5), the value of plan assets
is deemed to be such amount, reduced by the amount of the
prefunding balance, but only if an election under paragraph (2)
applying any portion of the prefunding balance in reducing the
minimum required contribution is in effect for the plan year.
`(B) DETERMINATION OF EXCESS ASSETS, FUNDING
SHORTFALL, AND FUNDING TARGET ATTAINMENT PERCENTAGE-
`(i) IN GENERAL- For purposes of subsections
(a), (c)(4)(B), and (d)(2)(A), the value of plan assets is
deemed to be such amount, reduced by the amount of the
prefunding balance and the funding standard carryover balance.
`(ii) SPECIAL RULE FOR CERTAIN BINDING
AGREEMENTS WITH PBGC- For purposes of subsection (c)(4)(B), the
value of plan assets shall not be deemed to be reduced for a
plan year by the amount of the specified balance if, with
respect to such balance, there is in effect for a plan year a
binding written agreement with the Pension Benefit Guaranty
Corporation which provides that such balance is not available to
reduce the minimum required contribution for the plan year. For
purposes of the preceding sentence, the term `specified balance'
means the prefunding balance or the funding standard carryover
balance, as the case may be.
`(C) AVAILABILITY OF BALANCES IN PLAN YEAR FOR
CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION- For purposes of
paragraph (3)(C)(i) of this subsection, the value of plan assets
is deemed to be such amount, reduced by the amount of the
prefunding balance.
`(5) ELECTION TO REDUCE BALANCE PRIOR TO
DETERMINATIONS OF VALUE OF PLAN ASSETS AND CREDITING AGAINST MINIMUM
REQUIRED CONTRIBUTION-
`(A) IN GENERAL- The plan sponsor may elect to
reduce by any amount the balance of the prefunding balance and the
funding standard carryover balance for any plan year (but not
below zero). Such reduction shall be effective prior to any
determination of the value of plan assets for such plan year under
this section and application of the balance in reducing the
minimum required contribution for such plan for such plan year
pursuant to an election under paragraph (2).
`(B) COORDINATION BETWEEN PREFUNDING BALANCE
AND FUNDING STANDARD CARRYOVER BALANCE- To the extent that any
plan has a funding standard carryover balance greater than zero,
no election may be made under subparagraph (A) with respect to the
prefunding balance.
`(A) IN GENERAL- A prefunding balance
maintained by a plan shall consist of a beginning balance of zero,
increased and decreased to the extent provided in subparagraphs
(B) and (C), and adjusted further as provided in paragraph (8).
`(i) IN GENERAL- As of the first day of each
plan year beginning after 2008, the prefunding balance of a plan
shall be increased by the amount elected by the plan sponsor for
the plan year. Such amount shall not exceed the excess (if any)
of--
`(I) the aggregate total of employer
contributions to the plan for the preceding plan year, over--
`(II) the minimum required contribution for
such preceding plan year.
`(ii) ADJUSTMENTS FOR INTEREST- Any excess
contributions under clause (i) shall be properly adjusted for
interest accruing for the periods between the first day of the
current plan year and the dates on which the excess
contributions were made, determined by using the effective
interest rate for the preceding plan year and by treating
contributions as being first used to satisfy the minimum
required contribution.
`(iii) CERTAIN CONTRIBUTIONS NECESSARY TO
AVOID BENEFIT LIMITATIONS DISREGARDED- The excess described in
clause (i) with respect to any preceding plan year shall be
reduced (but not below zero) by the amount of contributions an
employer would be required to make under paragraph (1), (2), or
(4) of section 206(g) to avoid a benefit limitation which would
otherwise be imposed under such paragraph for the preceding plan
year. Any contribution which may be taken into account in
satisfying the requirements of more than 1 of such paragraphs
shall be taken into account only once for purposes of this
clause.
`(C) DECREASE- The prefunding balance of a plan
shall be decreased (but not below zero) by--
`(i) as of the first day of each plan year
after 2008, the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
`(ii) as of the time specified in paragraph
(5))(A), any reduction in such balance elected under paragraph
(5).
