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109th Congress                                            Rept. 109-232
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================
 
                     PENSION PROTECTION ACT OF 2005

                                _______
                                

               September 22, 2005.--Ordered to be printed

                                _______
                                

    Mr. Boehner, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2830]

  The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 2830) to amend the Employee Retirement 
Income Security Act of 1974 and the Internal Revenue Code of 
1986 to reform the pension funding rules, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Pension Protection 
Act of 2005''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.

 TITLE I--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. Technical and conforming amendments.

        Subtitle B--Amendments to Internal Revenue Code of 1986

 [See introduced bill, page 71, line 1 through page 140, line 13].

                      Subtitle C--Other provisions

Sec. 121. Modification of transition rule to pension funding 
requirements.
Sec. 122. Treatment of nonqualified deferred compensation plans when 
employer defined benefit plan in at-risk status [See introduced bill, 
page 142, line 3 through page 143, line 16].

    TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

 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. Removal of restrictions with respect to procedures applicable 
to disputes involving withdrawal liability.

        Subtitle B--Amendments to Internal Revenue Code of 1986

 [See introduced bill, page 200, line 8 through page 251, line 15].

                      TITLE III--OTHER PROVISIONS

Sec. 301. Interest rate assumption for determination of lump sum 
distributions.
Sec. 302. Interest rate assumption for applying benefit limitations to 
lump sum distributions [See introduced bill, page 254, line 6 through 
page 255, line 7].
Sec. 303. Distributions during working retirement.
Sec. 304. Other amendments relating to prohibited transactions.
Sec. 305. Correction period for certain transactions involving 
securities and commodities.
Sec. 306. Government Accountability Office pension funding report.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.

                          TITLE V--DISCLOSURE

Sec. 501. Defined benefit plan funding notices.
Sec. 502. Additional disclosure requirements.
Sec. 503. Section 4010 filings with the PBGC.

                      TITLE VI--INVESTMENT ADVICE

Sec. 601. Amendments to Employee Retirement Income Security Act of 1974 
providing prohibited transaction exemption for provision of investment 
advice.
Sec. 602. Amendments to Internal Revenue Code of 1986 providing 
prohibited transaction exemption for provision of investment advice 
[See introduced bill, page 287, line 15 through page 298, line 23].

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

Sec. 701. Improvements in benefit accrual standards.

                   TITLE VIII--DEDUCTION LIMITATIONS

 [See introduced bill, page 299, line 1 through page 305, line 20].

 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 further by 
inserting after section 301 the following new section:
                      ``minimum funding standards
  ``Sec. 302. (a) Requirement to Meet Minimum Funding Standard.--
          ``(1) In general.--A plan to which this part applies shall 
        satisfy the minimum funding standard applicable to the plan for 
        any plan year.
          ``(2) Minimum funding standard.--For purposes of paragraph 
        (1), a plan shall be treated as satisfying the minimum funding 
        standard for a plan year if--
                  ``(A) in the case of a defined benefit plan which is 
                a single-employer plan, the employer makes 
                contributions to or under the plan for the plan year 
                which, in the aggregate, are not less than the minimum 
                required contribution determined under section 303 for 
                the plan for the plan year,
                  ``(B) in the case of a money purchase plan which is a 
                single-employer plan, the employer makes contributions 
                to or under the plan for the plan year which are 
                required under the terms of the plan, and
                  ``(C) in the case of a multiemployer plan, the 
                employers make contributions to or under the plan for 
                any plan year which, in the aggregate, are sufficient 
                to ensure that the plan does not have an accumulated 
                funding deficiency under section 304 as of the end of 
                the plan year.
  ``(b) Liability for Contributions.--
          ``(1) In general.--Except as provided in paragraph (2), the 
        amount of any contribution required by this section (including 
        any required installments under 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.--In the case of a single-employer plan, if 
        the employer referred to in paragraph (1) is a member of a 
        controlled group, each member of such group shall be jointly 
        and severally liable for payment of such contributions.
  ``(c) Variance From Minimum Funding Standards.--
          ``(1) Waiver in case of business hardship.--
                  ``(A) In general.--If--
                          ``(i) an employer is (or in the case of a 
                        multiemployer plan, 10 percent or more of the 
                        number of employers contributing to or under 
                        the plan 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
                          ``(ii) consider--
                                  ``(I) any comments of the Corporation 
                                under clause (i)(II), and
                                  ``(II) any views of any employee 
                                organization (within the meaning of 
                                section 3(4)) representing participants 
                                in the plan which are submitted in 
                                writing to the Secretary of the 
                                Treasury in connection with such 
                                application.
                Information provided to the Corporation under this 
                subparagraph shall be considered tax return information 
                and subject to the safeguarding and reporting 
                requirements of section 6103(p) of the Internal Revenue 
                Code of 1986.
                  ``(C) Exception for certain waivers.--
                          ``(i) In general.--The preceding provisions 
                        of this paragraph shall not apply to any plan 
                        with respect to which the sum of--
                                  ``(I) the aggregate unpaid minimum 
                                required contribution for the plan year 
                                and all preceding plan years, and
                                  ``(II) the present value of all 
                                waiver amortization installments 
                                determined for the plan year and 
                                succeeding plan years under section 
                                303(e)(2),
                        is less than $1,000,000.
                          ``(ii) Treatment of waivers for which 
                        applications are pending.--The amount described 
                        in clause (i)(I) shall include any increase in 
                        such amount which would result if all 
                        applications for waivers of the minimum funding 
                        standard under this subsection which are 
                        pending with respect to such plan were denied.
                          ``(iii) Unpaid minimum required 
                        contribution.--For purposes of this 
                        subparagraph--
                                  ``(I) In general.--The term `unpaid 
                                minimum required contribution' means, 
                                with respect to any plan year, any 
                                minimum required contribution under 
                                section 303 for the plan year which is 
                                not paid on or before the due date (as 
                                determined under section 303(j)(1)) for 
                                the plan year.
                                  ``(II) Ordering rule.--For purposes 
                                of subclause (I), any payment to or 
                                under a plan for any plan year shall be 
                                allocated first to unpaid minimum 
                                required contributions for all 
                                preceding plan years on a first-in, 
                                first-out basis and then to the minimum 
                                required contribution under section 303 
                                for the plan year.
          ``(5) Special rules for single-employer plans.--
                  ``(A) Application must be submitted before date 2\1/
                2\ months after close of year.--In the case of a 
                single-employer plan, no waiver may be granted under 
                this subsection with respect to any plan for any plan 
                year unless an application therefor is submitted to the 
                Secretary of the Treasury not later than the 15th day 
                of the 3rd month beginning after the close of such plan 
                year.
                  ``(B) Special rule if employer is member of 
                controlled group.--In the case of a single-employer 
                plan, if an employer is a member of a controlled group, 
                the temporary substantial business hardship 
                requirements of paragraph (1) shall be treated as met 
                only if such requirements are met--
                          ``(i) with respect to such employer, and
                          ``(ii) with respect to the controlled group 
                        of which such employer is a member (determined 
                        by treating all members of such group as a 
                        single employer).
                The Secretary of the Treasury may provide that an 
                analysis of a trade or business or industry of a member 
                need not be conducted if the Secretary of the Treasury 
                determines such analysis is not necessary because the 
                taking into account of such member would not 
                significantly affect the determination under this 
                paragraph.
          ``(6) Advance notice.--
                  ``(A) In general.--The Secretary of the Treasury 
                shall, before granting a waiver under this subsection, 
                require each applicant to provide evidence satisfactory 
                to such Secretary that the applicant has provided 
                notice of the filing of the application for such waiver 
                to each affected party (as defined in section 
                4001(a)(21)). Such notice shall include a description 
                of the extent to which the plan is funded for benefits 
                which are guaranteed under title IV and for benefit 
                liabilities.
                  ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under subparagraph (A).
          ``(7) Restriction on plan amendments.--
                  ``(A) In general.--No amendment of a plan which 
                increases the liabilities of the plan by reason of any 
                increase in benefits, any change in the accrual of 
                benefits, or any change in the rate at which benefits 
                become nonforfeitable under the plan shall be adopted 
                if a waiver under this subsection or an extension of 
                time under section 304(d) is in effect with respect to 
                the plan, or if a plan amendment described in 
                subsection (d)(2) has been made at any time in the 
                preceding 24 months. If a plan is amended in violation 
                of the preceding sentence, any such waiver, or 
                extension of time, shall not apply to any plan year 
                ending on or after the date on which such amendment is 
                adopted.
                  ``(B) Exception.--Paragraph (1) 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 substantial business 
        hardship (as determined under subsection (c)(2)) 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 2005.

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 further by inserting after section 302 the 
following new section:
``minimum funding standards for single-employer defined benefit pension 
                                 plans
  ``Sec. 303. (a) Minimum Required Contribution.--For purposes of this 
section and section 302(a)(2)(A), except as provided in subsection (f), 
the term `minimum required contribution' means, with respect to any 
plan year of a defined benefit plan which is a single employer plan--
          ``(1) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) is less than the 
        funding target of the plan for the plan year, the sum of--
                  ``(A) the target normal cost of the plan for the plan 
                year,
                  ``(B) the shortfall amortization charge (if any) for 
                the plan for the plan year determined under subsection 
                (c), and
                  ``(C) the waiver amortization charge (if any) for the 
                plan for the plan year as determined under subsection 
                (e);
          ``(2) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)) exceeds the funding 
        target of the plan for the plan year, the target normal cost of 
        the plan for the plan year reduced by such excess; or
          ``(3) in any other case, the target normal cost of the plan 
        for the plan year.
  ``(b) Target Normal Cost.--For purposes of this section, except as 
provided in subsection (i)(2) with respect to plans in at-risk status, 
the term `target normal cost' means, for any plan year, the present 
value of all benefits which are expected to accrue or to be earned 
under the plan during the plan year. For purposes of this subsection, 
if any benefit attributable to services performed in a preceding plan 
year is increased by reason of any increase in compensation during the 
current plan year, the increase in such benefit shall be treated as 
having accrued during the current plan year.
  ``(c) Shortfall Amortization Charge.--
          ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan year is 
        the aggregate total of the shortfall amortization installments 
        for such plan year with respect to the shortfall amortization 
        bases for such plan year and each of the 6 preceding plan 
        years.
          ``(2) Shortfall amortization installment.--The plan sponsor 
        shall determine, with respect to the shortfall amortization 
        base of the plan for any plan year, the amounts necessary to 
        amortize such shortfall amortization base, in level annual 
        installments over a period of 7 plan years beginning with such 
        plan year. For purposes of paragraph (1), the annual 
        installment of such amortization for each plan year in such 7-
        plan-year period is the shortfall amortization installment for 
        such plan year with respect to such shortfall amortization 
        base. In determining any shortfall amortization installment 
        under this paragraph, the plan sponsor shall use the segment 
        rates determined under subparagraph (C) of subsection (h)(2), 
        applied under rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          ``(3) Shortfall amortization base.--For purposes of this 
        section, the shortfall amortization base of a plan for a plan 
        year is the excess (if any) of--
                  ``(A) the funding shortfall of such plan for such 
                plan year, over
                  ``(B) the sum of--
                          ``(i) 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, for 
                        such plan year and the 5 succeeding plan years, 
                        which have been determined with respect to the 
                        shortfall amortization bases of the plan for 
                        each of the 6 plan years preceding such plan 
                        year, and
                          ``(ii) the present value (as so determined) 
                        of the aggregate total of the waiver 
                        amortization installments for such plan year 
                        and the 5 succeeding plan years, which have 
                        been determined with respect to the waiver 
                        amortization bases of the plan for each of the 
                        5 plan years preceding such plan year.
                In any case in which the value of plan assets of the 
                plan (as reduced under subsection (f)(4)) 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.
          ``(4) Funding shortfall.--
                  ``(A) In general.--For purposes of this section, 
                except as provided in subparagraph (B), the funding 
                shortfall of a plan for any plan year is the excess (if 
                any) of--
                          ``(i) the funding target of the plan for the 
                        plan year, over
                          ``(ii) the value of plan assets of the plan 
                        (as reduced under subsection (f)(4)) for the 
                        plan year which are held by the plan on the 
                        valuation date.
                  ``(B) Transition rule.--
                          ``(i) In general.--For purposes of paragraph 
                        (3), in the case of a non-defecit reduction 
                        plan, subparagraph (A) shall be applied to plan 
                        years beginning after 2005 and before 2010 by 
                        substituting for the amount described in 
                        subparagraph (A)(i) the applicable percentage 
                        of the funding target of the plan for the plan 
                        year determined under the following table:


                                                                 The
                                                             applicable
 ``In the case of a plan year beginning in calendar year:    percentage
                                                                 is:


2006......................................................    92 percent
2007......................................................    94 percent
2008......................................................    96 percent
2009......................................................   98 percent.

                          ``(ii) Non-deficit reduction plan.--For 
                        purposes of clause (i), the term `non-deficit 
                        reduction plan' means any plan--
                                  ``(I) to which this part (as in 
                                effect on the day before the date of 
                                the enactment of the Pension Protection 
                                Act of 2005) applied for the plan year 
                                beginning in 2005, and
                                  ``(II) to which section 302(d) (as so 
                                in effect) did not apply for such plan 
                                year.
          ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the 
        shortfall amortization charge for such plan year and succeeding 
        plan years, the shortfall amortization bases for all preceding 
        plan years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced to 
        zero.
  ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
          ``(1) Funding target.--Except as provided in subsection 
        (i)(1) with respect to plans in at-risk status, the funding 
        target of a plan for a plan year is the present value of all 
        liabilities to participants and their beneficiaries under the 
        plan for 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)), 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.--The plan sponsor 
        shall determine, with respect to the waiver amortization base 
        of the plan for any plan year, the amounts necessary to 
        amortize such waiver amortization base, in level annual 
        installments over a period of 5 plan years beginning with the 
        succeeding plan year. For purposes of paragraph (1), the annual 
        installment of such amortization for each plan year in such 5-
        plan year period is the waiver amortization installment for 
        such plan year with respect to such waiver amortization 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 base for all preceding plan 
        years shall be reduced to zero.
  ``(f) Reduction of Minimum Required Contribution by Pre-Funding 
Balance and Funding Standard Carryover Balance.--
          ``(1) Election to maintain balances.--
                  ``(A) Pre-funding balance.--The plan sponsor of a 
                single-employer plan may elect to maintain a pre-
                funding 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 2005.--A plan is described in this 
                        clause if the plan--
                                  ``(I) was in effect for a plan year 
                                beginning in 2005, 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 pre-funding 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 pre-funding 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 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 pre-funding 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)), 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.
          ``(4) Effect of balances on amounts treated as value of plan 
        assets.--In the case of any plan maintaining a pre-funding 
        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 charge 
                and waiver amortization charge.--For purposes of 
                subsection (c)(3), the value of plan assets is deemed 
                to be such amount, reduced by the amount of the pre-
                funding balance, but only if an election under 
                paragraph (2) applying any portion of the pre-funding 
                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.--
                For purposes of subsections (a), (c)(4)(A)(ii), and 
                (d)(2)(A), the value of plan assets is deemed to be 
                such amount, reduced by the amount of the pre-funding 
                balance and the funding standard carryover balance.
                  ``(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 pre-funding 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 pre-funding 
                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 pre-funding 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 pre-funding 
                balance.
          ``(6) Pre-funding balance.--
                  ``(A) In general.--A pre-funding 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).
                  ``(B) Increases.--As of the valuation date for each 
                plan year beginning after 2006, the pre-funding 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 (increased by interest 
                        on any portion of such minimum required 
                        contribution remaining unpaid as of the 
                        valuation date for the current plan year, at 
                        the effective interest rate for the plan for 
                        the preceding plan year, for the period 
                        beginning with the first day of such preceding 
                        plan year and ending on the date that payment 
                        of such portion is made).
                  ``(C) Decreases.--As of the valuation date for each 
                plan year after 2006, the pre-funding balance of a plan 
                shall be decreased (but not below zero) by the sum of--
                          ``(i) 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) 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.--As of the valuation date for each 
                plan year after 2006, the funding standard carryover 
                balance of a plan shall be decreased (but not below 
                zero) by the sum of--
                          ``(i) 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) any reduction in such balance elected 
                        under paragraph (5).
          ``(8) Adjustments to balances.--In determining the pre-
        funding balance or the funding standard carryover balance of a 
        plan as of the valuation date (before applying any increase or 
        decrease under paragraph (6) or (7)), the plan sponsor shall, 
        in accordance with regulations which shall be prescribed by the 
        Secretary of the Treasury, adjust such balance so as to reflect 
        the rate of net gain or loss (determined, notwithstanding 
        subsection (g)(3), on the basis of fair market value) 
        experienced by all plan assets for the period beginning with 
        the valuation date for the preceding plan year and ending with 
        the date preceding the valuation date for the current plan 
        year, properly taking 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 500 or fewer 
                participants, the plan may designate any day during the 
                plan year as its valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans (other than 
                multiemployer plans) maintained by the same employer 
                (or any member of such employer's controlled group) 
                shall be treated as 1 plan, but only employees of such 
                employer or member shall be taken into account.
                  ``(C) Application of certain rules in determination 
                of plan size.--For purposes of this paragraph--
                          ``(i) Plans not in existence in preceding 
                        year.--In the case of the first plan year of 
                        any plan, subparagraph (B) shall apply to such 
                        plan by taking into account the number of 
                        participants that the plan is reasonably 
                        expected to have on days during such first plan 
                        year.
                          ``(ii) Predecessors.--Any reference in 
                        subparagraph (B) to an employer shall include a 
                        reference to any predecessor of such employer.
          ``(3) Authorization of use of actuarial value.--For purposes 
        of this section, the value of plan assets shall be determined 
        on the basis of any reasonable actuarial method of valuation 
        which takes into account fair market value and which is 
        permitted under regulations prescribed by the Secretary of the 
        Treasury, except that--
                  ``(A) any such method providing for averaging of fair 
                market values may not provide for averaging of such 
                values over more than the 3 most recent plan years 
                (including the current plan year), and
                  ``(B) any such method may 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.
          ``(4) Accounting for contribution receipts.--For purposes of 
        this section--
                  ``(A) Contributions for prior plan years taken into 
                account.--For purposes of determining the value of plan 
                assets for any current plan year, in any case in which 
                a contribution properly allocable to amounts owed for a 
                preceding plan year is made on or after the valuation 
                date of the plan for such current plan year, such 
                contribution shall be taken into account, except that 
                any such contribution made during any such current plan 
                year beginning after 2006 shall be taken into account 
                only in an amount equal to its present value 
                (determined using the effective rate of interest for 
                the plan for the preceding plan year) as of the 
                valuation date of the plan for such current plan year.
                  ``(B) Contributions for current plan year 
                disregarded.--For purposes of determining the value of 
                plan assets for any current plan year, contributions 
                which are properly allocable to amounts owed for such 
                plan year shall not be taken into account, and, in the 
                case of any such contribution made before the valuation 
                date of the plan for such plan year, such value of plan 
                assets shall be reduced for interest on such amount 
                determined using the effective rate of interest of the 
                plan for the preceding plan year for the period 
                beginning when such payment was made and ending on the 
                valuation date of the plan.
          ``(5) Accounting for plan liabilities.--For purposes of this 
        section--
                  ``(A) Liabilities taken into account for current plan 
                year.--In determining the value of liabilities under a 
                plan for a plan year, liabilities shall be taken into 
                account to the extent attributable to benefits 
                (including any early retirement or similar benefit) 
                accrued or earned as of the beginning of the plan year.
                  ``(B) Accruals during current plan year 
                disregarded.--For purposes of subparagraph (A), 
                benefits accrued or earned during such plan year shall 
                not be taken into account, irrespective of whether the 
                valuation date of the plan for such plan year is later 
                than the first day of such plan year.
  ``(h) Actuarial Assumptions and Methods.--
          ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation under 
        this section shall be made on the basis of actuarial 
        assumptions and methods--
                  ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                  ``(B) which, in combination, offer the actuary's best 
                estimate of anticipated experience under the plan.
          ``(2) Interest rates.--
                  ``(A) Effective interest rate.--For purposes of this 
                section, the term `effective interest rate' means, with 
                respect to any plan for any plan year, the single rate 
                of interest which, if used to determine the present 
                value of the plan's liabilities referred to in 
                subsection (d)(1), would result in an amount equal to 
                the funding target of the plan for such plan year.
                  ``(B) Interest rates for determining funding 
                target.--For purposes of determining the funding target 
                of a plan for any plan year, the interest rate used in 
                determining the present value of the liabilities of the 
                plan shall be--
                          ``(i) in the case of liabilities 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 liabilities 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 liabilities 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 a 3-year weighted average of 
                        yields on investment grade corporate bonds with 
                        varying maturities.
                          ``(ii) 3-year weighted average.--The term `3-
                        year weighted average' means an average 
                        determined by using a methodology under which 
                        the most recent year is weighted 50 percent, 
                        the year preceding such year is weighted 35 
                        percent, and the second year preceding such 
                        year is weighted 15 percent.
                  ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, with 
                respect to any plan for any plan year, the month which 
                includes the valuation date of such plan for such plan 
                year or, at the election of the plan administrator, any 
                of the 4 months which precede such month. Any election 
                made under this subparagraph shall apply to the plan 
                year for which the election is made and all succeeding 
                plan years, unless the election is revoked with the 
                consent of the Secretary of the Treasury.
                  ``(F) Publication requirements.--The Secretary of the 
                Treasury shall publish for each month the corporate 
                bond yield curve (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.
                  ``(G) Transition rule.--
                          ``(i) In general.--Notwithstanding the 
                        preceding provisions of this paragraph, for 
                        plan years beginning in 2006 or 2007, 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 2005), 
                                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 
                        2006 and 66\2/3\ percent for plan years 
                        beginning in 2007.
          ``(3) Mortality table.--
                  ``(A) In general.--Except as provided in subparagraph 
                (C), the mortality table used in determining any 
                present value or making any computation under this 
                section shall be the RP-2000 Combined Mortality Table, 
                using Scale AA, as published by the Society of 
                Actuaries, as in effect on the date of the enactment of 
                the Pension Protection Act of 2005 and as revised from 
                time to time under subparagraph (B).
                  ``(B) Periodic revision.--The Secretary of the 
                Treasury shall (at least every 10 years) make revisions 
                in any table in effect under subparagraph (A) to 
                reflect the actual experience of pension plans and 
                projected trends in such experience.
                  ``(C) Substitute mortality table.--
                          ``(i) In general.--Upon request by the plan 
                        sponsor and approval by the Secretary of the 
                        Treasury for a period not to exceed 10 years, a 
                        mortality table which meets the requirements of 
                        clause (ii) shall be used in determining any 
                        present value or making any computation under 
                        this section. A mortality table described in 
                        this clause shall cease to be in effect if the 
                        plan actuary determines at any time that such 
                        table does not meet the requirements of 
                        subclauses (I) and (II) of clause (ii).
                          ``(ii) Requirements.--A mortality table meets 
                        the requirements of this clause if the 
                        Secretary of the Treasury determines that--
                                  ``(I) such table reflects the actual 
                                experience of the pension plan and 
                                projected trends in such experience, 
                                and
                                  ``(II) such table is significantly 
                                different from the table described in 
                                subparagraph (A).
                          ``(iii) Deadline for disposition of 
                        application.--Any mortality table submitted to 
                        the Secretary of the Treasury for approval 
                        under this subparagraph shall be treated as in 
                        effect for the succeeding plan year unless the 
                        Secretary of the Treasury, during the 180-day 
                        period beginning on the date of such 
                        submission, disapproves of such table and 
                        provides the reasons that such table fails to 
                        meet the requirements of clause (ii).
                  ``(D) Transition rule.--Under regulations of the 
                Secretary of the Treasury, any difference in 
                assumptions as set forth in the mortality table 
                specified in subparagraph (A) and assumptions as set 
                forth in the mortality table described in section 
                302(d)(7)(C)(ii) (as in effect for plan years beginning 
                in 2005) shall be phased in ratably over the first 
                period of 5 plan years beginning in or after 2006 so as 
                to be fully effective for the fifth plan year.
          ``(4) Probability of benefit payments in the form of lump 
        sums or other optional forms.--For purposes of determining any 
        present value or making any computation under this section, 
        there shall be taken into account--
                  ``(A) the probability that future benefit payments 
                under the plan will be made in the form of optional 
                forms of benefits provided under the plan (including 
                lump sum distributions, determined on the basis of the 
                plan's experience and other related assumptions), and
                  ``(B) any difference in the present value of such 
                future benefit payments resulting from the use of 
                actuarial assumptions, in determining benefit payments 
                in any such optional form of benefits, which are 
                different from those specified in this subsection.
          ``(5) Approval of large changes in actuarial assumptions.--
                  ``(A) In general.--No actuarial assumption used to 
                determine the funding target for a single-employer plan 
                to which this paragraph applies may be changed without 
                the approval of the Secretary of the Treasury.
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                          ``(i) the aggregate unfunded 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
                          ``(ii) the change in assumptions (determined 
                        after taking into account any changes in 
                        interest rate and mortality table) results in a 
                        decrease in the funding shortfall of the plan 
                        for the current plan year that exceeds 
                        $50,000,000, or that exceeds $5,000,000 and 
                        that is 5 percent or more of the funding target 
                        of the plan before such change.
  ``(i) Special Rules for at-Risk Plans.--
          ``(1) Funding target for plans in at-risk status.--
                  ``(A) In general.--In any case in which a plan is in 
                at-risk status for a plan year, the funding target of 
                the plan for the plan year is the sum of--
                          ``(i) the present value of all liabilities to 
                        participants and their beneficiaries under the 
                        plan for the plan year, as determined by using, 
                        in addition to the actuarial assumptions 
                        described in subsection (g), the supplemental 
                        actuarial assumptions described in subparagraph 
                        (B), plus
                          ``(ii) a loading factor determined under 
                        subparagraph (C).
                  ``(B) Supplemental actuarial assumptions.--The 
                actuarial assumptions used in determining the valuation 
                of the funding target shall include, in addition to the 
                actuarial assumptions described in subsection (h), an 
                assumption that all participants will elect benefits at 
                such times and in such forms as will result in the 
                highest present value of liabilities under subparagraph 
                (A)(i).
                  ``(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 any case in 
        which a plan is in at-risk status for a plan year, the target 
        normal cost of the plan for such plan year shall be 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 under the actuarial 
                assumptions used under paragraph (1), plus
                  ``(B) the loading factor under paragraph (1)(C), 
                excluding the portion of the loading factor described 
                in paragraph (1)(C)(i).
          ``(3) Determination of at-risk status.--For purposes of this 
        subsection, a plan is in `at-risk status' for a plan year if 
        the funding target attainment percentage of the plan for the 
        preceding plan year was less than 60 percent.
          ``(4) 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 this 
                paragraph, the `transition percentage' for a plan year 
                is the product derived by multiplying--
                          ``(i) 20 percent, by
                          ``(ii) the number of plan years during the 
                        period described in subparagraph (A).
  ``(j) Payment of Minimum Required Contributions.--
          ``(1) In general.--For purposes of this section, the due date 
        for any payment of any minimum required contribution for any 
        plan year shall be 8\1/2\ months after the close of the plan 
        year.
          ``(2) Interest.--Any payment required under paragraph (1) for 
        a plan year made after the valuation date for such plan year 
        shall be increased by interest, for the period from the 
        valuation date to the payment date, at the effective rate of 
        interest for the plan for such plan year.
          ``(3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                  ``(A) Interest penalty for failure to meet 
                accelerated quarterly payment schedule.--In any case in 
                which the plan has a funding shortfall for the 
                preceding plan year, if the required installment is not 
                paid in full, then the minimum required contribution 
                for the plan year (as increased under paragraph (2)) 
                shall be further increased by an amount equal to the 
                interest on the amount of the underpayment for the 
                period of the underpayment, using an interest rate 
                equal to the excess of--
                          ``(i) 175 percent of the Federal mid-term 
                        rate (as in effect under section 1274 of the 
                        Internal Revenue Code of 1986 for the 1st month 
                        of such plan year), over
                          ``(ii) the effective rate of interest for the 
                        plan for the plan year.
                  ``(B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph (A)--
                          ``(i) Amount.--The amount of the underpayment 
                        shall be the excess of--
                                  ``(I) the required installment, over
                                  ``(II) the amount (if any) of the 
                                installment contributed to or under the 
                                plan on or before the due date for the 
                                installment.
                          ``(ii) Period of underpayment.--The period 
                        for which any interest is charged under this 
                        paragraph with respect to any portion of the 
                        underpayment shall run from the due date for 
                        the installment to the date on which such 
                        portion is contributed to or under the plan.
                          ``(iii) Order of crediting contributions.--
                        For purposes of clause (i)(II), contributions 
                        shall be credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                  ``(C) Number of required installments; due dates.--
                For purposes of this paragraph--
                          ``(i) Payable in 4 installments.--There shall 
                        be 4 required installments for each plan year.
                          ``(ii) Time for payment of installments.--The 
                        due dates for required installments are set 
                        forth in the following table:




