Bill summaries are authored by CRS.

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Reported to Senate without amendment (11/02/2005)

(This measure has not been amended since it was introduced. The summary has been expanded because action occurred on the measure.)

National Employee Savings and Trust Equity Guarantee Act of 2005 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC) to revise and establish requirements relating to pension plans, including plan funding, limitations on benefits which underfunded plans may provide, diversification of assets, and worker access to and information about their plans.

Title I: Diversification Rights and Other Participant Protections under Defined Contribution Plans - (Sec. 101) Requires defined contribution plans holding publicly-traded employer securities to allow participants and certain beneficiaries to divest employer stock and diversify their pension asset investments.

(Sec. 102) Requires notice of such freedom to divest employer securities or real property.

(Sec. 103) Requires periodic pension benefit statements.

(Sec. 104) Requires notice to participants or beneficiaries of blackout periods (temporary suspensions of participant or beneficiary ability to direct or diversify assets or obtain loans or distributions).

(Sec. 105) Allows eligible individuals to make, and receive credit for, additional IRA payments in certain cases of employer bankruptcy.

Title II: Information to Assist Pension Plan Participants - (Sec. 201) Amends ERISA and IRC to require defined contribution plans to provide adequate investment education to participants and beneficiaries with the right to direct investments in their individual account plans, by providing basic guidelines for investing for retirement. Directs the Secretary of Labor to develop a model form containing such guidelines.

(Sec. 202) Sets forth IRC and ERISA requirements for material information relating to investment in employer securities.

(Sec. 203) Requires the provision of independent investment advice to plan participants and beneficiaries under ERISA.

(Sec. 204) Prescribes IRC rules for treatment of qualified retirement planning services.

(Sec. 205) Authorizes the Secretaries of the Treasury and of Labor to prescribe rules applicable to certain statements required under IRC and ERISA provisions added by this Act.

Title III: Improvements in Funding Rules for Single-Employer Pension Plans - Subtitle A: Rules Relating to Funding, Benefit Limitations, and Deductions - Part I: Amendments to the Internal Revenue Code of 1986 - (Sec. 301) Revises IRC minimum funding standards for single-employer defined benefit pension plans.

(Sec. 302) Sets forth IRC funding rules for single-employer defined benefit pension plans. Requires such plans to amortize unfunded liabilities over not more than seven years. Eliminates a requirement for deficit reduction contributions. Requires a plan's accrued liability, for all benefits accrued by its participants before the current plan year, to be funded completely. Phases in such 100% funding over three years beginning in 2007, and over five years for plans with 100 or fewer participants.

Revises valuation of plan assets to require use of the fair market value or an averaging of such value through a method permitted under regulations prescribed by the Secretary of the Treasury and limited to a period of not more than 12 months. Revises valuation of plan liabilities to require use of segmented interest rates determined by specified portions of a corporate bond yield curve.

Sets forth special rules for plans at risk of terminating because they are underfunded and sponsored by firms that are financially weak, as determined by bond ratings. Requires such plan sponsors, in determining their required contribution, to assume that participants will retire at the earliest possible date and elect the form of benefit with the highest present value.

Sets forth IRC funding rules for certain multiemployer pension plans.

(Sec. 303) Sets forth IRC limitations on benefit improvements by single-employer plans which are underfunded or maintained by financially weak or bankrupt employers.

Provides such funding-based limits on single-employer plans increasing benefits, distributions, and benefit accruals, which are based on the plan's adjusted funded target liability percentage (funding ratio) as of the valuation date for the preceding plan year. Prohibits a plan amendment from increasing benefits liability if the funding ratio is less than 80%, or would be so with such amendment. Prohibits lump-sum payments for a specified period by plans with a funding ratio of less than 60%. Prohibits benefit accruals for specified periods for plans with funding ratio of less than 60% in the prior year.

(Sec. 304) Revises IRC deduction limits for single-employer plans to increase the allowable amount of such deductions.

Part II: Amendments to the Employee Retirement Income Security Act of 1974 - (Sec. 311) Revises ERISA minimum funding standards for single-employer defined benefit pension plans.

(Sec. 312) Sets forth ERISA funding rules for single-employer defined benefit pension plans, similar to IRC rules provided under section 302 of this Act.