`(7) FUNDING STANDARD CARRYOVER BALANCE-
`(A) IN GENERAL- A funding standard carryover
balance maintained by a plan shall consist of a beginning balance
determined under subparagraph (B), decreased to the extent
provided in subparagraph (C), and adjusted further as provided in
paragraph (8).
`(B) BEGINNING BALANCE- The beginning balance
of the funding standard carryover balance shall be the positive
balance described in paragraph (1)(B)(ii)(II).
`(C) DECREASES- The funding standard carryover
balance of a plan shall be decreased (but not below zero) by--
`(i) as of the first day of each plan year
after 2008, the amount of such balance credited under paragraph
(2) (if any) in reducing the minimum required contribution of
the plan for the preceding plan year, and
`(ii) as of the time specified in paragraph
(5))(A), any reduction in such balance elected under paragraph
(5).
`(8) ADJUSTMENTS FOR INVESTMENT EXPERIENCE- In
determining the prefunding balance or the funding standard carryover
balance of a plan as of the first day of the plan year, the plan
sponsor shall, in accordance with regulations prescribed by the
Secretary of the Treasury, adjust such balance to reflect the rate
of return on plan assets for the preceding plan year.
Notwithstanding subsection (g)(3), such rate of return shall be
determined on the basis of fair market value and shall properly take
into account, in accordance with such regulations, all
contributions, distributions, and other plan payments made during
such period.
`(9) ELECTIONS- Elections under this subsection
shall be made at such times, and in such form and manner, as shall
be prescribed in regulations of the Secretary of the Treasury.
`(g) Valuation of Plan Assets and Liabilities-
`(1) TIMING OF DETERMINATIONS- Except as
otherwise provided under this subsection, all determinations under
this section for a plan year shall be made as of the valuation date
of the plan for such plan year.
`(2) VALUATION DATE- For purposes of this
section--
`(A) IN GENERAL- Except as provided in
subparagraph (B), the valuation date of a plan for any plan year
shall be the first day of the plan year.
`(B) EXCEPTION FOR SMALL PLANS- If, on each day
during the preceding plan year, a plan had 100 or fewer
participants, the plan may designate any day during the plan year
as its valuation date for such plan year and succeeding plan
years. For purposes of this subparagraph, all defined benefit
plans which are single-employer plans and are maintained by the
same employer (or any member of such employer's controlled group)
shall be treated as 1 plan, but only participants with respect to
such employer or member shall be taken into account.
`(C) APPLICATION OF CERTAIN RULES IN
DETERMINATION OF PLAN SIZE- For purposes of this paragraph--
`(i) PLANS NOT IN EXISTENCE IN PRECEDING
YEAR- In the case of the first plan year of any plan,
subparagraph (B) shall apply to such plan by taking into account
the number of participants that the plan is reasonably expected
to have on days during such first plan year.
`(ii) PREDECESSORS- Any reference in
subparagraph (B) to an employer shall include a reference to any
predecessor of such employer.
`(3) DETERMINATION OF VALUE OF PLAN ASSETS- For
purposes of this section--
`(A) IN GENERAL- Except as provided in
subparagraph (B), the value of plan assets shall be the fair
market value of the assets.
`(B) AVERAGING ALLOWED- A plan may determine
the value of plan assets on the basis of the averaging of fair
market values, but only if such method--
`(i) is permitted under regulations
prescribed by the Secretary of the Treasury,
`(ii) does not provide for averaging of such
values over more than the period beginning on the last day of
the 25th month preceding the month in which the valuation date
occurs and ending on the valuation date (or a similar period in
the case of a valuation date which is not the 1st day of a
month), and
`(iii) does not result in a determination of
the value of plan assets which, at any time, is lower than 90
percent or greater than 110 percent of the fair market value of
such assets at such time.
Any such averaging shall be adjusted for
contributions and distributions (as provided by the Secretary of
the Treasury).