``In the case of the following      The due date is:
 required installment:
  1st.............................  April 15
  2nd.............................  July 15
  3rd.............................  October 15
  4th.............................  January 15 of the following year

                  ``(D) Amount of required installment.--For purposes 
                of this paragraph--
                          ``(i) In general.--The amount of any required 
                        installment shall be 25 percent of the required 
                        annual payment.
                          ``(ii) Required annual payment.--For purposes 
                        of clause (i), the term `required annual 
                        payment' means the lesser of--
                                  ``(I) 90 percent of the minimum 
                                required contribution (without regard 
                                to any waiver under section 302(c)) to 
                                the plan for the plan year under this 
                                section, or
                                  ``(II) in the case of a plan year 
                                beginning after 2006, 100 percent of 
                                the minimum required contribution 
                                (without regard to any waiver under 
                                section 302(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the preceding 
                        plan year referred to in such clause was not a 
                        year of 12 months.
                  ``(E) Fiscal years and short years.--
                          ``(i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on any date 
                        other than January 1, there shall be 
                        substituted for the months specified in this 
                        paragraph, the months which correspond thereto.
                          ``(ii) Short plan year.--This subparagraph 
                        shall be applied to plan years of less than 12 
                        months in accordance with regulations 
                        prescribed by the Secretary of the Treasury.
          ``(4) Liquidity requirement in connection with quarterly 
        contributions.--
                  ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment under paragraph (3) 
                to the extent that the value of the liquid assets paid 
                in such installment is less than the liquidity 
                shortfall (whether or not such liquidity shortfall 
                exceeds the amount of such installment required to be 
                paid but for this paragraph).
                  ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan (other than a plan that 
                would be described in subsection (f)(2)(B) if `100' 
                were substituted for `500' therein) which--
                          ``(i) is required to pay installments under 
                        paragraph (3) for a plan year, and
                          ``(ii) has a liquidity shortfall for any 
                        quarter during such plan year.
                  ``(C) Period of underpayment.--For purposes of 
                paragraph (3)(A), any portion of an installment that is 
                treated as not paid under subparagraph (A) shall 
                continue to be treated as unpaid until the close of the 
                quarter in which the due date for such installment 
                occurs.
                  ``(D) Limitation on increase.--If the amount of any 
                required installment is increased by reason of 
                subparagraph (A), in no event shall such increase 
                exceed the amount which, when added to prior 
                installments for the plan year, is necessary to 
                increase the funding target attainment percentage of 
                the plan for the plan year (taking into account the 
                expected increase in funding target due to benefits 
                accruing or earned during the plan year) to 100 
                percent.
                  ``(E) Definitions.--For purposes of this 
                subparagraph:
                          ``(i) Liquidity shortfall.--The term 
                        `liquidity shortfall' means, with respect to 
                        any required installment, an amount equal to 
                        the excess (as of the last day of the quarter 
                        for which such installment is made) of--
                                  ``(I) the base amount with respect to 
                                such quarter, over
                                  ``(II) the value (as of such last 
                                day) of the plan's liquid assets.
                          ``(ii) Base amount.--
                                  ``(I) In general.--The term `base 
                                amount' means, with respect to any 
                                quarter, an amount equal to 3 times the 
                                sum of the adjusted disbursements from 
                                the plan for the 12 months ending on 
                                the last day of such quarter.
                                  ``(II) Special rule.--If the amount 
                                determined under subclause (I) exceeds 
                                an amount equal to 2 times the sum of 
                                the adjusted disbursements from the 
                                plan for the 36 months ending on the 
                                last day of the quarter and an enrolled 
                                actuary certifies to the satisfaction 
                                of the Secretary of the Treasury that 
                                such excess is the result of 
                                nonrecurring circumstances, the base 
                                amount with respect to such quarter 
                                shall be determined without regard to 
                                amounts related to those nonrecurring 
                                circumstances.
                          ``(iii) Disbursements from the plan.--The 
                        term `disbursements from the plan' means all 
                        disbursements from the trust, including 
                        purchases of annuities, payments of single sums 
                        and other benefits, and administrative 
                        expenses.
                          ``(iv) Adjusted disbursements.--The term 
                        `adjusted disbursements' means disbursements 
                        from the plan reduced by the product of--
                                  ``(I) the plan's funding target 
                                attainment percentage for the plan 
                                year, and
                                  ``(II) the sum of the purchases of 
                                annuities, payments of single sums, and 
                                such other disbursements as the 
                                Secretary of the Treasury shall provide 
                                in regulations.
                          ``(v) Liquid assets.--The term `liquid 
                        assets' means cash, marketable securities, and 
                        such other assets as specified by the Secretary 
                        of the Treasury in regulations.
                          ``(vi) Quarter.--The term `quarter' means, 
                        with respect to any required installment, the 
                        3-month period preceding the month in which the 
                        due date for such installment occurs.
                  ``(F) Regulations.--The Secretary of the Treasury may 
                prescribe such regulations as are necessary to carry 
                out this paragraph.
  ``(k) Imposition of Lien Where Failure to Make Required 
Contributions.--
          ``(1) In general.--In the case of a plan covered under 
        section 4021 of this Act and to which this subsection applies 
        (as provided under paragraph (2)), if--
                  ``(A) any person fails to make a contribution payment 
                required by section 302 and this section before the due 
                date for such payment, and
                  ``(B) the unpaid balance of such payment (including 
                interest), when added to the aggregate unpaid balance 
                of all preceding such payments for which payment was 
                not made before the due date (including interest), 
                exceeds $1,000,000,
        then there shall be a lien in favor of the plan in the amount 
        determined under paragraph (3) upon all property and rights to 
        property, whether real or personal, belonging to such person 
        and any other person who is a member of the same controlled 
        group of which such person is a member.
          ``(2) Plans to which subsection applies.--This subsection 
        shall apply to a defined benefit plan which is a single-
        employer plan for any plan year for which the funding target 
        attainment percentage (as defined in subsection (d)(2)) of such 
        plan is less than 100 percent.
          ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of contribution payments required under this section 
        and section 302 for which payment has not been made before the 
        due date.
          ``(4) Notice of failure; lien.--
                  ``(A) Notice of failure.--A person committing a 
                failure described in paragraph (1) shall notify the 
                Pension Benefit Guaranty Corporation of such failure 
                within 10 days of the due date for the required 
                contribution payment.
                  ``(B) Period of lien.--The lien imposed by paragraph 
                (1) shall arise on the due date for the required 
                contribution payment and shall continue until the last 
                day of the first plan year in which the plan ceases to 
                be described in paragraph (1)(B). Such lien shall 
                continue to run without regard to whether such plan 
                continues to be described in paragraph (2) during the 
                period referred to in the preceding sentence.
                  ``(C) Certain rules to apply.--Any amount with 
                respect to which a lien is imposed under paragraph (1) 
                shall be treated as taxes due and owing the United 
                States and rules similar to the rules of subsections 
                (c), (d), and (e) of section 4068 shall apply with 
                respect to a lien imposed by subsection (a) and the 
                amount with respect to such lien.
          ``(5) Enforcement.--Any lien created under paragraph (1) may 
        be perfected and enforced only by the Pension Benefit Guaranty 
        Corporation, or at the direction of the Pension Benefit 
        Guaranty Corporation, by the contributing sponsor (or any 
        member of the controlled group of the contributing sponsor).
          ``(6) Definitions.--For purposes of this subsection--
                  ``(A) Contribution payment.--The term `contribution 
                payment' means, in connection with a plan, a 
                contribution payment required to be made to the plan, 
                including any required installment under paragraphs (3) 
                and (4) of subsection (i).
                  ``(B) Due date; required installment.--The terms `due 
                date' and `required installment' have the meanings 
                given such terms by subsection (j), except that in the 
                case of a payment other than a required installment, 
                the due date shall be the date such payment is required 
                to be made under section 303.
                  ``(C) Controlled group.--The term `controlled group' 
                means any group treated as a single employer under 
                subsections (b), (c), (m), and (o) of section 414 of 
                the Internal Revenue Code of 1986.
  ``(l) Qualified Transfers to Health Benefit Accounts.--In the case of 
a qualified transfer (as defined in section 420 of the Internal Revenue 
Code of 1986), any assets so transferred shall not, for purposes of 
this section, be treated as assets in the plan.''.
  (b) Clerical Amendment.--The table of sections in section 1 of such 
Act (as amended by section 101) is amended by inserting after the item 
relating to section 302 the following new item:

``Sec. 303. Minimum funding standards for single-employer defined 
benefit pension plans.''.

  (c) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning after 2005.

SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

  (a) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--Section 206 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056) is 
amended by adding at the end the following new subsection:
  ``(g) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--
          ``(1) In general.--No pension plan which is a single-employer 
        plan may provide benefits to which participants are entitled 
        solely by reason of the occurrence of--
                  ``(A) a plant shutdown, or
                  ``(B) any other unpredictable contingent event.
          ``(2) Unpredictable contingent event.--For purposes of this 
        subsection, the term `unpredictable contingent event' means an 
        event other than--
                  ``(A) attainment of any age, performance of any 
                service, receipt or derivation of any compensation, or 
                the occurrence of death or disability, or
                  ``(B) an event which is reasonably and reliably 
                predictable (as determined by the Secretary of the 
                Treasury).''.
  (b) Other Limits on Benefits and Benefit Accruals.--
          (1) In general.--Section 206 of such Act (as amended by 
        subsection (a)) is amended further by adding at the end the 
        following new subsection:
  ``(h) Funding-Based Limits on Benefits and Benefit Accruals Under 
Single-Employer Plans.--
          ``(1) Limitations on plan amendments increasing liability for 
        benefits.--
                  ``(A) In general.--No amendment to a single-employer 
                plan which has the effect of increasing liabilities of 
                the plan by reason of increases in benefits, 
                establishment of new benefits, changing the rate of 
                benefit accrual, or changing the rate at which benefits 
                become nonforfeitable to the plan may take effect 
                during any plan year if the funding target attainment 
                percentage as of the valuation date of the plan for 
                such plan year is--
                          ``(i) less than 80 percent, or
                          ``(ii) would be less than 80 percent taking 
                        into account such amendment.
                For purposes of this subparagraph, any increase in 
                benefits under the plan by reason of an increase in the 
                benefit rate provided under the plan or on the basis of 
                an increase in compensation shall be treated as 
                affected by plan amendment.
                  ``(B) Exemption.--Subparagraph (A) shall cease to 
                apply with respect to any plan year, effective as of 
                the first date of the plan year (or if later, the 
                effective date of the amendment), upon payment by the 
                plan sponsor of a contribution (in addition to any 
                minimum required contribution under section 303) equal 
                to--
                          ``(i) in the case of subparagraph (A)(i), the 
                        amount of the increase in the funding target of 
                        the plan (under section 303) for the plan year 
                        attributable to the amendment, and
                          ``(ii) in the case of subparagraph (A)(ii), 
                        the amount sufficient to result in a funding 
                        target attainment percentage of 80 percent.
          ``(2) Funding-based limitation on certain forms of 
        distribution.--
                  ``(A) In general.--A single-employer plan shall 
                provide that, in any case in which the plan's funding 
                target attainment percentage as of the valuation date 
                of the plan for a plan year is less than 80 percent, 
                the plan may not after such date pay any prohibited 
                payment (as defined in section 206(e)).
                  ``(B) Exception.--Subparagraph (A) shall not apply to 
                any plan for any plan year if the terms of such plan 
                (as in effect for the period beginning on June 29, 
                2005, and ending with such plan year) provide for no 
                benefit accruals with respect to any participant during 
                such period.
          ``(3) Limitations on benefit accruals for plans with severe 
        funding shortfalls.--A single-employer plan shall provide that, 
        in any case in which the plan's funding target attainment 
        percentage as of the valuation date of the plan for a plan year 
        is less than 60 percent, all future benefit accruals under the 
        plan shall cease as of such date.
          ``(4) New plans.--Paragraphs (1) and (3) shall not apply to a 
        plan for the first 5 plan years of the plan. For purposes of 
        this paragraph, the reference in this paragraph to a plan shall 
        include a reference to any predecessor plan.
          ``(5) Presumed underfunding for purposes of benefit 
        limitations based on prior year's funding status.--
                  ``(A) Presumption of continued underfunding.--In any 
                case in which a benefit limitation under paragraph (1), 
                (2), or (3) has been applied to a plan with respect to 
                the plan year preceding the current plan year, the 
                funding target attainment percentage of the plan as of 
                the valuation date of the plan for the current plan 
                year shall be presumed to be equal to the funding 
                target attainment percentage of the plan as of the 
                valuation date of the plan for the preceding plan year 
                until the enrolled actuary of the plan certifies the 
                actual funding target attainment percentage of the plan 
                as of the valuation date of the plan for the current 
                plan year.
                  ``(B) Presumption of underfunding after 10th month.--
                In any case in which no such certification is made with 
                respect to the plan before the first day of the 10th 
                month of the current plan year, for purposes of 
                paragraphs (1), (2), and (3), the plan's funding target 
                attainment percentage shall be conclusively presumed to 
                be less than 60 percent as of the first day of such 
                10th month, and such day shall be deemed, for purposes 
                of such paragraphs, to be the valuation date of the 
                plan for the current plan year.
                  ``(C) Presumption of underfunding after 4th month for 
                nearly underfunded plans.--In any case in which--
                          ``(i) a benefit limitation under paragraph 
                        (1), (2), or (3) did not apply to a plan with 
                        respect to the plan year preceding the current 
                        plan year, but the funding target attainment 
                        percentage of the plan for such preceding plan 
                        year was not more than 10 percentage points 
                        greater than the percentage which would have 
                        caused such paragraph to apply to the plan with 
                        respect to such preceding plan year, and
                          ``(ii) as of the first day of the 4th month 
                        of the current plan year, the enrolled actuary 
                        of the plan has not certified the actual 
                        funding target attainment percentage of the 
                        plan as of the valuation date of the plan for 
                        the current plan year,
                until the enrolled actuary so certifies, such first day 
                shall be deemed, for purposes of such paragraph, to be 
                the valuation date of the plan for the current plan 
                year and the funding target attainment percentage of 
                the plan as of such first day shall, for purposes of 
                such paragraph, be presumed to be equal to 10 
                percentage points less than the funding target 
                attainment percentage of the plan as of the valuation 
                date of the plan for such preceding plan year.
          ``(6) Restoration by plan amendment of benefits or benefit 
        accrual.--In any case in which a prohibition under paragraph 
        (2) of the payment of lump sum distributions or benefits in any 
        other accelerated form or a cessation of benefit accruals under 
        paragraph (3) is applied to a plan with respect to any plan 
        year and such prohibition or cessation, as the case may be, 
        ceases to apply to any subsequent plan year, the plan may 
        provide for the resumption of such benefit payment or such 
        benefit accrual only by means of the adoption of a plan 
        amendment after the valuation date of the plan for such 
        subsequent plan year. The preceding sentence shall not apply to 
        a prohibition or cessation required by reason of paragraph (5).
          ``(7) Funding target attainment percentage.--
                  ``(A) In general.--For purposes of this subsection, 
                the term `funding target attainment percentage' means, 
                with respect to any plan for any plan year, the ratio 
                (expressed as a percentage) which--
                          ``(i) the value of plan assets for the plan 
                        year (as determined under section 303(g)) 
                        reduced by the pre-funding balance and the 
                        funding standard carryover balance (within the 
                        meaning of section 303(f)), bears to
                          ``(ii) the funding target of the plan for the 
                        plan year (as determined under section 
                        303(d)(1), but without regard to section 
                        303(i)(1)).
                  ``(B) Application to plans which are fully funded 
                without regard to reductions for funding balances.--In 
                the case of a plan for any plan year, if the funding 
                target attainment percentage is 100 percent or more 
                (determined without regard to this subparagraph and 
                without regard to the reduction under subparagraph 
                (A)(i) for the pre-funding balance and the funding 
                standard carryover balance), subparagraph (A) shall be 
                applied without regard to such reduction.''.
          (2) Notice requirement.--
                  (A) In general.--Section 101 of such Act (29 U.S.C. 
                1021) is amended--
                          (i) by redesignating subsection (j) as 
                        subsection (k); and
                          (ii) by inserting after subsection (i) the 
                        following new subsection:
  ``(j) Notice of Funding-Based Limitation on Certain Forms of 
Distribution.--The plan administrator of a single-employer plan shall 
provide a written notice to plan participants and beneficiaries within 
30 days after the plan has become subject to the restriction described 
in section 206(h)(2) or at such other time as may be determined by the 
Secretary.''.
                  (B) Enforcement.--Section 502(c)(4) of such Act (29 
                U.S.C. 1132(c)(4)) is amended by striking ``section 
                302(b)(7)(F)(vi)'' and inserting ``sections 101(j) and 
                302(b)(7)(F)(vi)''.
  (c) Special Rule for Plan Amendments.--A plan shall not fail to meet 
the requirements of section 204(g) of the Employee Retirement Income 
Security Act of 1974 or section 411(d)(6) of the Internal Revenue Code 
of 1986 solely by reason of the adoption by the plan of an amendment 
necessary to meet the requirements of the amendments made by this 
section.
  (d) Effective Date.--
          (1) Shutdown benefits.--Except as provided in paragraph (3), 
        the amendments made by subsection (a) shall apply with respect 
        to plant shutdowns, or other unpredictable contingent events, 
        occurring after 2006.
          (2) Other benefits.--Except as provided in paragraph (3), the 
        amendments made by subsection (b) shall apply with respect to 
        plan years beginning after 2006.
          (3) Collective bargaining exception.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified before the date of the enactment of this 
        Act, the amendments made by this subsection shall not apply to 
        plan years beginning before the earlier of--
                  (A) the later of--
                          (i) the date on which the last collective 
                        bargaining agreement relating to the plan 
                        terminates (determined without regard to any 
                        extension thereof agreed to after the date of 
                        the enactment of this Act), or
                          (ii) the first day of the first plan year to 
                        which the amendments made by this subsection 
                        would (but for this subparagraph) apply, or
                  (B) January 1, 2009.
        For purposes of clause (i), any plan amendment made pursuant to 
        a collective bargaining agreement relating to the plan which 
        amends the plan solely to conform to any requirement added by 
        this subsection shall not be treated as a termination of such 
        collective bargaining agreement.