(Sec. 313) Sets forth ERISA limitations on benefit improvements by single-employer plans which are underfunded or maintained by financially weak or bankrupt employers, similar to IRC limitations provided under section 303 of this Act.

Part III: Interest Rate Assumptions and Deductible Amounts for 2006 - (Sec. 321) Extends provisions which replace the 30-year Treasury rate as a basis for interest rate assumptions.

(Sec. 322) Revises deduction limits for plan contributions to allow increased deductions in certain cases.

(Sec. 323) Revises deduction rules for combination of plans. Provides that IRC deduction limits for plan sponsors maintaining both defined benefit plans and defined contribution plans are applicable, in the case of employer contributions to one or more defined contribution plans, only in so far as those contributions exceed a certain percentage of compensation otherwise paid or accrued to beneficiaries during the plan year.

Subtitle B: Related Provisions - (Sec. 331) Replaces the 30-year Treasury rate for calculating lump-sum distributions. Phases in use of a yield curve method involving interest rates on corporate bonds over three-month periods to determine the amount of such payments.

(Sec. 332) Revises the interest rate assumptions for applying benefit limitations to lump sum distributions.

(Sec. 333) Restricts funding of nonqualified deferred compensation plans by employers maintaining underfunded or terminated single-employer plans.

(Sec. 334) Provides special funding rules for plans maintained by commercial airlines that are amended to cease future benefit accruals.

(Sec. 335) Revises pension funding requirements for plans subject to the current transition rule.

Subtitle C: Other Provisions - (Sec. 341) Provides for treatment of cash balance and other hybrid defined benefit pension plans.

(Sec. 342) Provides for treatment of eligible combined defined benefit plans and qualified cash or deferred arrangements.

Subtitle D: Studies - (Sec. 351) Directs the Secretaries of the Treasury and of Labor and the Pension Benefit Guaranty Corporation (PBGC) Executive Director to conduct a joint study on revitalizing defined benefit plans.

(Sec. 352) Directs the Secretary of the Treasury and the PBGC Executive Director to conduct a study on floor-offset employee stock ownership plans (ESOPs).

Title IV: Disclosure and Benefit Statement Requirements for Single-Employer Defined Benefit Plans - (Sec. 401) Requires single-employer defined benefit plans to provide for specified actuarial reports and summary annual reports. Imposes a tax on failure to provide such required notices.

(Sec. 402) Requires such plans to provide notice of funding benefit limitations and restrictions on benefit increases. Imposes a tax on failure to provide such notice.

(Sec. 403) Requires such plans to provide notice of bankruptcy filing. Imposes a tax on failure to provide such notice.

Title V: Improvements in Funding Rules for Multiemployer Defined Benefits Pension Plans and Related Provisions - (Sec. 501) Revises IRC deduction limits for multiemployer plans to increase the allowable amount of such deductions.

(Sec. 502) Sets forth requirements for multiemployer defined benefit plan funding notices. Imposes a tax on failure to comply with such requirements.

(Sec. 503) Allows transfer of excess pension assets to multiemployer health plans.

(Sec. 504) Authorizes the Secretaries of the Treasury and of Labor to prescribe rules applicable to certain statements required under IRC and ERISA provisions added by this Act.

Title VI: PBGC Premium and Guarantee Provisions - (Sec. 601) Increases the PBGC flat-rate premiums for single employer plans to a minimum base amount of $30 per participant for plan years beginning in 2006, with adjusted amounts to be determined for plan years beginning after 2006. Revises interest rate assumptions relating to risk-based premiums.

(Sec. 602) Sets forth plan termination rules relating to employer filing of bankruptcy.

(Sec. 603) Limits PBGC guarantee of shutdown benefits and other unpredictable contingent event benefits under single employer plans.

(Sec. 604) Revises PBGC premiums for new plans of small employers. Sets the flat-rate premium at five dollars per plan participant for the first five years of a new single-employer plan of an employer with 100 or fewer employees.

(Sec. 605) Revises PBGC additional premiums for new and small plans. Phases in, over a five-year period, the variable-rate premium for a new defined benefit plan. Limits the variable-rate premium, for a plan maintained by an employer with 25 or fewer employees, to no more than $5 times the number of plan participants at the close of the preceding plan year.

(Sec. 606) Authorizes the PBGC to pay interest on premium overpayment refunds.

(Sec. 607) Revises rules for substantial owner benefits in terminated plans with respect to phase-in of guarantee and to allocation of assets.