`(4) ACCOUNTING FOR CONTRIBUTION RECEIPTS- For
purposes of determining the value of assets under paragraph (3)--
`(A) PRIOR YEAR CONTRIBUTIONS- If--
`(i) an employer makes any contribution to
the plan after the valuation date for the plan year in which the
contribution is made, and
`(ii) the contribution is for a preceding
plan year,
the contribution shall be taken into account as
an asset of the plan as of the valuation date, except that in the
case of any plan year beginning after 2008, only the present value
(determined as of the valuation date) of such contribution may be
taken into account. For purposes of the preceding sentence,
present value shall be determined using the effective interest
rate for the preceding plan year to which the contribution is
properly allocable.
`(B) SPECIAL RULE FOR CURRENT YEAR
CONTRIBUTIONS MADE BEFORE VALUATION DATE- If any contributions for
any plan year are made to or under the plan during the plan year
but before the valuation date for the plan year, the assets of the
plan as of the valuation date shall not include--
`(i) such contributions, and
`(ii) interest on such contributions for the
period between the date of the contributions and the valuation
date, determined by using the effective interest rate for the
plan year.
`(h) Actuarial Assumptions and Methods-
`(1) IN GENERAL- Subject to this subsection, the
determination of any present value or other computation under this
section shall be made on the basis of actuarial assumptions and
methods--
`(A) each of which is reasonable (taking into
account the experience of the plan and reasonable expectations),
and
`(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
`(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 and normal
cost of a plan for any plan year, the interest rate used in
determining the present value of the benefits of the plan shall
be--
`(i) in the case of benefits reasonably
determined to be payable during the 5-year period beginning on
the first day of the plan year, the first segment rate with
respect to the applicable month,
`(ii) in the case of benefits reasonably
determined to be payable during the 15-year period beginning at
the end of the period described in clause (i), the second
segment rate with respect to the applicable month, and
`(iii) in the case of benefits reasonably
determined to be payable after the period described in clause
(ii), the third segment rate with respect to the applicable
month.
`(C) SEGMENT RATES- For purposes of this
paragraph--
`(i) FIRST SEGMENT RATE- The term `first
segment rate' means, with respect to any month, the single rate
of interest which shall be determined by the Secretary of the
Treasury for such month on the basis of the corporate bond yield
curve for such month, taking into account only that portion of
such yield curve which is based on bonds maturing during the
5-year period commencing with such month.
`(ii) SECOND SEGMENT RATE- The term `second
segment rate' means, with respect to any month, the single rate
of interest which shall be determined by the Secretary of the
Treasury for such month on the basis of the corporate bond yield
curve for such month, taking into account only that portion of
such yield curve which is based on bonds maturing during the
15-year period beginning at the end of the period described in
clause (i).
`(iii) THIRD SEGMENT RATE- The term `third
segment rate' means, with respect to any month, the single rate
of interest which shall be determined by the Secretary of the
Treasury for such month on the basis of the corporate bond yield
curve for such month, taking into account only that portion of
such yield curve which is based on bonds maturing during periods
beginning after the period described in clause (ii).
`(D) CORPORATE BOND YIELD CURVE- For purposes
of this paragraph--
`(i) IN GENERAL- The term `corporate bond
yield curve' means, with respect to any month, a yield curve
which is prescribed by the Secretary of the Treasury for such
month and which reflects the average, for the 24-month period
ending with the month preceding such month, of monthly yields on
investment grade corporate bonds with varying maturities and
that are in the top 3 quality levels available.
`(ii) ELECTION TO USE YIELD CURVE- Solely for
purposes of determining the minimum required contribution under
this section, the plan sponsor may, in lieu of the segment rates
determined under subparagraph (C), elect to use interest rates
under the corporate bond yield curve. For purposes of the
preceding sentence such curve shall be determined without regard
to the 24-month averaging described in clause (i). Such
election, once made, may be revoked only with the consent of the
Secretary of the Treasury.