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

  (a) Miscellaneous Amendments to Title I.--Subtitle B of title I of 
such Act (29 U.S.C. 1021 et seq.) is amended--
          (1) in section 101(d)(3), by striking ``section 302(e)'' and 
        inserting ``section 303(j)'';
          (2) in section 101(f)(2)(B), by striking clause (i) and 
        inserting the following:
                          ``(i) a statement as to whether--
                                  ``(I) in the case of a single-
                                employer plan, the plan's funding 
                                target attainment percentage (as 
                                defined in section 303(d)(2)), or
                                  ``(II) in the case of a multiemployer 
                                plan, the plan's funded percentage (as 
                                defined in section 305(d)(2)),
                        is at least 100 percent (and, if not, the 
                        actual percentage);'';
          (3) in section 103(d)(8)(B), by striking ``the requirements 
        of section 302(c)(3)'' and inserting ``the applicable 
        requirements of sections 303(h) and 304(c)(3)'';
          (4) in section 103(d), by striking paragraph (11) and 
        inserting the following:
          ``(11) If the current value of the assets of the plan is less 
        than 70 percent of--
                  ``(A) in the case of a single-employer plan, the 
                funding target (as defined in section 303(d)(1)) of the 
                plan, or
                  ``(B) in the case of a multiemployer plan, the 
                current liability (as defined in section 304(c)(6)(D)) 
                under the plan,
        the percentage which such value is of the amount described in 
        subparagraph (A) or (B).'';
          (5) in section 203(a)(3)(C), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
          (6) in section 204(g)(1), by striking ``section 302(c)(8)'' 
        and inserting ``section 302(d)(2)'';
          (7) in section 204(i)(2)(B), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
          (8) in section 204(i)(3), by striking ``funded current 
        liability percentage (within the meaning of section 302(d)(8) 
        of this Act)'' and inserting ``funding target attainment 
        percentage (as defined in section 303(d)(2))'';
          (9) in section 204(i)(4), by striking ``section 
        302(c)(11)(A), without regard to section 302(c)(11)(B)'' and 
        inserting ``section 302(b)(1), without regard to section 
        302(b)(2)'';
          (10) in section 206(e)(1), by striking ``section 302(d)'' and 
        inserting ``section 303(j)(4)'', and by striking ``section 
        302(e)(5)'' and inserting ``section 303(j)(4)(E)(i)'';
          (11) in section 206(e)(3), by striking ``section 302(e) by 
        reason of paragraph (5)(A) thereof'' and inserting ``section 
        303(j)(3) by reason of section 303(j)(4)(A)''; and
          (12) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by 
        striking ``American Jobs Creation Act of 2004'' and inserting 
        ``Pension Protection Act of 2005''.
  (b) Miscellaneous Amendments to Title IV.--Title IV of such Act is 
amended--
          (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by 
        striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by 
        striking ``412(c)(11)(A)'' and inserting ``412(b)(1)'', by 
        striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by 
        striking ``412(c)(11)(B)'' and inserting ``412(b)(2)'';
          (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by striking 
        ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) and 
        (B)'', and by striking ``412(n)(1)(A) and (B)'' and inserting 
        ``430(k)(1)(A) and (B)'';
          (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by striking 
        ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) and 
        (B)'', and by striking ``412(n)(1)(A) and (B)'' and inserting 
        ``430(k)(1)(A) and (B)'';
          (4) in section 4011(b) (29 U.S.C. 1311(b)), by striking ``to 
        which'' and all that follows and inserting ``for any plan year 
        for which the plan's funding target attainment percentage (as 
        defined in section 303(d)(2)) is at least 90 percent.'';
          (5) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), by striking 
        paragraphs (1), (2), and (3) and inserting the following:
          ``(1)(A) in the case of a single-employer plan, the sum of 
        the shortfall amortization charge (within the meaning of 
        section 303(c)(1) of this Act and 430(c)(1) of the Internal 
        Revenue Code of 1986) with respect to the plan (if any) for the 
        plan year in which the termination date occurs, plus the 
        aggregate total of shortfall amortization installments (if any) 
        determined for succeeding plan years under section 303(c)(2) of 
        this Act and section 430(c)(2) of such Code (which, for 
        purposes of this subparagraph, shall include any increase in 
        such sum which would result if all applications for waivers of 
        the minimum funding standard under section 302(c) of this Act 
        and section 412(c) of such Code which are pending with respect 
        to such plan were denied and if no additional contributions 
        (other than those already made by the termination date) were 
        made for the plan year in which the termination date occurs or 
        for any previous plan year), or
          ``(B) in the case of a multiemployer plan, the outstanding 
        balance of the accumulated funding deficiencies (within the 
        meaning of section 304(a)(2) of this Act and section 431(a) of 
        the Internal Revenue Code of 1986) of the plan (if any) (which, 
        for purposes of this subparagraph, shall include the amount of 
        any increase in such accumulated funding deficiencies of the 
        plan which would result if all pending applications for waivers 
        of the minimum funding standard under section 302(c) of this 
        Act or section 412(c) of such Code and for extensions of the 
        amortization period under section 304(d) of this Act or section 
        431(d) of such Code with respect to such plan were denied and 
        if no additional contributions (other than those already made 
        by the termination date) were made for the plan year in which 
        the termination date occurs or for any previous plan year),
          ``(2)(A) in the case of a single-employer plan, the sum of 
        the waiver amortization charge (within the meaning of section 
        303(e)(1) of this Act and 430(j)(2) of the Internal Revenue 
        Code of 1986) with respect to the plan (if any) for the plan 
        year in which the termination date occurs, plus the aggregate 
        total of waiver amortization installments (if any) determined 
        for succeeding plan years under section 303(e)(2) of this Act 
        and section 430(j)(3) of such Code, or
          ``(B) in the case of a multiemployer plan, the outstanding 
        balance of the amount of waived funding deficiencies of the 
        plan waived before such date under section 302(c) of this Act 
        or section 412(c) of such Code (if any), and
          ``(3) in the case of a multiemployer plan, the outstanding 
        balance of the amount of decreases in the minimum funding 
        standard allowed before such date under section 304(d) of this 
        Act or section 431(d) of such Code (if any);'';
          (6) in section 4071 (29 U.S.C. 1371), by striking 
        ``302(f)(4)'' and inserting ``303(k)(4)'';
          (7) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by 
        striking ``302(a)'' and inserting ``304(a)'', and, in clause 
        (i), by striking ``302(a)'' and inserting ``304(a)'';
          (8) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by striking 
        ``303(a)'' and inserting ``302(c)'';
          (9) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by striking 
        ``303(c)'' and inserting ``302(c)(3)''; and
          (10) in section 4243(g) (29 U.S.C. 1423(g)), by striking 
        ``302(c)(3)'' and inserting ``304(c)(3)''.
  (c) Amendments to Reorganization Plan No. 4 of 1978.--Section 
106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified and affirmed 
as law by Public Law 98-532 (98 Stat. 2705)) is amended by striking 
``302(c)(8)'' and inserting ``302(d)(2)'', by striking ``304(a) and 
(b)(2)(A)'' and inserting ``304(d)(1), (d)(2), and (e)(2)(A)'', and by 
striking ``412(c)(8), (e), and (f)(2)(A)'' and inserting ``412(d)(2) 
and 431(d)(1), (d)(2), and (e)(2)(A)''.
  (d) Repeal of Expired Authority for Temporary Variances.--
          (1) In general.--Section 207 of such Act (29 U.S.C. 1057) is 
        repealed.
          (2) Conforming amendment.--The table of contents in section 1 
        of such Act is amended by striking the item relating to section 
        207.
  (e) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after 2005.

        Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 111. [SEE INTRODUCED BILL, PAGE 71, LINE 1 THROUGH PAGE 140, LINE 
                    13].

                      Subtitle C--Other Provisions

SEC. 121. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING 
                    REQUIREMENTS.

  (a) In General.--In the case of a plan that--
          (1) was not required to pay a variable rate premium for the 
        plan year beginning in 1996,
          (2) has not, in any plan year beginning after 1995, merged 
        with another plan (other than a plan sponsored by an employer 
        that was in 1996 within the controlled group of the plan 
        sponsor); and
          (3) is sponsored by a company that is engaged primarily in 
        the interurban or interstate passenger bus service,
the rules described in subsection (b) shall apply for any plan year 
beginning after 2005.
  (b) Modified Rules.--The rules described in this subsection are as 
follows:
          (1) For purposes of section 430(i)(3) of the Internal Revenue 
        Code of 1986 and section 303(j)(3) of the Employee Retirement 
        Income Security Act of 1974, the plan shall be treated as not 
        having a funding shortfall for any plan year.
          (2) For purposes of--
                  (A) determining unfunded vested benefits under 
                section 4006(a)(3)(E)(iii) of such Act, and
                  (B) determining any present value or making any 
                computation under section 412 of such Code or section 
                302 of such Act,
        the mortality table shall be the mortality table used by the 
        plan.
          (3) Notwithstanding section 303(f)(4)(B) of such Act, for 
        purposes of section 303(c)(4)(B) of such Act, the value of plan 
        assets is deemed to be such amount, reduced by the amount of 
        the pre-funding balance if, pursuant to a binding written 
        agreement with the Pension Benefit Guaranty Corporation entered 
        into before January 1, 2006, the funding standard carryover 
        balance is not available to reduce the minimum required 
        contribution for the plan year.
          (4) Section 430(c)(4)(B) of such Code and section 
        303(c)(4)(B) of such Act (relating to phase-in of funding 
        target for determination of funding shortfall) shall each be 
        applied by substituting ``2011'' for ``2010'' therein and by 
        substituting for the table therein the following:



                                                                 The
                                                             applicable
  In the case of a plan year beginning in calendar year:     percentage
                                                                 is:


2006......................................................    90 percent
2007......................................................    92 percent
2008......................................................    94 percent
2009......................................................    96 percent
2010......................................................   98 percent.

  (c) Definitions.--Any term used in this section which is also used in 
section 303 of such Act shall have the meaning provided such term in 
such section.
  (d) Conforming Amendment.--
          (1) Section 769 of the Retirement Protection Act of 1994 (26 
        U.S.C. 412 note) is amended by striking subsection (c).
          (2) The amendment made this subsection shall apply to plan 
        years beginning after 2005.

SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION PLANS WHEN 
                    EMPLOYER DEFINED BENEFIT PLAN IN AT-RISK STATUS.

  [See introduced bill, page 142, line 3 through page 143, line 16]

    TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974

SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

  (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by section 102) is 
amended further by inserting after section 303 the following new 
section:
          ``minimum funding standards for multiemployer plans
  ``Sec. 304. (a) In General.--For purposes of section 302, the 
accumulated funding deficiency of a multiemployer plan for any plan 
year is--
          ``(1) except as provided in paragraph (2), the amount, 
        determined as of the end of the plan year, equal to the excess 
        (if any) of the total charges to the funding standard account 
        of the plan for all plan years (beginning with the first plan 
        year for which this part applies to the plan) over the total 
        credits to such account for such years, and
          ``(2) if the multiemployer plan is in reorganization for any 
        plan year, the accumulated funding deficiency of the plan 
        determined under section 4243.
  ``(b) Funding Standard Account.--
          ``(1) Account required.--Each multiemployer plan to which 
        this part applies shall establish and maintain a funding 
        standard account. Such account shall be credited and charged 
        solely as provided in this section.
          ``(2) Charges to account.--For a plan year, the funding 
        standard account shall be charged with the sum of--
                  ``(A) the normal cost of the plan for the plan year,
                  ``(B) the amounts necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) in the case of a plan in existence on 
                        January 1, 1974, the unfunded past service 
                        liability under the plan on the first day of 
                        the first plan year to which this section 
                        applies, over a period of 40 plan years,
                          ``(ii) in the case of a plan which comes into 
                        existence after January 1, 1974, the unfunded 
                        past service liability under the plan on the 
                        first day of the first plan year to which this 
                        section applies, over a period of 15 plan 
                        years,
                          ``(iii) separately, with respect to each plan 
                        year, the net increase (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                          ``(iv) separately, with respect to each plan 
                        year, the net experience loss (if any) under 
                        the plan, over a period of 15 plan years, and
                          ``(v) separately, with respect to each plan 
                        year, the net loss (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                  ``(C) the amount necessary to amortize each waived 
                funding deficiency (within the meaning of section 
                302(c)(3)) for each prior plan year in equal annual 
                installments (until fully amortized) over a period of 
                15 plan years,
                  ``(D) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 5 plan years any amount credited to the 
                funding standard account under section 302(b)(3)(D) (as 
                in effect on the day before the date of the enactment 
                of the Pension Protection Act of 2005), and
                  ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of section 302(c)(7)(A)(i)(I) (as in effect 
                on the day before the date of the enactment of the 
                Pension Protection Act of 2005).
          ``(3) Credits to account.--For a plan year, the funding 
        standard account shall be credited with the sum of--
                  ``(A) the amount considered contributed by the 
                employer to or under the plan for the plan year,
                  ``(B) the amount necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) separately, with respect to each plan 
                        year, the net decrease (if any) in unfunded 
                        past service liability under the plan arising 
                        from plan amendments adopted in such year, over 
                        a period of 15 plan years,
                          ``(ii) separately, with respect to each plan 
                        year, the net experience gain (if any) under 
                        the plan, over a period of 15 plan years, and
                          ``(iii) separately, with respect to each plan 
                        year, the net gain (if any) resulting from 
                        changes in actuarial assumptions used under the 
                        plan, over a period of 15 plan years,
                  ``(C) the amount of the waived funding deficiency 
                (within the meaning of section 302(c)(3)) for the plan 
                year, and
                  ``(D) in the case of a plan year for which the 
                accumulated funding deficiency is determined under the 
                funding standard account if such plan year follows a 
                plan year for which such deficiency was determined 
                under the alternative minimum funding standard under 
                section 305 (as in effect on the day before the date of 
                the enactment of the Pension Protection Act of 2005), 
                the excess (if any) of any debit balance in the funding 
                standard account (determined without regard to this 
                subparagraph) over any debit balance in the alternative 
                minimum funding standard account.
          ``(4) Special rule for amounts first amortized to plan years 
        before 2006.--In the case of any amount amortized under section 
        302(b) (as in effect on the day before the date of the 
        enactment of the Pension Protection Act of 2005) over any 
        period beginning with a plan year beginning before 2006, in 
        lieu of the amortization described in paragraphs (2)(B) and 
        (3)(B), such amount shall continue to be amortized under such 
        section as so in effect.
          ``(5) Combining and offsetting amounts to be amortized.--
        Under regulations prescribed by the Secretary of the Treasury, 
        amounts required to be amortized under paragraph (2) or 
        paragraph (3), as the case may be--
                  ``(A) may be combined into one amount under such 
                paragraph to be amortized over a period determined on 
                the basis of the remaining amortization period for all 
                items entering into such combined amount, and
                  ``(B) may be offset against amounts required to be 
                amortized under the other such paragraph, with the 
                resulting amount to be amortized over a period 
                determined on the basis of the remaining amortization 
                periods for all items entering into whichever of the 
                two amounts being offset is the greater.
          ``(6) Interest.--Except as provided in subsection (c)(9), the 
        funding standard account (and items therein) shall be charged 
        or credited (as determined under regulations prescribed by the 
        Secretary of the Treasury) with interest at the appropriate 
        rate consistent with the rate or rates of interest used under 
        the plan to determine costs.
          ``(7) Certain amortization charges and credits.--In the case 
        of a plan which, immediately before the date of the enactment 
        of the Multiemployer Pension Plan Amendments Act of 1980, was a 
        multiemployer plan (within the meaning of section 3(37) as in 
        effect immediately before such date)--
                  ``(A) any amount described in paragraph (2)(B)(ii), 
                (2)(B)(iii), or (3)(B)(i) of this subsection which 
                arose in a plan year beginning before such date shall 
                be amortized in equal annual installments (until fully 
                amortized) over 40 plan years, beginning with the plan 
                year in which the amount arose;
                  ``(B) any amount described in paragraph (2)(B)(iv) or 
                (3)(B)(ii) of this subsection which arose in a plan 
                year beginning before such date shall be amortized in 
                equal annual installments (until fully amortized) over 
                20 plan years, beginning with the plan year in which 
                the amount arose;
                  ``(C) any change in past service liability which 
                arises during the period of 3 plan years beginning on 
                or after such date, and results from a plan amendment 
                adopted before such date, shall be amortized in equal 
                annual installments (until fully amortized) over 40 
                plan years, beginning with the plan year in which the 
                change arises; and
                  ``(D) any change in past service liability which 
                arises during the period of 2 plan years beginning on 
                or after such date, and results from the changing of a 
                group of participants from one benefit level to another 
                benefit level under a schedule of plan benefits which--
                          ``(i) was adopted before such date, and
                          ``(ii) was effective for any plan participant 
                        before the beginning of the first plan year 
                        beginning on or after such date,
                shall be amortized in equal annual installments (until 
                fully amortized) over 40 plan years, beginning with the 
                plan year in which the change arises.
          ``(8) Special rules relating to charges and credits to 
        funding standard account.--For purposes of this part--
                  ``(A) Withdrawal liability.--Any amount received by a 
                multiemployer plan in payment of all or part of an 
                employer's withdrawal liability under part 1 of 
                subtitle E of title IV shall be considered an amount 
                contributed by the employer to or under the plan. The 
                Secretary of the Treasury may prescribe by regulation 
                additional charges and credits to a multiemployer 
                plan's funding standard account to the extent necessary 
                to prevent withdrawal liability payments from being 
                unduly reflected as advance funding for plan 
                liabilities.
                  ``(B) Adjustments when a multiemployer plan leaves 
                reorganization.--If a multiemployer plan is not in 
                reorganization in the plan year but was in 
                reorganization in the immediately preceding plan year, 
                any balance in the funding standard account at the 
                close of such immediately preceding plan year--
                          ``(i) shall be eliminated by an offsetting 
                        credit or charge (as the case may be), but
                          ``(ii) shall be taken into account in 
                        subsequent plan years by being amortized in 
                        equal annual installments (until fully 
                        amortized) over 30 plan years.
                The preceding sentence shall not apply to the extent of 
                any accumulated funding deficiency under section 
                4243(a) as of the end of the last plan year that the 
                plan was in reorganization.
                  ``(C) Plan payments to supplemental program or 
                withdrawal liability payment fund.--Any amount paid by 
                a plan during a plan year to the Pension Benefit 
                Guaranty Corporation pursuant to section 4222 of this 
                Act or to a fund exempt under section 501(c)(22) of the 
                Internal Revenue Code of 1986 pursuant to section 4223 
                of this Act shall reduce the amount of contributions 
                considered received by the plan for the plan year.
                  ``(D) Interim withdrawal liability payments.--Any 
                amount paid by an employer pending a final 
                determination of the employer's withdrawal liability 
                under part 1 of subtitle E of title IV and subsequently 
                refunded to the employer by the plan shall be charged 
                to the funding standard account in accordance with 
                regulations prescribed by the Secretary of the 
                Treasury.
                  ``(E) Election for deferral of charge for portion of 
                net experience loss.--If an election is in effect under 
                section 302(b)(7)(F) (as in effect on the day before 
                the date of the enactment of the Pension Protection Act 
                of 2005) for any plan year, the funding standard 
                account shall be charged in the plan year to which the 
                portion of the net experience loss deferred by such 
                election was deferred with the amount so deferred (and 
                paragraph (2)(B)(iv) shall not apply to the amount so 
                charged).
                  ``(F) Financial assistance.--Any amount of any 
                financial assistance from the Pension Benefit Guaranty 
                Corporation to any plan, and any repayment of such 
                amount, shall be taken into account under this section 
                and section 412 in such manner as is determined by the 
                Secretary of the Treasury.
                  ``(G) Short-term benefits.--To the extent that any 
                plan amendment increases the unfunded past service 
                liability under the plan by reason of an increase in 
                benefits which are payable under the plan during a 
                period that does not exceed 14 years, paragraph 
                (2)(B)(iii) shall be applied separately with respect to 
                such increase in unfunded past service liability by 
                substituting the number of years of the period during 
                which such benefits are payable for `15'.
  ``(c) Additional Rules.--
          ``(1) Determinations to be made under funding method.--For 
        purposes of this part, normal costs, accrued liability, past 
        service liabilities, and experience gains and losses shall be 
        determined under the funding method used to determine costs 
        under the plan.
          ``(2) Valuation of assets.--
                  ``(A) In general.--For purposes of this part, the 
                value of the plan's assets shall be determined on the 
                basis of any reasonable actuarial method of valuation 
                which takes into account fair market value and which is 
                permitted under regulations prescribed by the Secretary 
                of the Treasury.
                  ``(B) Election with respect to bonds.--The value of a 
                bond or other evidence of indebtedness which is not in 
                default as to principal or interest may, at the 
                election of the plan administrator, be determined on an 
                amortized basis running from initial cost at purchase 
                to par value at maturity or earliest call date. Any 
                election under this subparagraph shall be made at such 
                time and in such manner as the Secretary of the 
                Treasury shall by regulations provide, shall apply to 
                all such evidences of indebtedness, and may be revoked 
                only with the consent of such Secretary.
          ``(3) Actuarial assumptions must be reasonable.--For purposes 
        of this section, all costs, liabilities, rates of interest, and 
        other factors under the plan shall be determined on the basis 
        of actuarial assumptions and methods--
                  ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                  ``(B) which, in combination, offer the actuary's best 
                estimate of anticipated experience under the plan.
          ``(4) Treatment of certain changes as experience gain or 
        loss.--For purposes of this section, if--
                  ``(A) a change in benefits under the Social Security 
                Act or in other retirement benefits created under 
                Federal or State law, or
                  ``(B) a change in the definition of the term `wages' 
                under section 3121 of the Internal Revenue Code of 
                1986, or a change in the amount of such wages taken 
                into account under regulations prescribed for purposes 
                of section 401(a)(5) of such Code,
        results in an increase or decrease in accrued liability under a 
        plan, such increase or decrease shall be treated as an 
        experience loss or gain.
          ``(5) Full funding.--If, as of the close of a plan year, a 
        plan would (without regard to this paragraph) have an 
        accumulated funding deficiency in excess of the full funding 
        limitation--
                  ``(A) the funding standard account shall be credited 
                with the amount of such excess, and
                  ``(B) all amounts described in subparagraphs (B), 
                (C), and (D) of subsection (b) (2) and subparagraph (B) 
                of subsection (b)(3) which are required to be amortized 
                shall be considered fully amortized for purposes of 
                such subparagraphs.
          ``(6) Full-funding limitation.--
                  ``(A) In general.--For purposes of paragraph (5), the 
                term `full-funding limitation' means the excess (if 
                any) of--
                          ``(i) the accrued liability (including normal 
                        cost) under the plan (determined under the 
                        entry age normal funding method if such accrued 
                        liability cannot be directly calculated under 
                        the funding method used for the plan), over
                          ``(ii) the lesser of--
                                  ``(I) the fair market value of the 
                                plan's assets, or
                                  ``(II) the value of such assets 
                                determined under paragraph (2).
                  ``(B) Minimum amount.--
                          ``(i) In general.--In no event shall the 
                        full-funding limitation determined under 
                        subparagraph (A) be less than the excess (if 
                        any) of--
                                  ``(I) 90 percent of the current 
                                liability of the plan (including the 
                                expected increase in current liability 
                                due to benefits accruing during the 
                                plan year), over
                                  ``(II) the value of the plan's assets 
                                determined under paragraph (2).
                          ``(ii) Assets.--For purposes of clause (i), 
                        assets shall not be reduced by any credit 
                        balance in the funding standard account.
                  ``(C) Full funding limitation.--For purposes of this 
                paragraph, unless otherwise provided by the plan, the 
                accrued liability under a multiemployer plan shall not 
                include benefits which are not nonforfeitable under the 
                plan after the termination of the plan (taking into 
                consideration section 411(d)(3) of the Internal Revenue 
                Code of 1986).
                  ``(D) Current liability.--For purposes of this 
                paragraph--
                          ``(i) In general.--The term `current 
                        liability' means all liabilities to employees 
                        and their beneficiaries under the plan.
                          ``(ii) Treatment of unpredictable contingent 
                        event benefits.--For purposes of clause (i), 
                        any benefit contingent on an event other than--
                                  ``(I) age, service, compensation, 
                                death, or disability, or
                                  ``(II) an event which is reasonably 
                                and reliably predictable (as determined 
                                by the Secretary of the Treasury),
                        shall not be taken into account until the event 
                        on which the benefit is contingent occurs.
                          ``(iii) Interest rate used.--The rate of 
                        interest used to determine current liability 
                        under this paragraph shall be the rate of 
                        interest determined under subparagraph (E).
                          ``(iv) Mortality tables.--
                                  ``(I) Commissioners' standard 
                                table.--In the case of plan years 
                                beginning before the first plan year to 
                                which the first tables prescribed under 
                                subclause (II) apply, the mortality 
                                table used in determining current 
                                liability under this paragraph shall be 
                                the table prescribed by the Secretary 
                                of the Treasury which is based on the 
                                prevailing commissioners' standard 
                                table (described in section 
                                807(d)(5)(A) of the Internal Revenue 
                                Code of 1986) used to determine 
                                reserves for group annuity contracts 
                                issued on January 1, 1993.
                                  ``(II) Secretarial authority.--The 
                                Secretary of the Treasury may by 
                                regulation prescribe for plan years 
                                beginning after December 31, 1999, 
                                mortality tables to be used in 
                                determining current liability under 
                                this subsection. Such tables shall be 
                                based upon the actual experience of 
                                pension plans and projected trends in 
                                such experience. In prescribing such 
                                tables, such Secretary shall take into 
                                account results of available 
                                independent studies of mortality of 
                                individuals covered by pension plans.
                          ``(v) Separate mortality tables for the 
                        disabled.--Notwithstanding clause (iv)--
                                  ``(I) In general.--In the case of 
                                plan years beginning after December 31, 
                                1995, the Secretary of the Treasury 
                                shall establish mortality tables which 
                                may be used (in lieu of the tables 
                                under clause (iv)) to determine current 
                                liability under this subsection for 
                                individuals who are entitled to 
                                benefits under the plan on account of 
                                disability. Such Secretary shall 
                                establish separate tables for 
                                individuals whose disabilities occur in 
                                plan years beginning before January 1, 
                                1995, and for individuals whose 
                                disabilities occur in plan years 
                                beginning on or after such date.
                                  ``(II) Special rule for disabilities 
                                occurring after 1994.--In the case of 
                                disabilities occurring in plan years 
                                beginning after December 31, 1994, the 
                                tables under subclause (I) shall apply 
                                only with respect to individuals 
                                described in such subclause who are 
                                disabled within the meaning of title II 
                                of the Social Security Act and the 
                                regulations thereunder.
                          ``(vi) Periodic review.--The Secretary of the 
                        Treasury shall periodically (at least every 5 
                        years) review any tables in effect under this 
                        subparagraph and shall, to the extent such 
                        Secretary determines necessary, by regulation 
                        update the tables to reflect the actual 
                        experience of pension plans and projected 
                        trends in such experience.
                  ``(E) Required change of interest rate.--For purposes 
                of determining a plan's current liability for purposes 
                of this paragraph--
                          ``(i) In general.--If any rate of interest 
                        used under the plan under subsection (b)(6) to 
                        determine cost is not within the permissible 
                        range, the plan shall establish a new rate of 
                        interest within the permissible range.
                          ``(ii) Permissible range.--For purposes of 
                        this subparagraph--
                                  ``(I) In general.--Except as provided 
                                in subclause (II), the term 
                                `permissible range' means a rate of 
                                interest which is not more than 5 
                                percent above, and not more than 10 
                                percent below, the weighted average of 
                                the rates of interest on 30-year 
                                Treasury securities during the 4-year 
                                period ending on the last day before 
                                the beginning of the plan year.
                                  ``(II) Secretarial authority.--If the 
                                Secretary of the Treasury finds that 
                                the lowest rate of interest permissible 
                                under subclause (I) is unreasonably 
                                high, such Secretary may prescribe a 
                                lower rate of interest, except that 
                                such rate may not be less than 80 
                                percent of the average rate determined 
                                under such subclause.
                          ``(iii) Assumptions.--Notwithstanding 
                        paragraph (3)(A), the interest rate used under 
                        the plan shall be--
                                  ``(I) determined without taking into 
                                account the experience of the plan and 
                                reasonable expectations, but
                                  ``(II) consistent with the 
                                assumptions which reflect the purchase 
                                rates which would be used by insurance 
                                companies to satisfy the liabilities 
                                under the plan.
          ``(7) Annual valuation.--
                  ``(A) In general.--For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not 
                less frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary of the Treasury.
                  ``(B) Valuation date.--
                          ``(i) Current year.--Except as provided in 
                        clause (ii), the valuation referred to in 
                        subparagraph (A) shall be made as of a date 
                        within the plan year to which the valuation 
                        refers or within one month prior to the 
                        beginning of such year.
                          ``(ii) Use of prior year valuation.--The 
                        valuation referred to in subparagraph (A) may 
                        be made as of a date within the plan year prior 
                        to the year to which the valuation refers if, 
                        as of such date, the value of the assets of the 
                        plan are not less than 100 percent of the 
                        plan's current liability (as defined in 
                        paragraph (6)(D) without regard to clause (iv) 
                        thereof).
                          ``(iii) Adjustments.--Information under 
                        clause (ii) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                          ``(iv) Limitation.--A change in funding 
                        method to use a prior year valuation, as 
                        provided in clause (ii), may not be made unless 
                        as of the valuation date within the prior plan 
                        year, the value of the assets of the plan are 
                        not less than 125 percent of the plan's current 
                        liability (as defined in paragraph (6)(D) 
                        without regard to clause (iv) thereof).
          ``(8) Time when certain contributions deemed made.--For 
        purposes of this section, any contributions for a plan year 
        made by an employer after the last day of such plan year, but 
        not later than two and one-half months after such day, shall be 
        deemed to have been made on such last day. For purposes of this 
        subparagraph, such two and one-half month period may be 
        extended for not more than six months under regulations 
        prescribed by the Secretary of the Treasury.
          ``(9) Interest rule for waivers and extensions.--The interest 
        rate applicable for any plan year for purposes of computing the 
        amortization charge described in subsection (b)(2)(C) and in 
        connection with an extension granted under subsection (d) shall 
        be the greater of--
                  ``(A) 150 percent of the Federal mid-term rate (as in 
                effect under section 1274 of the Internal Revenue Code 
                of 1986 for the 1st month of such plan year), or
                  ``(B) the rate of interest used under the plan for 
                determining costs.
  ``(d) Extension of Amortization Periods for Multiemployer Plans.--In 
the case of a multiemployer plan--
          ``(1) Extension.--The period of years required to amortize 
        any unfunded liability (described in any clause of subsection 
        (b)(2)(B)) of any multiemployer plan may be extended (in 
        addition to any extension under paragraph (2)) by the Secretary 
        of the Treasury for a period of time (not in excess of 5 years) 
        if such Secretary determines that such extension would carry 
        out the purposes of this Act and would provide adequate 
        protection for participants under the plan and their 
        beneficiaries and if he determines that the failure to permit 
        such extension would--
                  ``(A) result in--
                          ``(i) a substantial risk to the voluntary 
                        continuation of the plan, or
                          ``(ii) a substantial curtailment of pension 
                        benefit levels or employee compensation, and
                  ``(B) be adverse to the interests of plan 
                participants in the aggregate.
          ``(2) Additional extension.--The period of years required to 
        amortize any unfunded liability (described in any clause of 
        subsection (b)(2)(B)) of any multiemployer plan may be extended 
        (in addition to any extension under paragraph (1)) by the 
        Secretary of the Treasury for a period of time (not in excess 
        of 5 years) if such Secretary determines that--
                  ``(A) absent the extension, the plan would have an 
                accumulated funding deficiency in any of the next 10 
                plan years,
                  ``(B) the plan sponsor has adopted a plan to improve 
                the plan's funding status, and
                  ``(C) taking into account the extension, the plan is 
                projected to have suficient assets to timely pay its 
                expected benefit liabilities and other anticipated 
                expenditures
          ``(3) Advance notice.--
                  ``(A) In general.--The Secretary of the Treasury 
                shall, before granting an extension under this section, 
                require each applicant to provide evidence satisfactory 
                to such Secretary that the applicant has provided 
                notice of the filing of the application for such 
                extension to each affected party (as defined in section 
                4001(a)(21)) with respect to the affected plan. Such 
                notice shall include a description of the extent to 
                which the plan is funded for benefits which are 
                guaranteed under title IV and for benefit liabilities.
                  ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under paragraph (1).''.
  (b) Conforming Amendments.--
          (1) Section 301 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1081) is amended by striking subsection 
        (d).
          (2) The table of contents in section 1 of such Act (as 
        amended by section 102 of this Act) is amended further by 
        inserting after the item relating to section 303 the following 
        new item:

``Sec. 304. Minimum funding standards for multiemployer plans.''.

  (c) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after 2005.

SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN 
                    ENDANGERED OR CRITICAL STATUS.

  (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by the preceding 
provisions of this Act) is amended further by inserting after section 
304 the following new section:
``additional funding rules for multiemployer plans in endangered status 
                           or critical status
  ``Sec. 305. (a) Annual Certification by Plan Actuary.--
          ``(1) In general.--During the 90-day period beginning on 
        first day of each plan year of a multiemployer plan, the plan 
        actuary shall certify to the Secretary of the Treasury whether 
        or not the plan is in endangered status for such plan year and 
        whether or not the plan is in critical status for such plan 
        year.
          ``(2) Actuarial projections of assets and liabilities.--
                  ``(A) In general.--In making the determinations under 
                paragraph (1), the plan actuary shall make projections 
                under subsections (b)(2) and (c)(2) for the current and 
                succeeding plan years, using reasonable actuarial 
                assumptions and methods, of the current value of the 
                assets of the plan and the present value of all 
                liabilities to participants and beneficiaries under the 
                plan for the current plan year as of the beginning of 
                such year, as based on the actuarial statement prepared 
                for the preceding plan year under section 103(d).
                  ``(B) Determinations of future contributions.--Any 
                such actuarial projection of plan assets shall assume--
                          ``(i) reasonably anticipated employer and 
                        employee contributions for the current and 
                        succeeding plan years, assuming that the terms 
                        of the one or more collective bargaining 
                        agreements pursuant to which the plan is 
                        maintained for the current plan year continue 
                        in effect for succeeding plan years, or
                          ``(ii) that employer and employee 
                        contributions for the most recent plan year 
                        will continue indefinitely, but only if the 
                        plan actuary determines there have been no 
                        significant demographic changes that would make 
                        continued application of such terms 
                        unreasonable.
          ``(3) Presumed status in absence of timely actuarial 
        certification.--If certification under this subsection is not 
        made before the end of the 90-day period specified in paragraph 
        (1), the plan shall be presumed to be in critical status for 
        such plan year until such time as the plan actuary makes a 
        contrary certification.
          ``(4) Notice.--In any case in which a multiemployer plan is 
        certified to be in endangered status under paragraph (1) or 
        enters into critical status, the plan sponsor shall, not later 
        than 30 days after the date of the certification or entry, 
        provide notification of the endangered or critical status to 
        the participants and beneficiaries, the bargaining parties, the 
        Pension Benefit Guaranty Corporation, the Secretary of the 
        Treasury, and the Secretary of Labor.
  ``(b) Funding Rules for Multiemployer Plans in Endangered Status.--
          ``(1) In general.--In any case in which a multiemployer plan 
        is in endangered status for a plan year and no funding 
        improvement plan under this subsection with respect to such 
        multiemployer plan is in effect for the plan year, the plan 
        sponsor shall, in accordance with this subsection, amend the 
        multiemployer plan to include a funding improvement plan upon 
        approval thereof by the bargaining parties under this 
        subsection. The amendment shall be adopted not later than 240 
        days after the date on which the plan is certified to be in 
        endangered status under subsection (a)(1).
          ``(2) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by the plan 
        actuary under subsection (a)--
                  ``(A) the plan's funded percentage for such plan year 
                is less than 80 percent, or
                  ``(B) the plan has an accumulated funding deficiency 
                for such plan year under section 304 or is projected to 
                have such an accumulated funding deficiency for any of 
                the 6 succeeding plan years, taking into account any 
                extension of amortization periods under section 304(d).
          ``(3) Funding improvement plan.--
                  ``(A) Benchmarks.--A funding improvement plan shall 
                consist of amendments to the plan formulated to 
                provide, under reasonable actuarial assumptions, for 
                the attainment, during the funding improvement period 
                under the funding improvement plan, of the following 
                benchmarks:
                          ``(i) Increase in funded percentage.--An 
                        increase in the plan's funded percentage such 
                        that--
                                  ``(I) the difference between 100 
                                percent and the plan's funded 
                                percentage for the last year of the 
                                funding improvement period, is not more 
                                than
                                  ``(II) \2/3\ of the difference 
                                between 100 percent and the plan's 
                                funded percentage for the first year of 
                                the funding improvement period.
                          ``(ii) Avoidance of accumulated funding 
                        deficiencies.--No accumulated funding 
                        deficiency for any plan year during the funding 
                        improvement period (taking into account any 
                        extension of amortization periods under section 
                        304(d)).
                  ``(B) Funding improvement period.--The funding 
                improvement period for any funding improvement plan 
                adopted pursuant to this subsection is the 10-year 
                period beginning on the earlier of--
                          ``(i) the second anniversary of the date of 
                        the adoption of the funding improvement plan, 
                        or
                          ``(ii) the first day of the first plan year 
                        of the multiemployer plan following the plan 
                        year in which occurs the first date after the 
                        day of the certification as of which collective 
                        bargaining agreements covering on the day of 
                        such certification at least 75 percent of 
                        active participants in such multiemployer plan 
                        have expired.
                  ``(C) Special rules for certain seriously underfunded 
                plans.--
                          ``(i) In the case of a plan in which the 
                        funded percentage of a plan for the plan year 
                        is 70 percent or less, subparagraph (A)(i)(II) 
                        shall be applied by substituting `\4/5\' for 
                        `\2/3\' and subparagraph (B) shall be applied 
                        by substituting `the 15-year period' for `the 
                        10-year period'.
                          ``(ii) In the case of a plan in which the 
                        funded percentage of a plan for the plan year 
                        is more than 70 percent but less than 80 
                        percent, and--
                                  ``(I) the plan actuary certifies 
                                within 30 days after certification 
                                under subsection (a)(1) that the plan 
                                is not able to attain the increase 
                                described in subparagraph (A)(i) over 
                                the period described in subparagraph 
                                (B), and
                                  ``(II) the plan year is prior to the 
                                day described in subparagraph (B)(ii),
                        subparagraph (A)(i)(II) shall be applied by 
                        substituting `\4/5\' for `\2/3\' and 
                        subparagraph (B) shall be applied by 
                        substituting `the 15-year period' for `the 10-
                        year period'.
                          ``(iii) For any plan year following the year 
                        described in clause (ii)(II), subparagraph 
                        (A)(i)(II) and subparagraph (B) shall apply, 
                        except that for each plan year ending after 
                        such date for which the plan actuary certifies 
                        (at the time of the annual certification under 
                        subsection (a)(1) for such plan year) that the 
                        plan is not able to attain the increase 
                        described in subparagraph (A)(i) over the 
                        period described in subparagraph (B), 
                        subparagraph (B) shall be applied by 
                        substituting `the 15-year period' for `the 10-
                        year period'.
                  ``(D) Reporting.--A summary of any funding 
                improvement plan or modification thereto adopted during 
                any plan year, together with annual updates regarding 
                the funding ratio of the plan, shall be included in the 
                annual report for such plan year under section 104(a) 
                and in the summary annual report described in section 
                104(b)(3).
          ``(4) Development of funding improvement plan.--
                  ``(A) Actions by plan sponsor pending approval.--
                Pending the approval of a funding improvement plan 
                under this paragraph, the plan sponsor shall take all 
                reasonable actions, consistent with the terms of the 
                plan and applicable law, necessary to ensure--
                          ``(i) an increase in the plan's funded 
                        percentage, and
                          ``(ii) postponement of an accumulated funding 
                        deficiency for at least 1 additional plan year.
                Such actions include applications for extensions of 
                amortization periods under section 304(d), use of the 
                shortfall funding method in making funding standard 
                account computations, amendments to the plan's benefit 
                structure, reductions in future benefit accruals, and 
                other reasonable actions consistent with the terms of 
                the plan and applicable law.
                  ``(B) Recommendations by plan sponsor.--
                          ``(i) In general.--During the period of 90 
                        days following the date on which a 
                        multiemployer plan is certified to be in 
                        endangered status, the plan sponsor shall 
                        develop and provide to the bargaining parties 
                        alternative proposals for revised benefit 
                        structures, contribution structures, or both, 
                        which, if adopted as amendments to the plan, 
                        may be reasonably expected to meet the 
                        benchmarks described in paragraph (3)(A). Such 
                        proposals shall include--
                                  ``(I) at least one proposal for 
                                reductions in the amount of future 
                                benefit accruals necessary to achieve 
                                the benchmarks, assuming no amendments 
                                increasing contributions under the plan 
                                (other than amendments increasing 
                                contributions necessary to achieve the 
                                benchmarks after amendments have 
                                reduced future benefit accruals to the 
                                maximum extent permitted by law), and
                                  ``(II) at least one proposal for 
                                increases in contributions under the 
                                plan necessary to achieve the 
                                benchmarks, assuming no amendments 
                                reducing future benefit accruals under 
                                the plan.
                          ``(ii) Requests by bargaining parties.--Upon 
                        the request of any bargaining party who--
                                  ``(I) employs at least 5 percent of 
                                the active participants, or
                                  ``(II) represents as an employee 
                                organization, for purposes of 
                                collective bargaining, at least 5 
                                percent of the active participants,
                        the plan sponsor shall provide all such parties 
                        information as to other combinations of 
                        increases in contributions and reductions in 
                        future benefit accruals which would result in 
                        achieving the benchmarks.
                          ``(iii) Other information.--The plan sponsor 
                        may, as it deems appropriate, prepare and 
                        provide the bargaining parties with additional 
                        information relating to contribution structures 
                        or benefit structures or other information 
                        relevant to the funding improvement plan.
          ``(5) Maintenance of contributions pending approval of 
        funding improvement plan.--Pending approval of a funding 
        improvement plan by the bargaining parties with respect to a 
        multiemployer plan, the multiemployer plan may not be amended 
        so as to provide--
                  ``(A) a reduction in the level of contributions for 
                participants who are not in pay status,
                  ``(B) a suspension of contributions with respect to 
                any period of service, or
                  ``(C) any new direct or indirect exclusion of younger 
                or newly hired employees from plan participation.
          ``(6) Benefit restrictions pending approval of funding 
        improvement plan.--Pending approval of a funding improvement 
        plan by the bargaining parties with respect to a multiemployer 
        plan--
                  ``(A) Restrictions on lump sum and similar 
                distributions.--In any case in which the present value 
                of a participant's accrued benefit under the plan 
                exceeds $5,000, such benefit may not be distributed as 
                an immediate distribution or in any other accelerated 
                form.
                  ``(B) Prohibition on benefit increases.--
                          ``(i) In general.--No amendment of the plan 
                        which increases the liabilities of the plan by 
                        reason of any increase in benefits, any change 
                        in the accrual of benefits, or any change in 
                        the rate at which benefits become 
                        nonforfeitable under the plan may be adopted.
                          ``(ii) Exception.--Clause (i) shall not apply 
                        to any plan amendment which is required as a 
                        condition of qualification under part I of 
                        subchapter D of chapter 1 of subtitle A of the 
                        Internal Revenue Code of 1986.
          ``(7) Default critical status if no funding improvement plan 
        adopted.--If no plan amendment adopting a funding improvement 
        plan has been adopted by the end of the 240-day period referred 
        to in subsection (b)(1), the plan enters into critical status 
        as of the first day of the succeeding plan year.
          ``(8) Restrictions upon approval of funding improvement 
        plan.--Upon adoption of a funding improvement plan with respect 
        to a multiemployer plan, the plan may not be amended--
                  ``(A) so as to be inconsistent with the funding 
                improvement plan, or
                  ``(B) so as to increase future benefit accruals, 
                unless the plan actuary certifies in advance that, 
                after taking into account the proposed increase, the 
                plan is reasonably expected to meet the the benchmarks 
                described in paragraph (3)(A).
  ``(c) Funding Rules for Multiemployer Plans in Critical Status.--
          ``(1) In general.--In any case in which a multiemployer plan 
        is in critical status for a plan year as described in paragraph 
        (2) (or otherwise enters into critical status under this 
        section) and no rehabilitation plan under this subsection with 
        respect to such multiemployer plan is in effect for the plan 
        year, the plan sponsor shall, in accordance with this 
        subsection, amend the multiemployer plan to include a 
        rehabilitation plan under this subsection. The amendment shall 
        be adopted not later than 240 days after the date on which the 
        plan enters into critical status.
          ``(2) Critical status.--A multiemployer plan is in critical 
        status for a plan year if--
                  ``(A) the plan is in endangered status for the 
                preceding plan year and the requirements of subsection 
                (b)(1) were not met with respect to the plan for such 
                preceding plan year, or
                  ``(B) as determined by the plan actuary under 
                subsection (a), the plan is described in paragraph (3).
          ``(3) Criticality description.--For purposes of paragraph 
        (2)(B), a plan is described in this paragraph if the plan is 
        described in at least one of the following subparagraphs:
                  ``(A) A plan is described in this subparagraph if, as 
                of the beginning of the current plan year--
                          ``(i) the funded percentage of the plan is 
                        less than 65 percent, and
                          ``(ii) the sum of--
                                  ``(I) the market value of plan 
                                assets, plus
                                  ``(II) the present value of the 
                                reasonably anticipated employer and 
                                employee contributions for the current 
                                plan year and each of the 6 succeeding 
                                plan years, assuming that the terms of 
                                the one or more collective bargaining 
                                agreements pursuant to which the plan 
                                is maintained for the current plan year 
                                continue in effect for succeeding plan 
                                years,
                        is less than the present value of all 
                        nonforfeitable benefits for all participants 
                        and beneficiaries projected to be payable under 
                        the plan during the current plan year and each 
                        of the 6 succeeding plan years (plus 
                        administrative expenses for such plan years).
                  ``(B) A plan is described in this subparagraph if, as 
                of the beginning of the current plan year, the sum of--
                          ``(i) the market value of plan assets, plus
                          ``(ii) the present value of the reasonably 
                        anticipated employer and employee contributions 
                        for the current plan year and each of the 4 
                        succeeding plan years, assuming that the terms 
                        of the one or more collective bargaining 
                        agreements pursuant to which the plan is 
                        maintained for the current plan year remain in 
                        effect for succeeding plan years,
                is less than the present value of all nonforfeitable 
                benefits for all participants and beneficiaries 
                projected to be payable under the plan during the 
                current plan year and each of the 4 succeeding plan 
                years (plus administrative expenses for such plan 
                years).
                  ``(C) A plan is described in this subparagraph if--
                          ``(i) as of the beginning of the current plan 
                        year, the funded percentage of the plan is less 
                        than 65 percent, and
                          ``(ii) the plan has an accumulated funding 
                        deficiency for the current plan year or is 
                        projected to have an accumulated funding 
                        deficiency for any of the 4 succeeding plan 
                        years, not taking into account any extension of 
                        amortization periods under section 304(d).
                  ``(D) A plan is described in this subparagraph if--
                          ``(i)(I) the plan's normal cost for the 
                        current plan year, plus interest (determined at 
                        the rate used for determining cost under the 
                        plan) for the current plan year on the amount 
                        of unfunded benefit liabilities under the plan 
                        as of the last date of the preceding plan year, 
                        exceeds
                          ``(II) the present value, as of the beginning 
                        of the current plan year, of the reasonably 
                        anticipated employer and employee contributions 
                        for the current plan year,
                          ``(ii) the present value, as of the beginning 
                        of the current plan year, of nonforfeitable 
                        benefits of inactive participants is greater 
                        than the present value, as of the beginning of 
                        the current plan year, of nonforfeitable 
                        benefits of active participants, and
                          ``(iii) the plan is projected to have an 
                        accumulated funding deficiency for the current 
                        plan year or any of the 4 succeeding plan 
                        years, not taking into account any extension of 
                        amortization periods under section 304(d).
                  ``(E) A plan is described in this subparagraph if--
                          ``(i) the funded percentage of the plan is 
                        greater than 65 percent for the current plan 
                        year, and
                          ``(ii) the plan is projected to have an 
                        accumulated funding deficiency during any of 
                        the succeeding 3 plan years, not taking into 
                        account any extension of amortization periods 
                        under section 304(d).
          ``(4) Rehabilitation plan.--
                  ``(A) In general.--A rehabilitation plan shall 
                consist of--
                          ``(i) amendments to the plan providing (under 
                        reasonable actuarial assumptions) for measures, 
                        agreed to by the bargaining parties, to 
                        increase contributions, reduce plan 
                        expenditures (including plan mergers and 
                        consolidations), or reduce future benefit 
                        accruals, or to take any combination of such 
                        actions, determined necessary to cause the plan 
                        to cease, during the rehabilitation period, to 
                        be in critical status, or
                          ``(ii) reasonable measures to forestall 
                        possible insolvency (within the meaning of 
                        section 4245) if the plan sponsor determines 
                        that, upon exhaustion of all reasonable 
                        measures, the plan would not cease during the 
                        rehabilitation period to be in critical status.
                  ``(B) Rehabilitation period.--The rehabilitation 
                period for any rehabilitation plan adopted pursuant to 
                this subsection is the 10-year period beginning on the 
                earlier of--
                          ``(i) the second anniversary of the date of 
                        the adoption of the rehabilitation plan, or
                          ``(ii) the first day of the first plan year 
                        of the multiemployer plan following the plan 
                        year in which occurs the first date, after the 
                        date of the plan's entry into critical status, 
                        as of which collective bargaining agreements 
                        covering at least 75 percent of active 
                        participants in such multiemployer plan 
                        (determined as of such date of entry) have 
                        expired.
                  ``(C) Reporting.--A summary of any rehabilitation 
                plan or modification thereto adopted during any plan 
                year, together with annual updates regarding the 
                funding ratio of the plan, shall be included in the 
                annual report for such plan year under section 104(a) 
                and in the summary annual report described in section 
                104(b)(3).
          ``(5) Development of rehabilitation plan.--
                  ``(A) Proposals by plan sponsor.--
                          ``(i) In general.--Within 90 days after the 
                        date of entry into critical status (or the date 
                        as of which the requirements of subsection 
                        (b)(1) are not met with respect to the plan), 
                        the plan sponsor shall propose to all 
                        bargaining parties a range of alternative 
                        schedules of increases in contributions and 
                        reductions in future benefit accruals that 
                        would serve to carry out a rehabilitation plan 
                        under this subsection.
                          ``(ii) Proposal assuming no contribution 
                        increases.--Such proposals shall include, as 
                        one of the proposed schedules, a schedule of 
                        those reductions in future benefit accruals 
                        that would be necessary to cause the plan to 
                        cease to be in critical status if there were no 
                        further increases in rates of contribution to 
                        the plan.
                          ``(iii) Proposal where contributions are 
                        necessary.--If the plan sponsor determines that 
                        the plan will not cease to be in critical 
                        status during the rehabilitation period unless 
                        the plan is amended to provide for an increase 
                        in contributions, the plan sponsor's proposals 
                        shall include a schedule of those increases in 
                        contribution rates that would be necessary to 
                        cause the plan to cease to be in critical 
                        status if future benefit accruals were reduced 
                        to the maximum extent permitted by law.
                  ``(B) Requests for additional schedules.--Upon the 
                request of any bargaining party who--
                          ``(i) employs at least 5 percent of the 
                        active participants, or
                          ``(ii) represents as an employee 
                        organization, for purposes of collective 
                        bargaining, at least 5 percent of active 
                        participants,
                the plan sponsor shall include among the proposed 
                schedules such schedules of increases in contributions 
                and reductions in future benefit accruals as may be 
                specified by the bargaining parties.
                  ``(C) Subsequent amendments.--Upon the adoption of a 
                schedule of increases in contributions or reductions in 
                future benefit accruals as part of the rehabilitation 
                plan, the plan sponsor may amend the plan thereafter to 
                update the schedule to adjust for any experience of the 
                plan contrary to past actuarial assumptions, except 
                that such an amendment may be made not more than once 
                in any 3-year period.
                  ``(D) Allocation of reductions in future benefit 
                accruals.--Any schedule containing reductions in future 
                benefit accruals forming a part of a rehabilitation 
                plan shall be applicable with respect to any group of 
                active participants who are employed by any bargaining 
                party (as an employer obligated to contribute under the 
                plan) in proportion to the extent to which increases in 
                contributions under such schedule apply to such 
                bargaining party.
                  ``(E) Limitation on reduction in rates of future 
                accruals.--Any schedule proposed under this paragraph 
                shall not reduce the rate of future accruals below the 
                lower of--
                          ``(i) a monthly benefit equal to 1 percent of 
                        the contributions required to be made with 
                        respect to a participant or the equivalent 
                        standard accrual rate for a participant or 
                        group of participants under the collective 
                        bargaining agreements in effect as of the first 
                        day of the plan year in which the plan enters 
                        critical status, or
                          ``(ii) if lower, the accrual rate under the 
                        plan on such date.
                The equivalent standard accrual rate shall be 
                determined by the trustees based on the standard or 
                average contribution base units that they determine to 
                be representative for active participants and such 
                other factors as they determine to be relevant.
          ``(6) Maintenance of contributions and restrictions on 
        benefits pending adoption of rehabilitation plan.--The rules of 
        paragraphs (5) and (6) of subsection (b) shall apply for 
        purposes of this subsection by substituting the term 
        `rehabilitation plan' for `funding improvement plan'.
          ``(7) Special rules.--
                  ``(A) Automatic employer surcharge.--
                          ``(i) 5 percent and 10 percent surcharge.--
                        For the first plan year in which the plan is in 
                        critical status, each employer otherwise 
                        obligated to make a contribution for that plan 
                        year shall be obligated to pay to the plan a 
                        surcharge equal to 5 percent of the 
                        contribution otherwise required under the 
                        respective collective bargaining agreement (or 
                        other agreement pursuant to which the employer 
                        contributes). For each consecutive plan year 
                        thereafter in which the plan is in critical 
                        status, the surcharge shall be 10 percent of 
                        the contribution otherwise required under the 
                        respective collective bargaining agreement (or 
                        other agreement pursuant to which the employer 
                        contributes).
                          ``(ii) Enforcement of surcharge.--The 
                        surcharges under clause (i) shall be due and 
                        payable on the same schedule as the 
                        contributions on which they are based. Any 
                        failure to make a surcharge payment shall be 
                        treated as a delinquent contribution under 
                        section 515 and shall be enforceable as such.
                          ``(iii) Surcharge to terminate upon cba 
                        renegotiation.--The surcharge under this 
                        paragraph shall cease to be effective with 
                        respect to employees covered by a collective 
                        bargaining agreement, beginning on the date on 
                        which that agreement is renegotiated to 
                        include--
                                  ``(I) a schedule of benefits and 
                                contributions published by the trustees 
                                pursuant to the plan's rehabilitation 
                                plan, or
                                  ``(II) otherwise collectively 
                                bargained benefit changes.
                          ``(iv) Surcharge not to apply until employer 
                        receives 30-day notice.--The surcharge under 
                        this subparagraph shall not apply to an 
                        employer until 30 days after the employer has 
                        been notified by the trustees that the plan is 
                        in critical status and that the surcharge is in 
                        effect.
                          ``(v) Surcharge not to generate increased 
                        benefit accruals.--Notwithstanding any 
                        provision of a plan to the contrary, the amount 
                        of any surcharge shall not be the basis for any 
                        benefit accruals under the plan.
                  ``(B) Benefit adjustments.--
                          ``(i) In general.--The trustees shall make 
                        appropriate reductions, if any, to adjustable 
                        benefits based upon the outcome of collective 
                        bargaining over the schedules provided under 
                        paragraph (5).
                          ``(ii) Retiree protection.--Except as 
                        provided in subparagraph (C), the trustees of a 
                        plan in critical status may not reduce 
                        adjustable benefits of any participant or 
                        beneficiary who was in pay status at least one 
                        year before the first day of the first plan 
                        year in which the plan enters into critical 
                        status.
                          ``(iii) Trustee flexibility.--The trustees 
                        shall include in the schedules provided to the 
                        bargaining parties an allowance for funding the 
                        benefits of participants with respect to whom 
                        contributions are not currently required to be 
                        made, and shall reduce their benefits to the 
                        extent permitted under this title and 
                        considered appropriate based on the plan's then 
                        current overall funding status and its future 
                        prospects in light of the results of the 
                        parties' negotiations.
                  ``(C) Adjustable benefit defined.--For purposes of 
                this paragraph, the term `adjustable benefit' means--
                          ``(i) benefits, rights, and features, such as 
                        post-retirement death benefits, 60-month 
                        guarantees, disability benefits not yet in pay 
                        status, and similar benefits,
                          ``(ii) retirement-type subsidies, early 
                        retirement benefits, and benefit payment 
                        options (other than the 50 percent qualified 
                        joint-and-survivor benefit and single life 
                        annuity), and
                          ``(iii) benefit increases that would not be 
                        eligible for a guarantee under section 4022A on 
                        the first day of the plan year in which the 
                        plan enters into critical status because they 
                        were adopted, or if later, took effect less 
                        than 60 months before reorganization.
                  ``(D) Normal retirement benefits protected.--Nothing 
                in this paragraph shall be construed to permit a plan 
                to reduce the level of a participant's accrued benefit 
                payable at normal retirement age which is not an 
                adjustable benefit.
                  ``(E) Adjustments disregarded in withdrawal liability 
                determination.--
                          ``(i) Benefit reductions.--Any benefit 
                        reductions under this paragraph shall be 
                        disregarded in determining a plan's unfunded 
                        vested benefits for purposes of determining an 
                        employer's withdrawal liability under section 
                        4201.
                          ``(ii) Surcharges.--Any surcharges under this 
                        paragraph shall be disregarded in determining 
                        an employer's withdrawal liability under 
                        section 4211, except for purposes of 
                        determining the unfunded vested benefits 
                        attributable to an employer or under a modified 
                        attributable method adopted with the approval 
                        of the Pension Benefit Guaranty Corporation 
                        under subsection (c)(5) of that section.
          ``(8) Restrictions upon approval of rehabilitation plan.--
        Upon adoption of a rehabilitation plan with respect to a 
        multiemployer plan, the plan may not be amended--
                  ``(A) so as to be inconsistent with the 
                rehabilitation plan, or
                  ``(B) so as to increase future benefit accruals, 
                unless the plan actuary certifies in advance that, 
                after taking into account the proposed increase, the 
                plan is reasonably expected to cease to be in critical 
                status.
          ``(9) Implementation of default schedule upon failure to 
        adopt rehabilitation plan.--If the plan is not amended by the 
        end of the 240-day period after entry into critical status to 
        include a rehabilitation plan, the plan sponsor shall amend the 
        plan to implement the schedule required by paragraph 
        (5)(A)(ii).
          ``(10) Deemed withdrawal.--Upon the failure of any employer 
        who has an obligation to contribute under the plan to make 
        contributions in compliance with the schedule adopted under 
        paragraph (4) as part of the rehabilitation plan, the failure 
        of the employer may, at the discretion of the plan sponsor, be 
        treated as a withdrawal by the employer from the plan under 
        section 4203 or a partial withdrawal by the employer under 
        section 4205.
  ``(d) Definitions.--For purposes of this section--
          ``(1) Bargaining party.--The term `bargaining party' means, 
        in connection with a multiemployer plan--
                  ``(A) an employer who has an obligation to contribute 
                under the plan, and
                  ``(B) an employee organization which, for purposes of 
                collective bargaining, represents plan participants 
                employed by such an employer.
          ``(2) Funded percentage.--The term `funded percentage' means 
        the percentage expressed as a ratio of which--
                  ``(A) the numerator of which is the value of the 
                plan's assets, as determined under section 304(c)(2), 
                and
                  ``(B) the denominator of which is the accrued 
                liability of the plan.
          ``(3) Accumulated funding deficiency.--The term `accumulated 
        funding deficiency' has the meaning provided such term in 
        section 304(a).
          ``(4) Active participant.--The term `active participant' 
        means, in connection with a multiemployer plan, a participant 
        who is in covered service under the plan.
          ``(5) Inactive participant.--The term `inactive participant' 
        means, in connection with a multiemployer plan, a participant 
        who--
                  ``(A) is not in covered service under the plan, and
                  ``(B) is in pay status under the plan or has a 
                nonforfeitable right to benefits under the plan.
          ``(6) Pay status.--A person is in `pay status' under a 
        multiemployer plan if--
                  ``(A) at any time during the current plan year, such 
                person is a participant or beneficiary under the plan 
                and is paid an early, late, normal, or disability 
                retirement benefit under the plan (or a death benefit 
                under the plan related to a retirement benefit), or
                  ``(B) to the extent provided in regulations of the 
                Secretary of the Treasury, such person is entitled to 
                such a benefit under the plan.
          ``(7) Obligation to contribute.--The term `obligation to 
        contribute' has the meaning provided such term under section 
        4212(a).
          ``(8) Entry into critical status.--A plan shall be treated as 
        entering into critical status as of the date that such plan is 
        certified to be in critical status under subsection (a)(1), is 
        presumed to be in critical status under subsection (a)(3), or 
        enters into critical status under subsection (b)(7).''.
  (b) Conforming Amendment.--The table of contents in section 1 of such 
Act (as amended by the preceding provisions of this Act) is amended 
further by inserting after the item relating to section 304 the 
following new item:

``Sec. 305. Additional funding rules for multiemployer plans in 
endangered status or critical status.''.

  (c) Effective Date.--The amendment made by this section shall apply 
with respect to plan years beginning after 2005.

SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

  (a) Advance Determination of Impending Insolvency Over 5 Years.--
Section 4245(d)(1) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1426(d)(1)) is amended--
          (1) by striking ``3 plan years'' the second place it appears 
        and inserting ``5 plan years''; and
          (2) by adding at the end the following new sentence: ``If the 
        plan sponsor makes such a determination that the plan will be 
        insolvent in any of the next 5 plan years, the plan sponsor 
        shall make the comparison under this paragraph at least 
        annually until the plan sponsor makes a determination that the 
        plan will not be insolvent in any of the next 5 plan years.''.
  (b) Effective Date.--The amendments made by this section shall apply 
with respect to determinations made in plan years beginning after 2005.

SEC. 204. WITHDRAWAL LIABILITY REFORMS.

  (a) Repeal of Limitation on Withdrawal Liability in the Event of 
Certain Sales of Employer Assets to Unrelated Parties.--
          (1) In general.--Section 4225 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1405) is repealed.
          (2) Conforming amendment.--The table of contents in section 1 
        of such Act is amended by striking the item relating to section 
        4225.
          (3) Effective date.--The amendments made by this section 
        shall apply with respect to sales occurring on or after January 
        1, 2006.
  (b) Repeal of Limitation to 20 Annual Payments.--
          (1) In general.--Section 4219(c)(1) of such Act (29 U.S.C. 
        1399(c)(1)) is amended by striking subparagraph (B).
          (2) Effective date.--The amendment made by this section shall 
        apply with respect to withdrawals occurring on or after January 
        1, 2006.
  (c) Withdrawal Liability Continues If Work Contracted Out.--
          (1) In general.--Clause (i) of section 4205(b)(2)(A) of such 
        Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ``or to 
        another party or parties'' after ``to another location''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to work transferred on or after the 
        date of the enactment of this Act.
  (d) Repeal of Special Rule for Long and Short Haul Trucking 
Industry.--
          (1) In general.--Subsection (d) of section 4203 of such Act 
        (29 U.S.C. 1383(d)) is repealed.
          (2) Effective date.--The repeal under this subsection shall 
        apply with respect to cessations to have obligations to 
        contribute to multiemployer plans and cessations of covered 
        operations under such plans occurring on or after January 1, 
        2006.
  (e) Application of Forgiveness Rule to Plans Primarily Covering 
Employees in the Building and Construction.--
          (1) In general.--Section 4210(b) of such Act (29 U.S.C. 
        1390(b)) is amended--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through (4) as 
                paragraphs (1) through (3), respectively.
          (2) Effective date.--The amendments made by this subsection 
        shall apply with respect to plan withdrawals occurring on or 
        after January 1, 2006.

SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO PROCEDURES APPLICABLE 
                    TO DISPUTES INVOLVING WITHDRAWAL LIABILITY.

  (a) In General.--Section 4221(f)(1) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1401(f)(1)) is amended--
          (1) in subparagraph (A) by inserting ``and'' after ``plan,'', 
        and
          (2) by striking subparagraphs (B) and (C) and inserting the 
        following new subparagraph:
                  ``(B) such determination is based in whole or in part 
                on a finding by the plan sponsor under section 4212(c) 
                that a principal purpose of any transaction which 
                occurred at least 5 years (2 years in the case of a 
                small employer) before the date of the complete or 
                partial withdrawal was to evade or avoid withdrawal 
                liability under this subtitle,''.
  (b) Small Employer.--Paragraph (2) of section 4221(f) of such Act is 
amended by adding at the end the following new subparagraph:
                  ``(C) Small employer.--For purposes of paragraph 
                (1)(B)--
                          ``(i) In general.--The term `small employer' 
                        means any employer who (as of immediately 
                        before the transaction referred to in paragraph 
                        (1)(B))--
                                  ``(I) employs not more than 500 
                                employees, and
                                  ``(II) is required to make 
                                contributions to the plan for not more 
                                than 250 employees.
                          ``(ii) Controlled group.--Any group treated 
                        as a single employer under subsection (b), (c), 
                        (m), or (o) of section 414 of the Internal 
                        Revenue Code of 1986 shall be treated as a 
                        single employer for purposes of this 
                        subparagraph.''.
  (c) Additional Amendments.--
          (1) Subparagraph (A) of section 4221(f)(2) of such Act (29 
        U.S.C. 1401(f)(2)) is amended by striking ``Notwithstanding'' 
        and inserting ``In the case of a transaction occurring before 
        January 1, 1999, and at least 5 years before the date of the 
        complete or partial withdrawal, notwithstanding''.
          (2) Section 4221(f)(2)(B) of such Act (29 U.S.C. 
        1401(f)(2)(B)) is amended--
                  (A) by inserting ``with respect to withdrawal 
                liability payments'' after ``determination'' the first 
                place it appears, and
                  (B) by striking ``any'' and inserting ``the''.
  (d) Effective Date.--The amendments made by this section shall apply 
to any employer that receives a notification under section 4219(b)(1) 
of the Employee Retirement Income Security Act of 1974 on or after the 
date of the enactment of this Act.

        Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 211. [SEE INTRODUCED BILL, PAGE 200, LINE 8 THROUGH PAGE 251, LINE 
                    15].

                      TITLE III--OTHER PROVISIONS

SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM 
                    DISTRIBUTIONS.

  (a) Amendments to Employee Retirement Income Security Act of 1974.--
Paragraph (3) of section 205(g) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as 
follows:
  ``(3)(A) For purposes of paragraphs (1) and (2), the present value 
shall not be less than the present value calculated by using the 
applicable mortality table and the applicable interest rate.
  ``(B) For purposes of subparagraph (A)--
          ``(i) The term `applicable mortality table' means a mortality 
        table, modified as appropriate by the Secretary of the 
        Treasury, based on the mortality table specified for the plan 
        year under section 303(h)(3).
          ``(ii) The term `applicable interest rate' means the adjusted 
        first, second, and third segment rates applied under rules 
        similar to the rules of section 303(h)(2)(C) for the month 
        before the date of the distribution or such other time as the 
        Secretary of the Treasury may by regulations prescribe.
          ``(iii) For purposes of clause (ii), the adjusted first, 
        second, and third segment rates are the first, second, and 
        third segment rates which would be determined under section 
        303(h)(2)(C) if--
                  ``(I) section 303(h)(2)(D)(i) were applied by 
                substituting `the yields' for `a 3-year weighted 
                average of yields',
                  ``(II) section 303(h)(2)(G)(i)(II) were applied by 
                substituting `section 205(g)(3)(B)(ii)' for `section 
                302(b)(5)(B)(ii)(II)', and
                  ``(III) the applicable percentage under section 
                303(h)(2)(G) were determined in accordance with the 
                following table:




``In the case of plan years         The applicable percentage is:
 beginning in:
  2006............................  20 percent
  2007............................  40 percent
  2008............................  60 percent
  2009............................  80 percent.''.

  (b) Amendments to Internal Revenue Code of 1986.--[See introduced 
bill, page 252, line 19 through page 254, line 5]
  (c) Special Rule for Plan Amendments.--A plan shall not fail to meet 
the requirements of section 204(g) of the Employee Retirement Income 
Security Act of 1974 solely by reason of the adoption by the plan of an 
amendment necessary to meet the requirements of the amendments made by 
this section.
  (d) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning after 2005.

SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO 
                    LUMP SUM DISTRIBUTIONS.

  [See introduced bill, page 254, line 6 through page 255, line 7]

SEC. 303. DISTRIBUTIONS DURING WORKING RETIREMENT.

  (a) In General.--Subparagraph (A) of section 3(2) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)) is amended 
by adding at the end the following new sentence: ``A distribution from 
a plan, fund, or program shall not be treated as made in a form other 
than retirement income or as a distribution prior to termination of 
covered employment solely because such distribution is made to an 
employee who has attained age 62 and who is not separated from 
employment at the time of such distribution.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to distributions in plan years beginning after 2005.

SEC. 304. OTHER AMENDMENTS RELATING TO PROHIBITED TRANSACTIONS.