(Sec. 608) Provides for accelerated computation of benefits payable to participants and beneficiaries by the PBGC from recoveries of employer liability. Revises requirements relating to: (1) the average recovery percentage of the outstanding amount of such benefits; and (2) the valuation of recovery liability in determining such benefit amounts.

Title VII: Provisions Relating to Spousal Pension Protection - (Sec. 701) Directs the Secretaries of Labor and of the Treasury to conduct a joint study of application of spousal consent rules to defined contribution plans under ERISA and IRC.

(Sec. 702) Directs the Secretary of Labor to issue specified types of regulations relating to the time and order of issuance of qualified domestic relations orders.

(Sec. 703) Amends the Railroad Retirement Act of 1974 (RRA) to entitle divorced spouses to railroad retirement annuities independent of the actual entitlement of the employees.

(Sec. 704) Extends the payment of any portion of Tier II railroad retirement benefits under RRA to surviving former spouses pursuant to divorce agreements.

(Sec. 705) Requires pension plans, under IRC and ERISA, to offer participants the option of a qualified joint and 3/4 survivor annuity (as an alternative to the current qualified joint and survivor annuity).

Title VIII: Improvements in Portability and Distribution Rules - (Sec. 801) Revises requirements for purchase of permissive service credit.

(Sec. 802) Allows rollover of after-tax amounts in annuity contracts.

(Sec. 803) Revises minimum distribution rules for governmental plans.

(Sec. 804) Allows a waiver of the 10% early withdrawal penalty tax on certain distributions of pension plans for public safety employees.

(Sec. 805) Permits rollovers by non-spouse beneficiaries of certain retirement plan distributions.

(Sec. 806) Provides for faster vesting of employer non-elective contributions.

(Sec. 807) Allows direct rollovers from retirement plans to Roth IRAs.

(Sec. 808) Eliminates a higher penalty on certain simple plan distributions.

(Sec. 809) Provides for simple plan portability.

(Sec. 810) Revises requirements relating to eligibility for participation in retirement plans.

(Sec. 811) Provides for mandatory transfers to the PBGC of certain amounts under IRC requirements for general distributions. Sets forth rules for tax treatment of such distributions to the PBGC. Sets forth requirements relating to involuntary cashouts. Authorizes the PBGC to charge a reasonable fee for costs involved with transfer and management of transferred amounts.

(Sec. 812) Directs the PBGC to issue missing participant rules for multiemployer plans. Allows the transfer of missing participants' benefits to the PBGC upon plan termination in the case of certain plans not subject to the PBGC termination insurance program.

Title IX: Administrative Provisions - (Sec. 901) Grants the Secretary of the Treasury full authority to establish and implement the Employee Plans Compliance Resolution System 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. Directs such Secretary to continue to update and improve such System, giving special attention to specified matters.

(Sec. 902) Extends to all governmental plans a moratorium on the application of certain nondiscrimination rules applicable to state and local plans.

(Sec. 903) Increases from 90 to 180 days the notice and consent period required before a plan may commence certain distributions. Requires the notification to describe not only a participant's right, if any, to defer receipt of a distribution, but also the consequences of failing to defer such receipt.

(Sec. 904) Provides for simplification of annual filing requirements for: (1) one-participant retirement plans; and (2) retirement plans which cover fewer than 25 employees.

(Sec. 905) Amends the IRC, ERISA, and the Age Discrimination in Employment Act of 1967, with respect to certain voluntary early retirement incentive and employment retention plans of local educational agencies and of educational associations, to treat such plans as bona fide severance pay plans to the extent that payments as early retirement benefits could otherwise be made, subject to specified conditions.

(Sec. 906) Prohibits reduction of unemployment compensation as a result of pension rollovers.

(Sec. 907) Amends requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001 to set forth a transition rule relating to withholding on distributions from certain governmental plans.

(Sec. 908) Revises requirements for treatment of defined benefit plans of Indian tribal governments.

(Sec. 909) Provides for treating as a governmental plan a specified eligible defined benefit plan, which is maintained by a nonprofit corporation incorporated on a certain date to support the missions and goals of a public corporation which was created by a state statute effective on a certain date, and which is a state governmental entity and a member of the nonprofit corporation.

(Sec. 910) Sets forth requirements relating to plan amendments.