`(E) APPLICABLE MONTH- For purposes of this
paragraph, the term `applicable month' means, with respect to any
plan for any plan year, the month which includes the valuation
date of such plan for such plan year or, at the election of the
plan sponsor, any of the 4 months which precede such month. Any
election made under this subparagraph shall apply to the plan year
for which the election is made and all succeeding plan years,
unless the election is revoked with the consent of the Secretary
of the Treasury.
`(F) PUBLICATION REQUIREMENTS- The Secretary of
the Treasury shall publish for each month the corporate bond yield
curve (and the corporate bond yield curve reflecting the
modification described in section 205(g)(3)(B)(iii)(I)) for such
month and each of the rates determined under subparagraph (B) for
such month. The Secretary of the Treasury shall also publish a
description of the methodology used to determine such yield curve
and such rates which is sufficiently detailed to enable plans to
make reasonable projections regarding the yield curve and such
rates for future months based on the plan's projection of future
interest rates.
`(i) IN GENERAL- Notwithstanding the
preceding provisions of this paragraph, for plan years beginning
in 2008 or 2009, the first, second, or third segment rate for a
plan with respect to any month shall be equal to the sum of--
`(I) the product of such rate for such
month determined without regard to this subparagraph,
multiplied by the applicable percentage, and
`(II) the product of the rate determined
under the rules of section 302(b)(5)(B)(ii)(II) (as in effect
for plan years beginning in 2007), multiplied by a percentage
equal to 100 percent minus the applicable percentage.
`(ii) APPLICABLE PERCENTAGE- For purposes of
clause (i), the applicable percentage is 33 1/3 percent for plan
years beginning in 2008 and 66 2/3 percent for plan years
beginning in 2009.
`(iii) NEW PLANS INELIGIBLE- Clause (i) shall
not apply to any plan if the first plan year of the plan begins
after December 31, 2007.
`(iv) ELECTION- The plan sponsor may elect
not to have this subparagraph apply. Such election, once made,
may be revoked only with the consent of the Secretary of the
Treasury.
`(A) IN GENERAL- Except as provided in
subparagraph (C) or (D), the Secretary of the Treasury shall by
regulation prescribe mortality tables to be used in determining
any present value or making any computation under this section.
Such tables shall be based on the actual experience of pension
plans and projected trends in such experience. In prescribing such
tables, the Secretary of the Treasury shall take into account
results of available independent studies of mortality of
individuals covered by pension plans.
`(B) PERIODIC REVISION- The Secretary of the
Treasury shall (at least every 10 years) make revisions in any
table in effect under subparagraph (A) to reflect the actual
experience of pension plans and projected trends in such
experience.
`(C) SUBSTITUTE MORTALITY TABLE-
`(i) IN GENERAL- Upon request by the plan
sponsor and approval by the Secretary of the Treasury, a
mortality table which meets the requirements of clause (iii)
shall be used in determining any present value or making any
computation under this section during the period of consecutive
plan years (not to exceed 10) specified in the request.
`(ii) EARLY TERMINATION OF PERIOD-
Notwithstanding clause (i), a mortality table described in
clause (i) shall cease to be in effect as of the earliest of--
`(I) the date on which there is a
significant change in the participants in the plan by reason
of a plan spinoff or merger or otherwise, or
`(II) the date on which the plan actuary
determines that such table does not meet the requirements of
clause (iii).
`(iii) REQUIREMENTS- A mortality table meets
the requirements of this clause if--
`(I) there is a sufficient number of plan
participants, and the pension plans have been maintained for a
sufficient period of time, to have credible information
necessary for purposes of subclause (II), and
`(II) such table reflects the actual
experience of the pension plans maintained by the sponsor and
projected trends in general mortality experience.
`(iv) ALL PLANS IN CONTROLLED GROUP MUST USE
SEPARATE TABLE- Except as provided by the Secretary of the
Treasury, a plan sponsor may not use a mortality table under
this subparagraph for any plan maintained by the plan sponsor
unless--
`(I) a separate mortality table is
established and used under this subparagraph for each other
plan maintained by the plan sponsor and if the plan sponsor is
a member of a controlled group, each member of the controlled
group, and
`(II) the requirements of clause (iii) are
met separately with respect to the table so established for
each such plan, determined by only taking into account the
participants of such plan, the time such plan has been in
existence, and the actual experience of such plan.