  (a) Definition of Amount Involved.--Section 502(i) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1132(i)) is amended 
to read as follows:
  ``(i)(1) In the case of a transaction prohibited by section 406 by a 
party in interest with respect to a plan to which this part applies, 
the Secretary may assess a civil penalty against such party in 
interest. The amount of such penalty may not exceed 5 percent of the 
amount involved in each such transaction for each year or part thereof 
during which the prohibited transaction continues, except that, if the 
transaction is not corrected (in such manner as the Secretary shall 
prescribe in regulations) within 90 days after notice from the 
Secretary (or such longer period as the Secretary may permit), such 
penalty may be in an amount not more than 100 percent of the amount 
involved.
  ``(2) For purposes of paragraph (1)--
          ``(A) Except as provided in subparagraphs (C) and (D), the 
        term `amount involved' means, with respect to a prohibited 
        transaction, the greater of--
                  ``(i) the amount of money and the fair market value 
                of the other property given, or
                  ``(ii) the amount of money and the fair market value 
                of the other property received.
          ``(B) For purposes of subparagraph (A), fair market value--
                  ``(i) shall be determined as of the date on which the 
                prohibited transaction occurs; and
                  ``(ii) shall be the highest fair market value during 
                the period between the date of the transaction and the 
                date of correction.
          ``(C) In the case of services described in subsection (b)(2) 
        or (c)(2) of section 408, the term `amount involved' means only 
        the amount of excess compensation.
          ``(D) In the case of principal transactions involving 
        securities or commodities, the term `amount involved' means 
        only the amount received by the disqualified person in excess 
        of the amount such person would have received in an arm's 
        length transaction with an unrelated party as of the same date.
          ``(E) For the purposes of this paragraph--
                  ``(i) the term `security' has the meaning given such 
                term by section 475(c)(2) of the Internal Revenue Code 
                of 1986 (without regard to subparagraph (F)(iii) and 
                the last sentence thereof) , and
                  ``(ii) the term `commodity' has the meaning given 
                such term by section 475(e)(2) of such Code (without 
                regard to subparagraph (D)(iii) thereof).''.
  (b) Exemption for Block Trading.--Section 408(b) of such Act (29 
U.S.C. 1108(b)), as amended by section 601, is further amended by 
adding at the end the following new paragraph:
          ``(15)(A) Any transaction involving the purchase or sale of 
        securities between a plan and a party in interest (other than a 
        fiduciary) with respect to a plan if--
                  ``(i) the transaction involves a block trade,
                  ``(ii) at the time of the transaction, the interest 
                of the plan (together with the interests of any other 
                plans maintained by the same plan sponsor), does not 
                exceed 10 percent of the aggregate size of the block 
                trade, and
                  ``(iii) the terms of the transaction, including the 
                price, are at least as favorable to the plan as an 
                arm's length transaction.
          ``(B) For purposes of this paragraph, the term `block trade' 
        includes any trade which will be allocated across two or more 
        client accounts of a fiduciary.''.
  (c) Bonding Relief.-- Section 412(a) of such Act (29 U.S.C. 1112(a)) 
is amended--
          (1) by redesignating paragraph (2) as paragraph (3);
          (2) by striking ``and'' at the end of paragraph (1); and
          (3) by inserting after paragraph (1) the following new 
        paragraph:
          ``(2) no bond shall be required of an entity which is subject 
        to regulation as a broker or a dealer under section 15 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or an 
        entity registered under the Investment Advisers Act of 1940 (15 
        U.S.C. 80b-1 et seq.), including requirements imposed by a 
        self-regulatory organization (within the meaning of section 
        3(a)(26) of such Act (15 U.S.C. 78c(a)(26)), or any affiliate 
        with respect to which the broker or dealer agrees to be liable 
        to the same extent as if they held the assets directly.''.
  (d) Exemption for Electronic Communication Network.--Section 408(b) 
of such Act (as amended by subsection (b)) is further amended by adding 
at the end the following:
          ``(16) Any transaction involving the purchase and sale of 
        securities or other property between a plan and a fiduciary or 
        a party in interest if--
                  ``(A) the transaction is executed through an 
                exchange, electronic communication network, alternative 
                trading system, or similar execution system or trading 
                venue subject to regulation and oversight by the 
                applicable governmental regulating entity,
                  ``(B) neither the execution system nor the parties to 
                the transaction take into account the identity of the 
                parties in the execution of trades,
                  ``(C) the transaction is effected pursuant to rules 
                designed to match purchases and sales at the best price 
                available through the execution system, and
                  ``(D) the price and compensation associated with the 
                purchase and sale are not greater than an arm's length 
                transaction with an unrelated party.''.
  (e) Conforming ERISA's Prohibited Transaction Provision to FERSA.--
Section 408(b) of such Act (29 U.S.C. 1106), as amended by subsection 
(d), is further amended by adding at the end the following new 
paragraph:
          ``(17)(A) transactions described in subparagraphs (A), (B), 
        and (D) of section 406(a)(1) between a plan and a party that is 
        a party in interest (under section 3(14)) solely by reason of 
        providing services, but only if in connection with such 
        transaction the plan receives no less, nor pays no more, than 
        adequate consideration.
          ``(B) For purposes of this paragraph, the term `adequate 
        consideration' means--
                  ``(i) in the case of a security for which there is a 
                generally recognized market--
                          ``(I) the price of the security prevailing on 
                        a national securities exchange which is 
                        registered under section 6 of the Securities 
                        Exchange Act of 1934, taking into account 
                        factors such as the size of the transaction and 
                        marketability of the security, or
                          ``(II) if the security is not traded on such 
                        a national securities exchange, a price not 
                        less favorable to the plan than the offering 
                        price for the security as established by the 
                        current bid and asked prices quoted by persons 
                        independent of the issuer and of the party in 
                        interest, taking into account factors such as 
                        the size of the transaction and marketability 
                        of the security, and
                  ``(ii) in the case of an asset other than a security 
                for which there is a generally recognized market, the 
                fair market value of the asset as determined in good 
                faith by a fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary.''.
  (f) Relief for Foreign Exchange Transactions.-- Section 408(b) of 
such Act (as amended by the preceding provisions of this section) is 
further amended by adding at the end the following new paragraph:
          ``(18) Any foreign exchange transactions, between a bank or 
        broker-dealer, or any affiliate of either thereof, and a plan 
        with respect to which the bank or broker-dealer, or any 
        affiliate, is a trustee, custodian, fiduciary, or other party 
        in interest, if--
                  ``(A) the transaction is in connection with the 
                purchase or sale of securities,
                  ``(B) at the time the foreign exchange transaction is 
                entered into, the terms of the transaction are not less 
                favorable to the plan than the terms generally 
                available in comparable arm's length foreign exchange 
                transactions between unrelated parties, or the terms 
                afforded by the bank or the broker-dealer (or any 
                affiliate thereof) in comparable arm's-length foreign 
                exchange transactions involving unrelated parties,
                  ``(C) the exchange rate used by the bank or broker-
                dealer for a particular foreign exchange transaction 
                must be at a rate no less favorable than the rate 
                quoted for transactions of similar size at the time of 
                the transaction as displayed on an independent service 
                that reports rates of exchange in the foreign currency 
                market for such currency, and
                  ``(D) the bank or broker-dealer, or any affiliate, 
                does not have investment discretion, or provide 
                investment advice, with respect to the securities 
                transaction.''.
  (g) Definition of Plan Asset Vehicle.--Section 3 of such Act (29 
U.S.C. 1002) is amended by adding at the end the following new 
paragraph:
  ``(42) the term `plan assets' means plan assets as defined by such 
regulations as the Secretary may prescribe, except that under such 
regulations the assets of any entity shall not be treated as plan 
assets if, immediately after the most recent acquisition of any equity 
interest in the entity, less than 50 percent of the total value of all 
equity interests in the entity are held by employee benefit plan 
investors. For purposes of determinations pursuant to this paragraph, 
the value of any equity interest owned by a person (other than such an 
employee benefit plan) who has discretionary authority or control with 
respect to the assets of the entity or any person who provides 
investment advice for a fee (direct or indirect) with respect to such 
assets, or any affiliate of such a person, shall be disregarded for 
purposes of calculating the 50 percent threshold. An entity shall be 
considered to hold plan assets only to the extent of the percentage of 
the equity interest owned by benefit plan investors. For purposes of 
this paragraph, the term `benefit plan investor' means an employee 
benefit plan subject to this part and any plan to which section 4975 of 
the Internal Revenue Code of 1986 applies.''.

SEC. 305. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING 
                    SECURITIES AND COMMODITIES.

  (a) In General.--Section 408(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108(b)), as amended by sections 304 
and 601, is further amended by adding at the end the following new 
paragraph:
          ``(19)(A) Except as provided in subparagraphs (B) and (C), a 
        transaction described in section 406(a) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the end of 
        the correction period.
          ``(B) Subparagraph (A) does not apply to any transaction 
        between a plan and a plan sponsor or its affiliates that 
        involves the acquisition or sale of an employer security (as 
        defined in section 407(d)(1)) or the acquisition, sale, or 
        lease of employer real property (as defined in section 
        407(d)(2)).
          ``(C) In the case of any fiduciary or other party in interest 
        (or any other person knowingly participating in such 
        transaction), subparagraph (A) does not apply to any prohibited 
        transaction if, at the time such transaction is discovered, 
        such fiduciary or party in interest (or other person) knew that 
        the transaction would (without regard to this paragraph) 
        constitute a violation of section 406(a).
          ``(D) For purposes of this paragraph, the term `correction 
        period' means, in connection with a fiduciary or party in 
        interest (or other person knowingly participating in the 
        transaction), the 14-day period beginning on the date on which 
        such fiduciary or party in interest (or other person) 
        discovers, or reasonably should have discovered, that the 
        transaction would (without regard to this paragraph) constitute 
        a violation of section 406(a).
          ``(E) For purposes of this paragraph--
                  ``(i) The term `security' has the meaning given such 
                term by section 475(c)(2) of the Internal Revenue Code 
                of 1986 (without regard to subparagraph (F)(iii) and 
                the last sentence thereof).
                  ``(ii) The term `commodity' has the meaning given 
                such term by section 475(e)(2) of such Code (without 
                regard to subparagraph (D)(iii) thereof).
                  ``(iii) The term `correct' means, with respect to a 
                transaction, to undo the transaction to the extent 
                possible, but in any case, to make good to the plan or 
                affected account any losses resulting from the 
                transaction and to restore to the plan or affected 
                account any profits made through use of the plan.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to any transaction which the fiduciary or disqualified person 
discovers, or reasonably should have discovered, after the date of the 
enactment of this Act, constitutes a prohibited transaction.

SEC. 306. GOVERNMENT ACCOUNTABILITY OFFICE PENSION FUNDING REPORT.

  (a) In General.--The Comptroller General of the Government 
Accountability Office shall transmit to the Congress a pension funding 
report not later than one year after the date of the enactment of this 
Act.
  (b) Report Content.--The pension funding report required under 
subsection (a) shall include an analysis of the feasibility, 
advantages, and disadvantages of--
          (1) requiring an employee pension benefit plan to insure a 
        portion of such plan's total investments;
          (2) requiring an employee pension benefit plan to adhere to 
        uniform solvency standards set by the Pension Benefit Guaranty 
        Corporation, which are similar to those applied on a State 
        level in the insurance industry; and
          (3) amortizing a single-employer defined benefit pension 
        plan's shortfall amortization base (referred to in section 
        303(c)(3) of the Employee Retirement Income Security Act of 
        1974 (as amended by this Act)) over various periods of not more 
        than 7 years.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

SEC. 401. INCREASES IN PBGC PREMIUMS.

  (a) Flat-Rate Premiums.--Section 4006(a)(3) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 
amended--
          (1) by striking clause (i) of subparagraph (A) and inserting 
        the following:
          ``(i) in the case of a single-employer plan, an amount equal 
        to--
                  ``(I) for plan years beginning after December 31, 
                1990, and before January 1, 2006, $19, or
                  ``(II) for plan years beginning after December 31, 
                2005, the amount determined under subparagraph (F),
        plus the additional premium (if any) determined under 
        subparagraph (E) for each individual who is a participant in 
        such plan during the plan year;''; and
          (2) by adding at the end the following new subparagraph:
  ``(F)(i) Except as otherwise provided in this subparagraph, for 
purposes of determining the annual premium rate payable to the 
corporation by a single-employer plan for basic benefits guaranteed 
under this title, the amount determined under this subparagraph is the 
greater of $30 or the adjusted amount determined under clause (ii).
  ``(ii) For plan years beginning after 2006, the adjusted amount 
determined under this clause is the product derived by multiplying $30 
by the ratio of--
          ``(I) the national average wage index (as defined in section 
        209(k)(1) of the Social Security Act) for the first of the 2 
        calendar years preceding the calendar year in which the plan 
        year begins, to
          ``(II) the national average wage index (as so defined) for 
        2004,
with such product, if not a multiple of $1, being rounded to the next 
higher multiple of $1 where such product is a multiple of $0.50 but not 
of $1, and to the nearest multiple of $1 in any other case.
  ``(iii) For purposes of determining the annual premium rate payable 
to the corporation by a single-employer plan for basic benefits 
guaranteed under this title for any plan year beginning after 2005 and 
before 2010--
          ``(I) except as provided in subclause (II), the premium 
        amount referred to in subparagraph (A)(i)(II) for any such plan 
        year is the amount set forth in connection with such plan year 
        in the following table:




``If the plan year begins in:       The amount is:
  2006............................  $21.20
  2007............................  $23.40
  2008............................  $25.60
  2009............................  $27.80; or

          ``(II) if the plan's funding target attainment percentage for 
        the plan year preceding the current plan year was less than 80 
        percent, the premium amount referred to in subparagraph 
        (A)(i)(II) for such current plan year is the amount set forth 
        in connection with such current plan year in the following 
        table:




``If the plan year begins in:       The amount is:
  2006............................  $22.67
  2007............................  $26.33
  2008 or 2009....................  the amount provided under clause
                                     (i).

  ``(iv) For purposes of this subparagraph, the term `funding target 
attainment percentage' has the meaning provided such term in section 
303(d)(2).''.
  (b) Risk-Based Premiums.--
          (1) Conforming amendments related to funding rules for 
        single-employer plans.--Section 4006(a)(3)(E) of such Act is 
        amended by striking clauses (iii) and (iv) and inserting the 
        following:
  ``(iii)(I) For purposes of clause (ii), except as provided in 
subclause (II), the term `unfunded vested benefits' means, for a plan 
year, the amount which would be the plan's funding shortfall (as 
defined in section 303(c)(4)), if the value of plan assets of the plan 
were equal to the fair market value of such assets and only vested 
benefits were taken into account.
  ``(II) The interest rate used in valuing vested benefits for purposes 
of subclause (I) shall be equal to the first, second, or third segment 
rate which would be determined under section 303(h)(2)(C) if section 
303(h)(2)(D)(i) were applied by substituting `the yields' for `the 3-
year weighted average of yields', as applicable under rules similar to 
the rules under section 303(h)(2)(B).''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply with respect to plan years beginning after 2005.

                          TITLE V--DISCLOSURE

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES.

  (a) Application of Plan Funding Notice Requirements to All Defined 
Benefit Plans.--Section 101(f) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021(f)) is amended--
          (1) in the heading, by striking ``Multiemployer'';
          (2) in paragraph (1), by striking ``which is a multiemployer 
        plan''; and
          (3) by striking paragraph (2)(B)(iii) and inserting the 
        following:
                          ``(iii)(I) in the case of a single-employer 
                        plan, a summary of the rules governing 
                        termination of single-employer plans under 
                        subtitle C of title IV, or
                          ``(II) in the case of a multiemployer plan, a 
                        summary of the rules governing insolvent 
                        multiemployer plans, including the limitations 
                        on benefit payments and any potential benefit 
                        reductions and suspensions (and the potential 
                        effects of such limitations, reductions, and 
                        suspensions on the plan); and''.
  (b) Inclusion of Statement of the Ratio of Inactive Participants to 
Active Participants.--Section 101(f)(2)(B) of such Act (29 U.S.C. 
1021(f)(2)(B)) is amended--
          (1) in clause (iii)(II) (added by subsection (a)(3) of this 
        section), by striking ``and'' at the end;
          (2) in clause (iv), by striking ``apply.'' and inserting 
        ``apply; and''; and
          (3) by adding at the end the following new clause:
                          ``(v) a statement of the ratio, as of the end 
                        of the plan year to which the notice relates, 
                        of--
                                  ``(I) the number of participants who 
                                are not in covered service under the 
                                plan and are in pay status under the 
                                plan or have a nonforfeitable right to 
                                benefits under the plan, to
                                  ``(II) the number of participants who 
                                are in covered service under the 
                                plan.''.
  (c) Comparison of Monthly Average of Value of Plan Assets to 
Projected Current Liabilities.--Section 101(f)(2)(B) of such Act (29 
U.S.C. 1021(f)(2)(B)) (as amended by the preceding provisions of this 
section) is amended further--
          (1) by striking clause (ii) and inserting the following:
                          ``(ii) a statement of a reasonable estimate 
                        of--
                                  ``(I) the value of the plan's assets 
                                for the plan year to which the notice 
                                relates,
                                  ``(II) projected liabilities of the 
                                plan for the plan year to which the 
                                notice relates, and
                                  ``(III) the ratio of the estimated 
                                amount determined under subclause (I) 
                                to the estimated amount determined 
                                under subclause (II);''; and
          (2) by adding at the end (after and below clause (v)) the 
        following:
                ``For purposes of determining a plan's projected 
                liabilities for a plan year under clause (ii)(II), such 
                projected liabilities shall be determined by projecting 
                forward in a reasonable manner to the end of the plan 
                year the liabilities of the plan to participants and 
                beneficiaries as of the first day of the plan year, 
                taking into account any significant events that occur 
                during the plan year and that have a material effect on 
                such liabilities, including any plan amendments in 
                effect for the plan year.''.
  (d) Statement of Plan's Funding Policy and Method of Asset 
Allocation.--Section 101(f)(2)(B) of such Act (as amended by the 
preceding provisions of this section) is amended further--
          (1) in clause (iv), by striking ``and'' at the end;
          (2) in clause (v), by striking the period and inserting 
        ``; and''; and
          (3) by inserting after clause (v) the following new clause:
                          ``(vi) a statement setting forth the funding 
                        policy of the plan and the asset allocation of 
                        investments under the plan (expressed as 
                        percentages of total assets) as of the end of 
                        the plan year to which the notice relates.''.
  (e) Notice of Funding Improvement Plan or Rehabilitation Plan Adopted 
by Multiemployer Plan.--Section 101(f)(2)(B) of such Act (as amended by 
the preceding provisions of this section) is amended further--
          (1) in clause (v), by striking ``and'' at the end;
          (2) in clause (vi), by striking the period and inserting ``; 
        and''; and
          (3) by inserting after clause (vi) the following new clause:
                          ``(vii) a summary of any funding improvement 
                        plan, rehabilitation plan, or modification 
                        thereof adopted under section 305 during the 
                        plan year to which the notice relates.''.
  (f) Notice Due 90 Days After Plan's Valuation Date.--
          (1) In general.--Section 101(f)(3) of such Act (29 U.S.C. 
        1021(f)(3)) is amended by striking ``two months after the 
        deadline (including extensions) for filing the annual report 
        for the plan year'' and inserting ``90 days after the end of 
        the plan year''.
          (2) Model notice.--Not later than 180 days after the date of 
        the enactment of this Act, the Secretary of Labor shall publish 
        a model version of the notice required by section 101(f) of the 
        Employee Retirement Income Security Act of 1974.
  (g) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2005.

SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS.

  (a) Additional Annual Reporting Requirements.--Section 103 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023) is 
amended--
          (1) in subsection (a)(1)(B), by striking ``subsections (d) 
        and (e)'' and inserting ``subsections (d), (e), and (f)''; and
          (2) by adding at the end the following new subsection:
  ``(f)(1) With respect to any defined benefit plan, an annual report 
under this section for a plan year shall include the following:
          ``(A) The ratio, as of the end of such plan year, of--
                  ``(i) the number of participants who, as of the end 
                of such plan year, are not in covered service under the 
                plan and are in pay status under the plan or have a 
                nonforfeitable right to benefits under the plan, to
                  ``(ii) the number of participants who are in covered 
                service under the plan as of the end of such plan year.
          ``(B) In any case in which any liabilities to participants or 
        their beneficiaries under such plan as of the end of such plan 
        year consist (in whole or in part) of liabilities to such 
        participants and beneficiaries borne by 2 or more pension plans 
        as of immediately before such plan year, the funded ratio of 
        each of such 2 or more pension plans as of immediately before 
        such plan year and the funded ratio of the plan with respect to 
        which the annual report is filed as of the end of such plan 
        year.
          ``(C) For purposes of this paragraph, the term `funded ratio' 
        means, in connection with a plan, the percentage which--
                  ``(i) the value of the plan's assets is of
                  ``(ii) the liabilities to participants and 
                beneficiaries under the plan.
  ``(2) With respect to any defined benefit plan which is a 
multiemployer plan, an annual report under this section for a plan year 
shall include the following:
          ``(A) The number of employers obligated to contribute to the 
        plan as of the end of such plan year.
          ``(B) The number of participants under the plan on whose 
        behalf no employer contributions have been made to the plan for 
        such plan year. For purposes of this subparagraph, the term 
        `employer contribution' means, in connection with a 
        participant, a contribution made by an employer as an employer 
        of such participant.''.
  (b) Additional Information in Annual Actuarial Statement Regarding 
Plan Retirement Projections.--Section 103(d) of such Act (29 U.S.C. 
1023(d)) is amended--
          (1) by redesignating paragraphs (12) and (13) as paragraphs 
        (13) and (14), respectively; and
          (2) by inserting after paragraph (11) the following new 
        paragraph:
          ``(12) A statement explaining the actuarial assumptions and 
        methods used in projecting future retirements and forms of 
        benefit distributions under the plan.''.
  (c) Filing After 275 Days After Plan Year Only in Cases of 
Hardship.--Section 104(a)(1) of such Act (29 U.S.C. 1024(a)(1)) is 
amended by inserting after the first sentence the following new 
sentence: ``In the case of a pension plan, the Secretary may extend the 
deadline for filing the annual report for any plan year past 275 days 
after the close of the plan year only on a case by case basis and only 
in cases of hardship, in accordance with regulations which shall be 
prescribed by the Secretary.''.
  (d) Internet Display of Information.--Section 104(b) of such Act (29 
U.S.C. 1024(b)) is amended by adding at the end the following:
  ``(5) Identification and basic plan information and actuarial 
information included in the annual report for any plan year shall be 
filed with the Secretary in an electronic format which accommodates 
display on the Internet, in accordance with regulations which shall be 
prescribed by the Secretary. The Secretary shall provide for display of 
such information included in the annual report, within 90 days after 
the date of the filing of the annual report, on a website maintained by 
the Secretary on the Internet and other appropriate media. Such 
information shall also be displayed on any website maintained by the 
plan sponsor (or by the plan administrator on behalf of the plan 
sponsor) on the Internet, in accordance with regulations which shall be 
prescribed by the Secretary.''.
  (e) Summary Annual Report Filed Within 15 Days After Deadline for 
Filing of Annual Report.--Section 104(b)(3) of such Act (29 U.S.C. 
1024(b)(3)) is amended--
          (1) by striking ``Within 210 days after the close of the 
        fiscal year of the plan,'' and inserting ``Within 15 business 
        days after the due date under subsection (a)(1) for the filing 
        of the annual report for the fiscal year of the plan,''; and
          (2) by striking ``the latest'' and inserting ``such''.
  (f) Disclosure of Plan Assets and Liabilities in Summary Annual 
Report.--
          (1) In general.--Section 104(b)(3) of such Act (as amended by 
        subsection (a)) is amended further--
                  (A) by inserting ``(A)'' after ``(3)''; and
                  (B) by adding at the end the following:
  ``(B) The material provided pursuant to subparagraph (A) to summarize 
the latest annual report shall be written in a manner calculated to be 
understood by the average plan participant and shall set forth the 
total assets and liabilities of the plan for the plan year for which 
the latest annual report was filed and for each of the 2 preceding plan 
years, as reported in the annual report for each such plan year under 
this section.''.
  (g) Information Made Available to Participants, Beneficiaries, and 
Employers With Respect to Multiemployer Plans.--
          (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021) (as amended by 
        section 103(b)(2)(A)) is further amended--
                  (A) by redesignating subsection (k) as subsection 
                (l); and
                  (B) by inserting after subsection (j) the following 
                new subsection:
  ``(k) Multiemployer Plan Information Made Available on Request.--
          ``(1) In general.--Each administrator of a multiemployer plan 
        shall furnish to any plan participant or beneficiary or any 
        employer having an obligation to contribute to the plan, who so 
        requests in writing--
                  ``(A) a copy of any actuarial report received by the 
                plan for any plan year which has been in receipt by the 
                plan for at least 30 days, and
                  ``(B) a copy of any financial report prepared for the 
                plan by any plan investment manager or advisor or other 
                person who is a plan fiduciary which has been in 
                receipt by the plan for at least 30 days.
          ``(2) Compliance.--Information required to be provided under 
        paragraph (1) --
                  ``(A) shall be provided to the requesting 
                participant, beneficiary, or employer within 30 days 
                after the request in a form and manner prescribed in 
                regulations of the Secretary, and
                  ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to persons to whom the 
                information is required to be provided.
          ``(3) Limitations.--In no case shall a participant, 
        beneficiary, or employer be entitled under this subsection to 
        receive more than one copy of any report described in paragraph 
        (1) during any one 12-month period. The administrator may make 
        a reasonable charge to cover copying, mailing, and other costs 
        of furnishing copies of information pursuant to paragraph (1). 
        The Secretary may by regulations prescribe the maximum amount 
        which will constitute a reasonable charge under the preceding 
        sentence.''.
          (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) (as amended by section 103(b)(2)(B)) is further 
        amended by striking ``sections 101(j) and 302(b)(7)(F)(iv)'' 
        and inserting ``sections 101(j), 101(k), and 
        302(b)(7)(F)(iv)''.
          (3) Regulations.--The Secretary shall prescribe regulations 
        under section 101(k)(2) of the Employee Retirement Income 
        Security Act of 1974 (added by paragraph (1) of this 
        subsection) not later than 90 days after the date of the 
        enactment of this Act.
  (h) Notice of Potential Withdrawal Liability to Multiemployer 
Plans.--
          (1) In general.--Section 101 of such Act (as amended by 
        subsection (g) of this section) is further amended--
                  (A) by redesignating subsection (l) as subsection 
                (m); and
                  (B) by inserting after subsection (k) the following 
                new subsection:
  ``(l) Notice of Potential Withdrawal Liability.--
          ``(1) In general.--The plan sponsor or administrator of a 
        multiemployer plan shall furnish to any employer who has an 
        obligation to contribute under the plan and who so requests in 
        writing notice of--
                  ``(A) the amount which would be the amount of such 
                employer's withdrawal liability under part 1 of 
                subtitle E of title IV if such employer withdrew on the 
                last day of the plan year preceding the date of the 
                request, and
                  ``(B) the average increase, per participant under the 
                plan, in accrued liabilities under the plan as of the 
                end of such plan year to participants under such plan 
                on whose behalf no employer contributions are payable 
                (or their beneficiaries), which would be attributable 
                to such a withdrawal by such employer.
        For purposes of subparagraph (B), the term `employer 
        contribution' means, in connection with a participant, a 
        contribution made by an employer as an employer of such 
        participant.
          ``(2) Compliance.--Any notice required to be provided under 
        paragraph (1)--
                  ``(A) shall be provided to the requesting employer 
                within 180 days after the request in a form and manner 
                prescribed in regulations of the Secretary, and
                  ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to employers to whom the 
                information is required to be provided.
          ``(3) Limitations.--In no case shall an employer be entitled 
        under this subsection to receive more than one notice described 
        in paragraph (1) during any one 12-month period. The person 
        required to provide such notice may make a reasonable charge to 
        cover copying, mailing, and other costs of furnishing such 
        notice pursuant to paragraph (1). The Secretary may by 
        regulations prescribe the maximum amount which will constitute 
        a reasonable charge under the preceding sentence.''.
          (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) (as amended by paragraph (1)) is further amended by 
        striking ``sections 101(j), 101(k), and 302(b)(7)(F)(iv)'' and 
        inserting ``sections 101(j), 101(k), 101(l), and 
        302(b)(7)(F)(iv)''.
  (i) Model Form.--Not later than 180 days after the date of the 
enactment of this Act, the Secretary of Labor shall publish a model 
form for providing the statements, schedules, and other material 
required to be provided under section 104(b)(3) of the Employee 
Retirement Income Security Act of 1974, as amended by this section.
  (j) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2005.