Title X: United States Tax Court Modernization - Subtitle A: Tax Court Pension and Compensation - Revises requirements for compensation and pensions of U.S. Tax Court (Tax Court) judges.

(Sec. 1001) Amends IRC to revise rules governing payment of annuities to surviving spouses and dependents of Tax Court judges to provide for the payment of an annuity for a judge with less than five years of service who is assassinated.

(Sec. 1002) Provides for cost-of-living increases to annuities for surviving spouses and dependents of Tax Court judges based on increases paid under the Civil Service Retirement System.

(Sec. 1003) Includes active and retired Tax Court judges in the federal employees group life insurance program (FEGLI).

(Sec. 1004) Authorizes the Tax Court to pay increases in the cost of FEGLI for judges age 65 and over.

(Sec. 1005) Authorizes the Tax Court to make a lump-sum payment to newly-appointed Tax Court judges for their accumulated and accrued current annual leave from prior federal service.

(Sec. 1006) Allows Tax Court judges to participate in the Thrift Savings Plan (TSP).

(Sec. 1007) Exempts compensation earned by a retired Tax Court judge for teaching from treatment as outside earned income subject to limitations under the Ethics in Government Act of 1978.

(Sec. 1008) Changes the title of special trial judge to magistrate judge. Authorizes the Chief Judge of the Tax Court to appoint and reappoint magistrate judges for eight-year terms. Allows the removal of a magistrate judge for specified reasons, including incompetence, misconduct, neglect of duty, or physical or mental disability.

(Sec 1009) Provides for the payment of annuities to surviving spouses and dependents of magistrate judges.

(Sec. 1010) Establishes a retirement and annuity program for magistrate judges. Entitles magistrate judges who have attained the age of 65 with at least 14 years of service to full retirement and annuity benefits, with prorated benefits and reductions for service of at least eight years. Sets forth requirements relating to benefits for magistrate judges upon failure of reappointment, retirement for disability, cost-of-living adjustments, and eligibility for lump-sum payments.

Establishes in the Treasury the Tax Court Judicial Officers' Retirement Fund for the financing of retirement and annuity benefits for magistrate judges.

Allows magistrate judges to participate in TSP.

(Sec. 1011) Permits incumbent magistrate judges to elect participation in an annuity under the Civil Service Retirement System or the Federal Employees' Retirement System in lieu of the retirement and annuity program established by this Act.

(Sec. 1012) Authorizes the Chief Judge of the Tax Court to recall retired magistrate judges for service. Limits the term of such service to 90 days in any calendar year.

Subtitle B: Tax Court Procedure - (Sec. 1021) Grants jurisdiction to the Tax Court over collection due process case appeals.

(Sec. 1022) Authorizes the assignment of certain employment status tax cases to magistrate judges.

(Sec. 1023) Permits the Tax Court to apply the doctrine of equitable recoupment (defendant's right to claim an offset against a debt in a creditor action) to the same extent that it is available in civil tax cases before U.S. district courts and the U.S. Court of Federal Claims.

(Sec. 1024) Authorizes the Tax Court to charge a filing fee in all cases commenced by the filing of a petition.

(Sec. 1025) Authorizes the Tax Court to establish its own personnel management system incorporating certain employee protections, including merit system principles, nondiscrimination, a right of appeal in personnel matters, and protections against prohibited personnel practices.

Allows the Tax Court to: (1) appoint its own Clerk of Court, law clerks, secretaries, and other employees; (2) set the pay and other conditions of employment for such employees; and (3) hire experts and consultants.

(Sec. 1026) Includes services to pro se taxpayers (taxpayers representing themselves before the Tax Court) among the uses of funds from Tax Court practitioner fees.

Title XI: Other Provisions - (Sec. 1101) Transfers certain excess funds from Black Lung Disability Trusts to the United Mine Workers of America Combined Benefit Fund.

(Sec. 1102) Amends the IRC to limit the tax exclusion for benefits paid by employer-owned life insurance contracts upon the death of an insured employee, with certain exceptions for directors and highly compensated employees and for proceeds paid to the heirs of an insured employee. Requires employers to provide written notice to employees of intent to insure their lives and obtain written consent from such employees to being insured under a company-owned life insurance contract. Imposes certain reporting and recordkeeping requirements for employer-owned life insurance contracts.