`(v) DEADLINE FOR SUBMISSION AND DISPOSITION
OF APPLICATION-
`(I) SUBMISSION- The plan sponsor shall
submit a mortality table to the Secretary of the Treasury for
approval under this subparagraph at least 7 months before the
1st day of the period described in clause (i).
`(II) DISPOSITION- Any mortality table
submitted to the Secretary of the Treasury for approval under
this subparagraph shall be treated as in effect as of the 1st
day of the period described in clause (i) unless the Secretary
of the Treasury, during the 180-day period beginning on the
date of such submission, disapproves of such table and
provides the reasons that such table fails to meet the
requirements of clause (iii). The 180-day period shall be
extended upon mutual agreement of the Secretary of the
Treasury and the plan sponsor.
`(D) SEPARATE MORTALITY TABLES FOR THE
DISABLED- Notwithstanding subparagraph (A)--
`(i) IN GENERAL- The Secretary of the
Treasury shall establish mortality tables which may be used (in
lieu of the tables under subparagraph (A)) under this subsection
for individuals who are entitled to benefits under the plan on
account of disability. The Secretary of the Treasury shall
establish separate tables for individuals whose disabilities
occur in plan years beginning before January 1, 1995, and for
individuals whose disabilities occur in plan years beginning on
or after such date.
`(ii) SPECIAL RULE FOR DISABILITIES OCCURRING
AFTER 1994- In the case of disabilities occurring in plan years
beginning after December 31, 1994, the tables under clause (i)
shall apply only with respect to individuals described in such
subclause who are disabled within the meaning of title II of the
Social Security Act and the regulations thereunder.
`(iii) PERIODIC REVISION- The Secretary of
the Treasury shall (at least every 10 years) make revisions in
any table in effect under clause (i) to reflect the actual
experience of pension plans and projected trends in such
experience.
`(4) PROBABILITY OF BENEFIT PAYMENTS IN THE FORM
OF LUMP SUMS OR OTHER OPTIONAL FORMS- For purposes of determining
any present value or making any computation under this section,
there shall be taken into account--
`(A) the probability that future benefit
payments under the plan will be made in the form of optional forms
of benefits provided under the plan (including lump sum
distributions, determined on the basis of the plan's experience
and other related assumptions), and
`(B) any difference in the present value of
such future benefit payments resulting from the use of actuarial
assumptions, in determining benefit payments in any such optional
form of benefits, which are different from those specified in this
subsection.
`(5) APPROVAL OF LARGE CHANGES IN ACTUARIAL
ASSUMPTIONS-
`(A) IN GENERAL- No actuarial assumption used
to determine the funding target for a plan to which this paragraph
applies may be changed without the approval of the Secretary of
the Treasury.
`(B) PLANS TO WHICH PARAGRAPH APPLIES- This
paragraph shall apply to a plan only if--
`(i) the plan is a single-employer plan to
which title IV applies,
`(ii) the aggregate unfunded vested benefits
as of the close of the preceding plan year (as determined under
section 4006(a)(3)(E)(iii)) of such plan and all other plans
maintained by the contributing sponsors (as defined in section
4001(a)(13)) and members of such sponsors' controlled groups (as
defined in section 4001(a)(14)) which are covered by title IV
(disregarding plans with no unfunded vested benefits) exceed
$50,000,000, and
`(iii) the change in assumptions (determined
after taking into account any changes in interest rate and
mortality table) results in a decrease in the funding shortfall
of the plan for the current plan year that exceeds $50,000,000,
or that exceeds $5,000,000 and that is 5 percent or more of the
funding target of the plan before such change.