SEC. 503. SECTION 4010 FILINGS WITH THE PBGC.

  (a) Change in Criteria for Persons Required to Provide Information to 
PBGC.--Section 4010(b) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1310(b)) is amended by striking paragraph (1), by 
redesignating paragraphs (2) and (3) as paragraphs (3) and (4), 
respectively, and by inserting before paragraph (3) (as so 
redesignated) the following new paragraphs:
          ``(1) the aggregate funding target attainment percentage of 
        the plan (as defined in subsection (d)(2)) is less than 60 
        percent;
          ``(2)(A) the aggregate funding target attainment percentage 
        of the plan (as defined in subsection (d)(2)) is less than 75 
        percent, and
          ``(B) the plan sponsor is in an industry with respect to 
        which the corporation determines that there is substantial 
        unemployment or underemployment and the sales and profits are 
        depressed or declining; ''.
  (b) Notice to Participants and Beneficiaries.--Section 4010 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1310) is 
amended by adding at the end the following new subsection:
  ``(d) Notice to Participants and Beneficiaries.--
          ``(1) In general.--Not later than 90 days after the 
        submission by any person to the corporation of information or 
        documentary material with respect to any plan pursuant to 
        subsection (a), such person shall provide notice of such 
        submission to each participant and beneficiary under the plan 
        (and under all plans maintained by members of the controlled 
        group of each contributing sponsor of the plan). Such notice 
        shall also set forth--
                  ``(A) the number of single-employer plans covered by 
                this title which are in at-risk status and are 
                maintained by contributing sponsors of such plan (and 
                by members of their controlled groups) with respect to 
                which the funding target attainment percentage for the 
                preceding plan year of each plan is less than 60 
                percent;
                  ``(B) the value of the assets of each of the plans 
                described in subparagraph (A) for the plan year, the 
                funding target for each of such plans for the plan 
                year, and the funding target attainment percentage of 
                each of such plans for the plan year; and
                  ``(C) taking into account all single-employer plans 
                maintained by the contributing sponsor and the members 
                of its controlled group as of the end of such plan 
                year--
                          ``(i) the aggregate total of the values of 
                        plan assets of such plans as of the end of such 
                        plan year,
                          ``(ii) the aggregate total of the funding 
                        targets of such plans, as of the end of such 
                        plan year, taking into account only benefits to 
                        which participants and beneficiaries have a 
                        nonforfeitable right, and
                          ``(iii) the aggregate funding targets 
                        attainment percentage with respect to the 
                        contributing sponsor for the preceding plan 
                        year.
          ``(2) Definitions.--For purposes of this subsection--
                  ``(A) Value of plan assets.--The term `value of plan 
                assets' means the value of plan assets, as determined 
                under section 303(g)(3).
                  ``(B) Funding target.--The term `funding target' has 
                the meaning provided under section 303(d)(1).
                  ``(C) Funding target attainment percentage.--The term 
                `funding target attainment percentage' has the meaning 
                provided in section 303(d)(2).
                  ``(D) Aggregate funding targets attainment 
                percentage.--The term `aggregate funding targets 
                attainment percentage' with respect to a contributing 
                sponsor for a plan year is the percentage, taking into 
                account all plans maintained by the contributing 
                sponsor and the members of its controlled group as of 
                the end of such plan year, which
                          ``(i) the aggregate total of the values of 
                        plan assets, as of the end of such plan year, 
                        of such plans, is of
                          ``(ii) the aggregate total of the funding 
                        targets of such plans, as of the end of such 
                        plan year, taking into account only benefits to 
                        which participants and beneficiaries have a 
                        nonforfeitable right.
                  ``(E) At-risk status.--The term `at-risk status' has 
                the meaning provided in section 303(i)(3).
          ``(3) Compliance.--
                  ``(A) In general.--Any notice required to be provided 
                under paragraph (1) may be provided in written, 
                electronic, or other appropriate form to the extent 
                such form is reasonably accessible to individuals to 
                whom the information is required to be provided.
                  ``(B) Limitations.--In no case shall a participant or 
                beneficiary be entitled under this subsection to 
                receive more than one notice described in paragraph (1) 
                during any one 12-month period. The person required to 
                provide such notice may make a reasonable charge to 
                cover copying, mailing, and other costs of furnishing 
                such notice pursuant to paragraph (1). The corporation 
                may by regulations prescribe the maximum amount which 
                will constitute a reasonable charge under the preceding 
                sentence.
          ``(4) Notice to congress.--Concurrent with the provision of 
        any notice under paragraph (1), such person shall provide such 
        notice to the Committee on Education and the Workforce of the 
        House of Representatives and the Committee on Health, 
        Education, Labor, and Pensions of the Senate, which shall be 
        treated as materials provided in executive session.''.
  (c) Effective Date.--The amendment made by this section shall apply 
with respect to plan years beginning after 2006.

                      TITLE VI--INVESTMENT ADVICE

SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 
                    PROVIDING PROHIBITED TRANSACTION EXEMPTION FOR 
                    PROVISION OF INVESTMENT ADVICE.

  (a) Exemption From Prohibited Transactions.--Section 408(b) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108(b)) is 
amended by adding at the end the following new paragraph:
          ``(14)(A) Any transaction described in subparagraph (B) in 
        connection with the provision of investment advice described in 
        section 3(21)(A)(ii), in any case in which--
                  ``(i) the investment of assets of the plan is subject 
                to the direction of plan participants or beneficiaries,
                  ``(ii) the advice is provided to the plan or a 
                participant or beneficiary of the plan by a fiduciary 
                adviser in connection with any sale, acquisition, or 
                holding of a security or other property for purposes of 
                investment of plan assets, and
                  ``(iii) the requirements of subsection (g) are met in 
                connection with the provision of the advice.
          ``(B) The transactions described in this subparagraph are the 
        following:
                          ``(i) the provision of the advice to the 
                        plan, participant, or beneficiary;
                          ``(ii) the sale, acquisition, or holding of a 
                        security or other property (including any 
                        lending of money or other extension of credit 
                        associated with the sale, acquisition, or 
                        holding of a security or other property) 
                        pursuant to the advice; and
                          ``(iii) the direct or indirect receipt of 
                        fees or other compensation by the fiduciary 
                        adviser or an affiliate thereof (or any 
                        employee, agent, or registered representative 
                        of the fiduciary adviser or affiliate) in 
                        connection with the provision of the advice or 
                        in connection with a sale, acquisition, or 
                        holding of a security or other property 
                        pursuant to the advice.''.
  (b) Requirements.--Section 408 of such Act is amended further by 
adding at the end the following new subsection:
  ``(g) Requirements Relating to Provision of Investment Advice by 
Fiduciary Advisers.--
          ``(1) In general.--The requirements of this subsection are 
        met in connection with the provision of investment advice 
        referred to in section 3(21)(A)(ii), provided to an employee 
        benefit plan or a participant or beneficiary of an employee 
        benefit plan by a fiduciary adviser with respect to the plan in 
        connection with any sale, acquisition, or holding of a security 
        or other property for purposes of investment of amounts held by 
        the plan, if--
                  ``(A) in the case of the initial provision of the 
                advice with regard to the security or other property by 
                the fiduciary adviser to the plan, participant, or 
                beneficiary, the fiduciary adviser provides to the 
                recipient of the advice, at a time reasonably 
                contemporaneous with the initial provision of the 
                advice, a written notification (which may consist of 
                notification by means of electronic communication)--
                          ``(i) of all fees or other compensation 
                        relating to the advice that the fiduciary 
                        adviser or any affiliate thereof is to receive 
                        (including compensation provided by any third 
                        party) in connection with the provision of the 
                        advice or in connection with the sale, 
                        acquisition, or holding of the security or 
                        other property,
                          ``(ii) of any material affiliation or 
                        contractual relationship of the fiduciary 
                        adviser or affiliates thereof in the security 
                        or other property,
                          ``(iii) of any limitation placed on the scope 
                        of the investment advice to be provided by the 
                        fiduciary adviser with respect to any such 
                        sale, acquisition, or holding of a security or 
                        other property,
                          ``(iv) of the types of services provided by 
                        the fiduciary adviser in connection with the 
                        provision of investment advice by the fiduciary 
                        adviser,
                          ``(v) that the adviser is acting as a 
                        fiduciary of the plan in connection with the 
                        provision of the advice, and
                          ``(vi) that a recipient of the advice may 
                        separately arrange for the provision of advice 
                        by another adviser, that could have no material 
                        affiliation with and receive no fees or other 
                        compensation in connection with the security or 
                        other property,
                  ``(B) the fiduciary adviser provides appropriate 
                disclosure, in connection with the sale, acquisition, 
                or holding of the security or other property, in 
                accordance with all applicable securities laws,
                  ``(C) the sale, acquisition, or holding occurs solely 
                at the direction of the recipient of the advice,
                  ``(D) the compensation received by the fiduciary 
                adviser and affiliates thereof in connection with the 
                sale, acquisition, or holding of the security or other 
                property is reasonable, and
                  ``(E) the terms of the sale, acquisition, or holding 
                of the security or other property are at least as 
                favorable to the plan as an arm's length transaction 
                would be.
          ``(2) Standards for presentation of information.--
                  ``(A) In general.--The notification required to be 
                provided to participants and beneficiaries under 
                paragraph (1)(A) shall be written in a clear and 
                conspicuous manner and in a manner calculated to be 
                understood by the average plan participant and shall be 
                sufficiently accurate and comprehensive to reasonably 
                apprise such participants and beneficiaries of the 
                information required to be provided in the 
                notification.
                  ``(B) Model form for disclosure of fees and other 
                compensation.--The Secretary shall issue a model form 
                for the disclosure of fees and other compensation 
                required in paragraph (1)(A)(i) which meets the 
                requirements of subparagraph (A).
          ``(3) Exemption conditioned on making required information 
        available annually, on request, and in the event of material 
        change.--The requirements of paragraph (1)(A) shall be deemed 
        not to have been met in connection with the initial or any 
        subsequent provision of advice described in paragraph (1) to 
        the plan, participant, or beneficiary if, at any time during 
        the provision of advisory services to the plan, participant, or 
        beneficiary, the fiduciary adviser fails to maintain the 
        information described in clauses (i) through (iv) of 
        subparagraph (A) in currently accurate form and in the manner 
        described in paragraph (2) or fails--
                  ``(A) to provide, without charge, such currently 
                accurate information to the recipient of the advice no 
                less than annually,
                  ``(B) to make such currently accurate information 
                available, upon request and without charge, to the 
                recipient of the advice, or
                  ``(C) in the event of a material change to the 
                information described in clauses (i) through (iv) of 
                paragraph (1)(A), to provide, without charge, such 
                currently accurate information to the recipient of the 
                advice at a time reasonably contemporaneous to the 
                material change in information.
          ``(4) Maintenance for 6 years of evidence of compliance.--A 
        fiduciary adviser referred to in paragraph (1) who has provided 
        advice referred to in such paragraph shall, for a period of not 
        less than 6 years after the provision of the advice, maintain 
        any records necessary for determining whether the requirements 
        of the preceding provisions of this subsection and of 
        subsection (b)(14) have been met. A transaction prohibited 
        under section 406 shall not be considered to have occurred 
        solely because the records are lost or destroyed prior to the 
        end of the 6-year period due to circumstances beyond the 
        control of the fiduciary adviser.
          ``(5) Exemption for plan sponsor and certain other 
        fiduciaries.--
                  ``(A) In general.--Subject to subparagraph (B), a 
                plan sponsor or other person who is a fiduciary (other 
                than a fiduciary adviser) shall not be treated as 
                failing to meet the requirements of this part solely by 
                reason of the provision of investment advice referred 
                to in section 3(21)(A)(ii) (or solely by reason of 
                contracting for or otherwise arranging for the 
                provision of the advice), if--
                          ``(i) the advice is provided by a fiduciary 
                        adviser pursuant to an arrangement between the 
                        plan sponsor or other fiduciary and the 
                        fiduciary adviser for the provision by the 
                        fiduciary adviser of investment advice referred 
                        to in such section,
                          ``(ii) the terms of the arrangement require 
                        compliance by the fiduciary adviser with the 
                        requirements of this subsection, and
                          ``(iii) the terms of the arrangement include 
                        a written acknowledgment by the fiduciary 
                        adviser that the fiduciary adviser is a 
                        fiduciary of the plan with respect to the 
                        provision of the advice.
                  ``(B) Continued duty of prudent selection of adviser 
                and periodic review.--Nothing in subparagraph (A) shall 
                be construed to exempt a plan sponsor or other person 
                who is a fiduciary from any requirement of this part 
                for the prudent selection and periodic review of a 
                fiduciary adviser with whom the plan sponsor or other 
                person enters into an arrangement for the provision of 
                advice referred to in section 3(21)(A)(ii). The plan 
                sponsor or other person who is a fiduciary has no duty 
                under this part to monitor the specific investment 
                advice given by the fiduciary adviser to any particular 
                recipient of the advice.
                  ``(C) Availability of plan assets for payment for 
                advice.--Nothing in this part shall be construed to 
                preclude the use of plan assets to pay for reasonable 
                expenses in providing investment advice referred to in 
                section 3(21)(A)(ii).
          ``(6) Definitions.--For purposes of this subsection and 
        subsection (b)(14)--
                  ``(A) Fiduciary adviser.--The term `fiduciary 
                adviser' means, with respect to a plan, a person who is 
                a fiduciary of the plan by reason of the provision of 
                investment advice by the person to the plan or to a 
                participant or beneficiary and who is--
                          ``(i) registered as an investment adviser 
                        under the Investment Advisers Act of 1940 (15 
                        U.S.C. 80b-1 et seq.) or under the laws of the 
                        State in which the fiduciary maintains its 
                        principal office and place of business,
                          ``(ii) a bank or similar financial 
                        institution referred to in section 408(b)(4) or 
                        a savings association (as defined in section 
                        3(b)(1) of the Federal Deposit Insurance Act 
                        (12 U.S.C. 1813(b)(1))), but only if the advice 
                        is provided through a trust department of the 
                        bank or similar financial institution or 
                        savings association which is subject to 
                        periodic examination and review by Federal or 
                        State banking authorities,
                          ``(iii) an insurance company qualified to do 
                        business under the laws of a State,
                          ``(iv) a person registered as a broker or 
                        dealer under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.),
                          ``(v) an affiliate of a person described in 
                        any of clauses (i) through (iv), or
                          ``(vi) an employee, agent, or registered 
                        representative of a person described in any of 
                        clauses (i) through (v) who satisfies the 
                        requirements of applicable insurance, banking, 
                        and securities laws relating to the provision 
                        of the advice.
                  ``(B) Affiliate.--The term `affiliate' of another 
                entity means an affiliated person of the entity (as 
                defined in section 2(a)(3) of the Investment Company 
                Act of 1940 (15 U.S.C. 80a-2(a)(3))).
                  ``(C) Registered representative.--The term 
                `registered representative' of another entity means a 
                person described in section 3(a)(18) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) 
                (substituting the entity for the broker or dealer 
                referred to in such section) or a person described in 
                section 202(a)(17) of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity 
                for the investment adviser referred to in such 
                section).''.
  (c) Effective Date.--The amendments made by this section shall apply 
with respect to advice referred to in section 3(21)(A)(ii) of the 
Employee Retirement Income Security Act of 1974 provided on or after 
January 1, 2006.

SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 1986 PROVIDING 
                    PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF 
                    INVESTMENT ADVICE.

  [See introduced bill, page 287, line 15 through page 298, line 23]

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

SEC. 701. IMPROVEMENTS IN BENEFIT ACCRUAL STANDARDS.

  (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
          (1) Rules relating to reduction in accrued benefits because 
        of attainment of any age.--Section 204(b)(1)(H) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 
        1054(b)(1)(H)) is amended by adding at the end the following 
        new clauses:
  ``(vii)(I) A plan shall not be treated as failing to meet the 
requirements of clause (i) if a participant's entire accrued benefit, 
as determined as of any date under the formula for determining benefits 
as set forth in the text of the plan documents, would be equal to or 
greater than that of any similarly situated, younger individual.
  ``(II) For purposes of this clause, an individual is similarly 
situated to a participant if such individual is identical to such 
participant in every respect (including period of service, 
compensation, position, date of hire, work history, and any other 
respect) except for age.
  ``(III) In determining the entire accrued benefit for purposes of 
this clause, the subsidized portion of any early retirement benefit 
(including any early retirement subsidy that is fully or partially 
included or reflected in an employee's opening balance or other 
transition benefits) shall be disregarded.
  ``(viii) A plan under which the accrued benefit payable under the 
plan upon distribution (or any portion thereof) is expressed as the 
balance of a hypothetical account maintained for the participant shall 
not be treated as failing to meet the requirements of clause (i) solely 
because interest accruing on such balance is taken into account.
  ``(ix) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan provides 
allowable offsets against those benefits under the plan which are 
attributable to employer contributions, based on benefits which are 
provided under title II of the Social Security Act, the Railroad 
Retirement Act of 1974, another plan described in section 401(a) of the 
Internal Revenue Code of 1986 maintained by the same employer, or under 
any retirement program for officers or employees of the Federal 
Government or of the government of any State or political subdivision 
thereof. For purposes of this clause, allowable offsets based on such 
benefits consist of offsets equal to all or part of the actual benefit 
payment amounts, reasonable projections or estimations of such benefit 
payment amounts, or actuarial equivalents of such actual benefit 
payment amounts, projections, or estimations (determined on the basis 
of reasonable actuarial assumptions).
  ``(x) A plan shall not be treated as failing to meet the requirements 
of this subparagraph solely because the plan provides a disparity in 
contributions or benefits with respect to which the requirements of 
section 401(l) of the Internal Revenue Code of 1986 are met.
  ``(xi)(I) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan provides for 
pre-retirement indexing of accrued benefits under the plan.
  ``(II) For purposes of this clause, the term `pre-retirement 
indexing' means, in connection with an accrued benefit, the periodic 
adjustment of the accrued benefit by means of the application of a 
recognized index or methodology so as to protect the economic value of 
the benefit against inflation prior to distribution.''.
          (2) Determinations of accrued benefit as balance of benefit 
        account.--Section 203 of such Act (29 U.S.C. 1053) is amended 
        by adding at the end the following new subsection:
  ``(f)(1) A defined benefit plan under which the accrued benefit 
payable under the plan upon distribution (or any portion thereof) is 
expressed as the balance of a hypothetical account maintained for the 
participant shall not be treated as failing to meet the requirements of 
subsection (a)(2) and section 205(g) solely because of the amount 
actually made available for such distribution under the terms of the 
plan, in any case in which the applicable interest rate that would be 
used under the terms of the plan to project the amount of the 
participant's account balance to normal retirement age is not greater 
than a market rate of return.
  ``(2) The Secretary of the Treasury may provide by regulation for 
rules governing the calculation of a market rate of return for purposes 
of paragraph (1) and for permissible methods of crediting interest to 
the account (including variable interest rates) resulting in effective 
rates of return meeting the requirements of paragraph (1).''.
  (b) Effective Date.--The amendments made by this section shall apply 
to periods beginning on or after June 29, 2005.

                   TITLE VIII--DEDUCTION LIMITATIONS

SEC. 801. [SEE INTRODUCED BILL, PAGE 299, LINE 1 THROUGH PAGE 305, LINE 
                    20].

                                Purpose

    The purpose of H.R. 2830, the ``Pension Protection Act of 
2005'' (PPA), is to ensure the health and future of the 
voluntary, employer-sponsored defined benefit pension system 
through comprehensive reforms intended to protect the interests 
of workers, retirees, and taxpayers. H.R. 2830 includes new 
funding requirements to ensure employers adequately and 
consistently fund their pension plans, provides workers with 
meaningful disclosure about the financial status of their 
benefits, and protects taxpayers from a potential multi-billion 
dollar bailout of the Pension Benefit Guaranty Corporation 
(PBGC).