`(i) Special Rules for At-Risk Plans-
`(1) FUNDING TARGET FOR PLANS IN AT-RISK STATUS-
`(A) IN GENERAL- In the case of a plan which is
in at-risk status for a plan year, the funding target of the plan
for the plan year shall be equal to the sum of--
`(i) the present value of all benefits
accrued or earned under the plan as of the beginning of the plan
year, as determined by using the additional actuarial
assumptions described in subparagraph (B), and
`(ii) in the case of a plan which also has
been in at-risk status for at least 2 of the 4 preceding plan
years, a loading factor determined under subparagraph (C).
`(B) ADDITIONAL ACTUARIAL ASSUMPTIONS- The
actuarial assumptions described in this subparagraph are as
follows:
`(i) All employees who are not otherwise
assumed to retire as of the valuation date but who will be
eligible to elect benefits during the plan year and the 10
succeeding plan years shall be assumed to retire at the earliest
retirement date under the plan but not before the end of the
plan year for which the at-risk funding target and at-risk
target normal cost are being determined.
`(ii) All employees shall be assumed to elect
the retirement benefit available under the plan at the assumed
retirement age (determined after application of clause (i))
which would result in the highest present value of benefits.
`(C) LOADING FACTOR- The loading factor applied
with respect to a plan under this paragraph for any plan year is
the sum of--
`(i) $700, times the number of participants
in the plan, plus
`(ii) 4 percent of the funding target
(determined without regard to this paragraph) of the plan for
the plan year.
`(2) TARGET NORMAL COST OF AT-RISK PLANS- In the
case of a plan which is in at-risk status for a plan year, the
target normal cost of the plan for such plan year shall be equal to
the sum of--
`(A) the present value of all benefits which
are expected to accrue or be earned under the plan during the plan
year, determined using the additional actuarial assumptions
described in paragraph (1)(B), plus
`(B) in the case of a plan which also has been
in at-risk status for at least 2 of the 4 preceding plan years, a
loading factor equal to 4 percent of the target normal cost
(determined without regard to this paragraph) of the plan for the
plan year.
`(3) MINIMUM AMOUNT- In no event shall--
`(A) the at-risk funding target be less than
the funding target, as determined without regard to this
subsection, or
`(B) the at-risk target normal cost be less
than the target normal cost, as determined without regard to this
subsection.
`(4) DETERMINATION OF AT-RISK STATUS- For
purposes of this subsection--
`(A) IN GENERAL- A plan is in at-risk status
for a plan year if--
`(i) the funding target attainment percentage
for the preceding plan year (determined under this section
without regard to this subsection) is less than 80 percent, and
`(ii) the funding target attainment
percentage for the preceding plan year (determined under this
section by using the additional actuarial assumptions described
in paragraph (1)(B) in computing the funding target) is less
than 70 percent.
`(B) TRANSITION RULE- In the case of plan years
beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall be
applied by substituting the following percentages for `80
percent':
`(i) 65 percent in the case of 2008.
`(ii) 70 percent in the case of 2009.
`(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008,
the funding target attainment percentage for the preceding plan
year under subparagraph (A)(ii) may be determined using such
methods of estimation as the Secretary of the Treasury may
provide.
`(C) SPECIAL RULE FOR EMPLOYEES OFFERED EARLY
RETIREMENT IN 2006-
`(i) IN GENERAL- For purposes of subparagraph
(A)(ii), the additional actuarial assumptions described in
paragraph (1)(B) shall not be taken into account with respect to
any employee if--
`(I) such employee is employed by a
specified automobile manufacturer,
`(II) such employee is offered a
substantial amount of additional cash compensation,
substantially enhanced retirement benefits under the plan, or
materially reduced employment duties on the condition that by
a specified date (not later than December 31, 2010) the
employee retires (as defined under the terms of the plan),
`(III) such offer is made during 2006 and
pursuant to a bona fide retirement incentive program and
requires, by the terms of the offer, that such offer can be
accepted not later than a specified date (not later than
December 31, 2006), and
`(IV) such employee does not elect to
accept such offer before the specified date on which the offer
expires.
`(ii) SPECIFIED AUTOMOBILE MANUFACTURER- For
purposes of clause (i), the term `specified automobile
manufacturer' means--
`(I) any manufacturer of automobiles, and
`(II) any manufacturer of automobile parts
which supplies such parts directly to a manufacturer of
automobiles and which, after a transaction or series of
transactions ending in 1999, ceased to be a member of a
controlled group which included such manufacturer of
automobiles.
`(5) TRANSITION BETWEEN APPLICABLE FUNDING
TARGETS AND BETWEEN APPLICABLE TARGET NORMAL COSTS-
`(A) IN GENERAL- In any case in which a plan
which is in at-risk status for a plan year has been in such status
for a consecutive period of fewer than 5 plan years, the
applicable amount of the funding target and of the target normal
cost shall be, in lieu of the amount determined without regard to
this paragraph, the sum of--
`(i) the amount determined under this section
without regard to this subsection, plus
`(ii) the transition percentage for such plan
year of the excess of the amount determined under this
subsection (without regard to this paragraph) over the amount
determined under this section without regard to this subsection.
`(B) TRANSITION PERCENTAGE- For purposes of
subparagraph (A), the transition percentage shall be determined in
accordance with the following table:
`If the consecutive number of
years (including the plan year)
The transition
the plan is in at-risk status
is--
percentage is--
1
--20
2
--40
3
--60
4
--80.
`(C) YEARS BEFORE EFFECTIVE DATE- For purposes
of this paragraph, plan years beginning before 2008 shall not be
taken into account.
`(6) SMALL PLAN EXCEPTION- If, on each day during
the preceding plan year, a plan had 500 or fewer participants, the
plan shall not be treated as in at-risk status for the plan year.
For purposes of this paragraph, all defined benefit plans (other
than multiemployer plans) maintained by the same employer (or any
member of such employer's controlled group) shall be treated as 1
plan, but only participants with respect to such employer or member
shall be taken into account and the rules of subsection (g)(2)(C)
shall apply.
`(j) Payment of Minimum Required Contributions-
`(1) IN GENERAL- For purposes of this section,
the due date for any payment of any minimum required contribution
for any plan year shall be 8 1/2 months after the close of the plan
year.
`(2) INTEREST- Any payment required under
paragraph (1) for a plan year that is made on a date other than the
valuation date for such plan year shall be adjusted for interest
accruing for the period between the valuation date and the payment
date, at the effective rate of interest for the plan for such plan
year.
`(3) ACCELERATED QUARTERLY CONTRIBUTION SCHEDULE
FOR UNDERFUNDED PLANS-
`(A) FAILURE TO TIMELY MAKE REQUIRED
INSTALLMENT- In any case in which the plan has a funding shortfall
for the preceding plan year, the employer maintaining the plan
shall make the required installments under this paragraph and if
the employer fails to pay the full amount of a required
installment for the plan year, then the amount of interest charged
under paragraph (2) on the underpayment for the period of
underpayment shall be determined by using a rate of interest equal
to the rate otherwise used under paragraph (2) plus 5 percentage
points.
`(B) AMOUNT OF UNDERPAYMENT, PERIOD OF
UNDERPAYMENT- For purposes of subparagraph (A)--
`(i) AMOUNT- The amount of the underpayment
shall be the excess of--
`(I) the required installment, over
`(II) the amount (if any) of the
installment contributed to or under the plan on or before the
due date for the installment.
`(ii) PERIOD OF UNDERPAYMENT- The period for
which any interest is charged under this paragraph with respect
to any portion of the underpayment shall run from the due date
for the installment to the date on which such portion is
contributed to or under the plan.
`(iii) ORDER OF CREDITING CONTRIBUTIONS- For
purposes of clause (i)(II), contributions shall be credited
against unpaid required installments in the order in which such
installments are required to be paid.
`(C) NUMBER OF REQUIRED INSTALLMENTS; DUE
DATES- For purposes of this paragraph--
`(i) PAYABLE IN 4 INSTALLMENTS- There shall
be 4 required installments for each plan year.
`(ii) TIME FOR PAYMENT OF INSTALLMENTS- The
due dates for required installments are set forth in the
following table:
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