                            Committee Action

    On June 9, 2005, Committee on Education and the Workforce 
Chairman John A. Boehner, Subcommittee on Employer-Employee 
Relations Chairman Sam Johnson and Vice Chairman John Kline, 
and Committee on Ways and Means Chairman Bill Thomas introduced 
H.R. 2830, the Pension Protection Act of 2005. H.R. 2830 
represents the culmination of legislative activity, begun in 
the 106th Congress and continuing through the 109th Congress, 
intended to fix outdated pension laws that threaten the fiscal 
well-being of taxpayers, workers, and retirees, and to improve 
the pension security of all American workers.

                             106TH CONGRESS

    In the 106th Congress, the Committee on Education and the 
Workforce (the ``Committee'') began a comprehensive review of 
the federal law governing private pensions, the Employee 
Retirement Income Security Act (``ERISA''), and its relevance 
to the needs of participants, beneficiaries, and employers in 
the 21st century.
    On March 11, 1999, Representatives Rob Portman and Benjamin 
Cardin introduced H.R. 1102, the ``Comprehensive Retirement 
Security and Pension Reform Act of 1999.'' The bill was jointly 
referred to the Committee on Education and Workforce and the 
Committee on Ways and Means. On June 29, 1999, the Subcommittee 
on Employer-Employee Relations held a hearing entitled 
``Enhancing Retirement Security: A Hearing on H.R. 1102, the 
`Comprehensive Retirement Security and Pension Reform Act of 
1999.' '' Testimony was received from the bill's sponsors, 
Representatives Portman and Cardin.
    On July 14, 1999, the Committee discharged the Subcommittee 
on Employer-Employee Relations from consideration of the bill, 
approved H.R. 1102, and ordered it favorably reported to the 
House of Representatives by voice vote. On July 19, 2000, the 
House of Representatives passed the bill by a vote of 401 yeas 
to 25 nays.\1\ The Senate did not complete consideration of 
H.R. 1102 prior to the adjournment of the 106th Congress.
---------------------------------------------------------------------------
    \1\ Fifteen provisions of Title VI of H.R. 1102 subsequently were 
included in H.R. 2488, the ``Taxpayer Refund and Relief Act of 1999,'' 
which passed the House and Senate on August 5, 1999, but was vetoed by 
then-President Clinton. The following year, twenty-two ERISA provisions 
from H.R. 1102 were included in the ``Retirement Savings and Pension 
Coverage Act of 2000,'' which was included in H.R. 2614, the ``Taxpayer 
Relief Act of 2000.'' The conference report on H.R. 2614 was adopted by 
the House on October 26, 2000, by a vote of 237 yeas, 174 nays, and one 
present. The conference report was not adopted by the Senate prior to 
adjournment of the 106th Congress.
---------------------------------------------------------------------------
    On February 15, 2000, the Subcommittee on Employer-Employee 
Relations continued its examination of issues arising under 
ERISA at a hearing entitled ``The Evolving Pension and 
Investment World After 25 Years of ERISA.'' The following 
individuals testified before the Subcommittee: Professor John 
H. Langbein, Chancellor Kent Professor of Law and Legal 
History, Yale Law School; Michael S. Gordon, Esq., Law Offices 
of Michael S. Gordon; Dr. John B. Shoven, Charles R. Schwab 
Professor of Economics, Stanford University; and Dr. Teresa 
Ghilarducci, Associate Professor of Economics, University of 
Notre Dame.
    On March 9th and 10th, 2000, the Subcommittee on Employer-
Employee Relations held a two days of hearings entitled ``More 
Secure Retirement for Workers: Proposals for ERISA Reform.'' 
Testifying on March 9th were: W. Allen Reed, President, General 
Motors Investment Management Company, testifying on behalf of 
the Committee on Investment of Employee Benefit Assets (CIEBA) 
of the Financial Executives Institute; Daniel P. O'Connell, 
Corporate Director for Employee Benefits and HR Systems, United 
Technologies Corporation, testifying on behalf of the ERISA 
Industry Committee (ERIC); Damon Silvers, Esq., Associate 
General Counsel, AFL-CIO; Professor Joseph A. Grundfest, 
William A. Franke Professor of Law and Business, Stanford Law 
School, and co-founder of Financial Engines, Inc.; Eula 
Ossofsky, President, Board of Directors, Older Women's League; 
and Margaret Raymond, Esq., Assistant General Counsel, Fidelity 
Investments, testifying on behalf of the Investment Company 
Institute. During the second day of hearings on March 10th, the 
Subcommittee heard testimony from Kenneth S. Cohen, Esq., 
Senior Vice President and Deputy General Counsel, Massachusetts 
Mutual Life Insurance Company, testifying on behalf of the 
American Council of Life Insurers; Marc E. Lackritz, President, 
Securities Industry Association; David Certner, Senior 
Coordinator, Department of Federal Affairs, American 
Association of Retired Persons; Louis Colosimo, Managing 
Director, Morgan Stanley Dean Witter & Company, Inc., 
testifying on behalf of the Bond Market Association; John Hotz, 
Deputy Director, Pension Rights Center; and Deedra Walkey, 
Esq., Assistant General Counsel, Frank Russell Company.
    On March 16, 2000, the Subcommittee on Employer-Employee 
Relations held a hearing entitled ``The Wealth Through the 
Workplace Act: Worker Ownership in Today's Economy.'' The 
hearing focused on H.R. 3462, introduced by then-Subcommittee 
Chairman John A. Boehner, which made stock options more readily 
available to ERISA participants. Testifying before the 
Subcommittee were: Jane F. Greenman, Esq., Deputy General 
Counsel (Human Resources), Honeywell, Inc., testifying on 
behalf of the American Benefits Counsel; Tim Byland, Senior 
Sales Executive, INTERVU, Inc.; and Patrick Von Bargen, 
Executive Director, National Commission on Entrepreneurship.
    On April 4, 2000, the Subcommittee on Employer-Employee 
Relations continued its examination of ERISA reform in a 
hearing entitled ``Modernizing ERISA to Promote Retirement 
Security.'' The following individuals testified at the hearing: 
the Honorable Leslie Kramerich, Acting Assistant Secretary of 
Labor for Pension and Welfare Benefits, U.S. Department of 
Labor; and David M. Strauss, Executive Director, Pension 
Benefit Guaranty Corporation.
    On June 26, 2000, then-Subcommittee on Employer-Employee 
Relations Chairman Boehner introduced H.R. 4747, the Retirement 
Security Advice Act of 2000. On July 19, 2000, the Subcommittee 
on Employer-Employee Relations ordered H.R. 4747 favorably 
reported, as amended, by voice vote. There was no further 
action taken on the legislation prior to the conclusion of the 
106th Congress.
    Concluding its legislative activity for the 106th Congress, 
the Subcommittee held a hearing on September 14, 2000 entitled 
``How to Improve Pension Coverage for American Workers.'' The 
Subcommittee heard testimony from Theodore Groom, Esq., Groom 
Law; Michael Calabrese, Director, Public Assets Program, New 
America Foundation; and Ed Tinsley, III, President and CEO, K-
Bob's Steakhouse.

                             107TH CONGRESS

    Building upon the activity of the previous Congress, the 
Committee continued its efforts to examine and improve upon the 
private pension system. On March 14, 2001, Representatives 
Portman and Cardin introduced H.R. 10, which was very similar 
to the House passed H.R. 1102 of the previous Congress. The 
Subcommittee on Employer-Employee Relations held a legislative 
hearing on the bill on April 5, 2001. At the hearing, entitled 
``Enhancing Retirement Security: A Hearing on H.R. 10, The 
`Comprehensive Retirement Security and Pension Reform Act of 
2001,' '' testimony was received from the bill's sponsors, 
Representatives Portman and Cardin, Nanci S. Palmintere, 
Director of Tax, Licensing and Customs, Intel Corporation, 
testifying on behalf of the American Benefits Council; Richard 
Turner, Esq., Associate General Counsel, American General 
Financial Group, testifying on behalf of the American Council 
of Life Insurers; Judith Mazo, Senior Vice President, Segal 
Co., testifying on behalf of the Building and Construction 
Trades Department, AFL-CIO and the National Coordinating 
Committee for Multiemployer Plans; and Karen Ferguson, 
Director, Pension Rights Center.
    On April 26, 2001, the Committee on Education and the 
Workforce approved H.R. 10, as amended, by voice vote and 
ordered the bill favorably reported to the House of 
Representatives. On May 5, 2001, the House of Representatives 
passed H.R. 10 by a vote of 407 yeas to 24 nays. On May 16, 
2001, the provisions of H.R. 10 were included in H.R. 1836, the 
Economic Growth and Tax Relief Reconciliation Act, and passed 
by the House of Representatives on a vote of 230 yeas to 197 
nays. The House passed the conference report on the measure on 
May 26, 2001, by a vote of 240 yeas to 154 nays. On December 5, 
2001, the Senate adopted the conference report, as amended, by 
a vote of 90 yeas and nine nays. On December 11, 2001, the 
House agreed to the Senate amendments by a roll call vote of 
369 yeas and 33 nays. The President signed the bill into law on 
December 21, 2001; it became public law 107-90.
    On June 21, 2001, Committee on Education and the Workforce 
Chairman Boehner introduced H.R. 2269, the ``Retirement 
Security Advice Act of 2001,'' a bill to promote the provision 
of retirement investment advice to workers regarding the 
management of their retirement income assets. The bill was 
referred to the Committee on Education and the Workforce and 
the Committee on Ways and Means.
    On July 17, 2001, the Subcommittee on Employer-Employee 
Relations held a hearing on H.R. 2269. Testifying before the 
Subcommittee were the Honorable Ann L. Combs, Assistant 
Secretary for Pension and Welfare Benefits, U.S. Department of 
Labor; Betty Shepard, Human Resources Administrator, Mohawk 
Industries, Inc.; Damon Silvers, Esq., Associate General 
Counsel, AFL-CIO; Richard A. Hiller, Vice President, Western 
Division, TIAA-CREF; Joseph Perkins, Immediate Past Present, 
American Association for Retired Persons; and Jon Breyfogle, 
Principal, Groom Law Group, testifying on behalf of the 
American Council of Life Insurers.
    On August 2, 2001, the Subcommittee on Employer-Employee 
Relations approved H.R. 2269, without amendment, by voice vote 
and ordered the bill favorably reported to the full Committee. 
On October 3, 2001, the Committee approved H.R. 2269, as 
amended, and ordered the bill favorably reported to the House 
of Representatives by a roll call vote of 29 yeas to 17 nays. 
The Committee on Ways and Means considered and marked up the 
bill on November 7, 2001, and reported it to the House on 
November 13, 2001. The bill, as amended, passed the House of 
Representatives on November 15, 2001 by a roll call vote of 280 
yeas to 144 nays. The Senate did not consider the measure prior 
to the adjournment of the 107th Congress.
    On February 6th and 7th, 2002, the Committee held two days 
of hearings entitled ``The Enron Collapse and Its Implications 
for Worker Retirement Security.'' On February 6th, the sole 
witness was U.S. Secretary of Labor Elaine Chao. On the second 
day, the witnesses were Thomas O. Padgett, Senior Lab Analyst, 
EOTT; Cindy K. Olson, Executive Vice President, Human Resources 
and Community Relations and Building Services, Enron 
Corporation; Mikie Rath, Benefits Manager, Enron Corporation; 
Scott Peterson, Global Practice Leader for Defined Contribution 
Services, Hewitt Associates; and Dr. Teresa Ghilarducci, 
Associate Professor, Department of Economics, University of 
Notre Dame.
    The Subcommittee on Employer-Employee Relations held a 
hearing on February 13, 2002 entitled ``Enron and Beyond: 
Enhancing Worker Retirement Security.'' The Subcommittee heard 
testimony from Jack L. VanDerhei, Ph.D., CEBS, Professor, 
Department of Risk, Insurance, and Healthcare Management, Fox 
School of Business and Management, Temple University, 
testifying on behalf of the Employee Benefit Research 
Institute; Douglas Kruse, Ph.D., Professor, School of 
Management and Labor Relations, Rutgers University; Norman 
Stein, Douglas Arant Professor of Law, University of Alabama 
School of Law; and Rebecca Miller, CPA, Partner, McGladrey & 
Pullen, LLP.
    On February 14, 2002, Chairman Boehner and Subcommittee on 
Employer-Employee Relations Chairman Sam Johnson introduced 
H.R. 3762, the ``Pension Security Act.''
    On February 27, 2002, the Subcommittee on Employer-Employee 
Relations held a hearing entitled ``Enron and Beyond: 
Legislative Solutions.'' The witnesses were Dave Evans, Vice 
President, Retirement and Financial Services, Independent 
Insurance Agents of America; Angela Reynolds, Director, 
International Pension and Benefits, NCR Corporation; Erik 
Olsen, Member, Board of Directors, American Association of 
Retired Persons; Dr. John H. Warner, Jr., Corporate Executive 
Vice President, Science Applications International Corp., 
testifying on behalf of the Profit Sharing Council of America; 
Richard Ferlauto, Director of Pensions and Benefits, American 
Federation of State County, and Municipal Employees (AFSCME), 
testifying on behalf of AFSCME and AFL-CIO; and John M. Vine, 
Esq., Partner, Covington and Burling, testifying on behalf of 
the ERISA Industry Committee.
    On March 20, 2002, the Committee on the Education and the 
Workforce approved H.R. 3762, as amended, and ordered the bill 
favorably reported to the House of Representatives by a roll 
call vote of 28 yeas to 19 nays. On April 11, 2003 the House 
passed H.R. 3762 by a recorded vote of 255 yeas to 163 nays. No 
further action was taken on the measure prior to the 
adjournment of the 107th Congress.

                             108TH CONGRESS

    Building on the success of corporate reform and the 
foundation of the pension reform principles established during 
the 107th Congress, the Subcommittee on Employer-Employee 
Relations held a hearing on February 13, 2003, ``The Pension 
Security Act: New Pension Protections to Safeguard the 
Retirement Savings of American Workers.'' Testifying before the 
Subcommittee were the Honorable Ann L. Combs, Assistant 
Secretary, Employee Benefits Security Administration, United 
States Department of Labor; Ed Rosic, Esq., Vice President and 
Managing Assistant General Counsel, Marriott International, 
Inc., testifying on behalf of the American Benefits Council; 
Nell Minow, Editor, The Corporate Library, testifying on behalf 
of Robert Monks, Lens Governance Advisors; and Scott Sleyster, 
Senior Vice President and President of Retirement Services and 
Guaranteed Products, Prudential Financial.
    On February 27, 2003, Chairman Boehner and Subcommittee on 
Employer-Employee Relations Chairman Sam Johnson introduced 
H.R. 1000, the ``Pension Security Act of 2003.'' This bill 
incorporated the provisions of H.R. 2269 from the previous 
Congress, and contained a number of ERISA provisions from H.R. 
10 in the 107th Congress that were dropped prior to that bill's 
final passage.
    On March 5, 2003, the Committee on Education and the 
Workforce approved H.R. 1000, as amended, and ordered the bill 
favorably reported to the House of Representatives by a roll 
call vote of 29 yeas to 19 nays. On May 14, 2003, the House of 
Representatives passed H.R. 1000 by a roll call vote of 271 
yeas to 157 nays. The Senate did not complete consideration of 
the bill before the adjournment of the 108th Congress.
    On June 4, 2003, as part of a series of hearings that would 
focus on the challenges that faced the future of defined 
benefit plans, and highlight obstacles in federal law that 
discourage employers from offering these plans, the 
Subcommittee on Employer-Employee Relations held a hearing 
entitled ``Strengthening Pension Security: Examining the Health 
and Future of the Defined Benefit Plan.'' The Subcommittee 
heard testimony from Dr. Jack Van Derhei, Professor, Fox School 
of Business Management, Temple University, testifying on behalf 
of the Employee Benefits Research Institute; Dr. John Leary, 
Esq., Partner, O'Donoghue and O'Donoghue; Ron Gebhardtsbauer, 
Senior Pension Fellow, American Academy of Actuaries; and J. 
Mark Iwry, Esq., Non-Resident Senior Fellow, The Brookings 
Institution.
    On July 15, 2003, the Subcommittee on Employer-Employee 
Relations and the Ways and Means Subcommittee on Select Revenue 
Measures held a joint hearing entitled ``Examining Pension 
Security and Defined Benefit Plans: The Bush Administration's 
Proposal to Replace the 30-Year Treasury Rate.'' The following 
witnesses testified on the Bush Administration's proposal to 
replace the discontinued 30-year Treasury interest rate that 
was used as the benchmark for defined benefit pension plan 
funding: The Honorable Ann Combs, Assistant Secretary, Employee 
Benefits Security Administration, U.S. Department of Labor; The 
Honorable Peter Fisher, Under Secretary for Domestic Finance, 
U.S. Department of Treasury; Kenneth Porter, Director of 
Corporate Insurance and Global Benefits Financial Planning, 
DuPont Company; Ashton Phelps, Publisher, The Times-Picayune; 
Kenneth Steiner, Resource Actuary, Watson Wyatt Worldwide; and 
Christian Weller, Economist, Economic Policy Institute.
    On September 4, 2003, the Committee on Education and the 
Workforce held the third in a series of hearings to examine the 
future of defined benefit pension plans entitled 
``Strengthening Pension Security and Defined Benefit Plans: 
Examining the Financial Health of the Pension Benefit Guaranty 
Corporation.'' The witnesses included David Walker, Comptroller 
General, General Accounting Office, and Steven Kandarian, 
Executive Director, Pension Benefit Guaranty Corporation.
    On September 17, 2003, Chairman Boehner, joined by Senior 
Democrat Member George Miller, Subcommittee on Employer-
Employee Relations Chairman Sam Johnson, Committee on Ways and 
Means Chairman Bill Thomas, Ways and Means Committee Senior 
Democrat Member Charles Rangel, and Representative Rob Portman 
introduced H.R. 3108, the ``Pension Funding Equity Act of 
2003.'' On October 8, 2003, the House passed the bill, as 
amended, by a vote of 397 yeas and two nays. On January 28, 
2004, the Senate approved an amended version of H.R. 3108 by a 
roll call vote of 86 yeas and nine nays. The House adopted the 
conference report on the bill on April 2, 2004, by a vote of 
336 yeas and 69 nays. On April 8, 2004, the Senate adopted the 
conference report by a vote of 78 yeas and 19 nays. On April 
10, 2004 President Bush signed the bill into law; it became 
public law 108-218.
    Immediately following House passage of H.R. 3108, Chairman 
Boehner and Employer-Employee Relations Subcommittee Chairman 
Sam Johnson announced that the Committee would proceed with its 
work to implement permanent, long-term solutions to the pension 
underfunding crisis. On October 29, 2003, the Committee held a 
hearing entitled ``The Pension Underfunding Crisis: How 
Effective Have Reforms Been?'' Testifying before the Committee 
were Barbara Bovbjerg, Director of Education, Workforce, and 
Income Security Issues, General Accounting Office; Robert 
Krinsky, Chairman, Segal Company; Michael S. Gordon, Esq., 
General Counsel, National Retiree Legislative Network, 
testifying on behalf of the American Benefits Council; J. Mark 
Iwry, Esq., Non-Resident Senior Fellow, Brookings Institution; 
and David John, Research Fellow, Thomas A. Roe Institute for 
Economic Policy Studies, Heritage Foundation.
    On February 25, 2004, the Committee held a hearing entitled 
``Strengthening Pension Security for All Americans: Are Workers 
Prepared for a Safe and Secure Retirement?'' Testifying before 
the Committee were Ben Stein, Honorary Chairperson, National 
Retirement Planning Coalition; Dan McCaw, Chairman and CEO, 
Mercer Human Resource Consulting; C. Robert Henrikson, 
President, U.S. Insurance and Financial Services, MetLife; and 
Peter R. Orszag, Joseph A. Pechman Senior Fellow, Brookings 
Institution.
    On March 18, 2004, the Subcommittee on Employer-Employee 
Relations held a hearing entitled, ``Reforming and 
Strengthening Defined Benefit Plans: Examining the Health of 
the Multiemployer Pension System.'' Testifying before the 
Subcommittee were Barbara Bovbjerg, Director of Education, 
Workforce, and Income Security Issues, General Accounting 
Office; John McDevitt, Senior Vice President, United Parcel 
Service; Scott Weicht, Executive Vice President, Adolfson and 
Peterson Construction, testifying on behalf of the Associated 
General Contractors; and Randy G. DeFrehn, Executive Director, 
National Coordinating Committee for Multiemployer Plans.
    On April 29, 2004, the Subcommittee on Employer-Employee 
Relations held a hearing entitled ``Examining Long-Term 
Solutions to Reform and Strengthen the Defined Benefit Pension 
System.'' Testifying before the Subcommittee were Kenneth A. 
Kent, Academy Vice President, Pension Issues, American Academy 
of Actuaries; Greg Heaslip, Vice President, Benefits, PepsiCo, 
Inc.; J. Mark Iwry, Esq., Non-Resident Senior Fellow, the 
Brookings Institution; Timothy Lynch, President and CEO, Motor 
Freight Carriers Association; John S. ``Rocky'' Miller, Esq., 
Partner, Cox, Castle & Nicholson, L.L.P.; and Dr. Teresa 
Ghilarducci, Ph.D., Associate Professor of Economics and 
Director of the Monsignor Higgins Labor Research Center, 
University of Notre Dame.
    On July 7, 2004, the Committee held its eighth hearing in 
the 108th Congress, focusing on issues relating to cash balance 
pension plans. The hearing was entitled ``Examining Cash 
Balance Pension Plans: Separating Myth from Fact.'' The 
Committee heard testimony from James Delaplane, Jr., Esq., 
Attorney, American Benefits Council; Ellen Collier, Director of 
Benefits, Eaton Corporation; Dr. Robert Clark, Professor, 
College of Management, North Carolina State University; Robert 
Hill, Esq., Partner, Hill & Robbins; and Nancy Pfotenhauer, 
President, Independent Women's Forum.

                             109TH CONGRESS

    In the 109th Congress, the Committee continued its efforts 
focusing on comprehensive reform of the defined benefit pension 
system. On March 2, 2005, the Committee held a hearing entitled 
``The Retirement Security Crisis: The Administration's Proposal 
for Pension Reform and Its Implications for Workers and 
Taxpayers.'' Testifying before the Committee were the Honorable 
Ann L. Combs, Assistant Secretary, Employee Benefits Security 
Administration, U.S. Department of Labor; the Honorable Mark 
Warshawsky, Assistant Secretary for Economic Policy, U.S. 
Department of Treasury; Bradley Belt, Executive Director, 
Pension Benefit Guaranty Corporation; Kenneth Porter, Director 
of Corporate Insurance and Global Benefits Financial Planning, 
the DuPont Company, testifying on behalf of the American 
Benefits Council; Norman Stein, Douglas Arant Professor, 
University of Alabama School of Law; and Dr. Janemarie Mulvey, 
Chief Economist, Employment Policy Foundation.
    On June 9, 2005, Chairman Boehner, Employer-Employee 
Relations Subcommittee Chairman Sam Johnson, Employer-Employee 
Relations Vice-Chairman John Kline and Committee on Ways and 
Means Chairman Bill Thomas introduced H.R. 2830, the ``Pension 
Protection Act of 2005.'' On that same day, Chairman Boehner 
also introduced H.R. 2831, the ``Pension Preservation and 
Portability Act of 2005.''
    On June 15, 2005, the Committee held a legislative hearing 
on H.R. 2830. Testifying before the Committee were Lynn 
Franzoi, Vice President for Human Resources, Fox Entertainment 
Group, testifying on behalf of the U.S. Chamber of Commerce; 
Bart Pushaw, Actuary, Milliman, Inc.; Dr. Teresa Ghilarducci, 
Professor of Economics, University of Notre Dame; Timothy 
Lynch, President and CEO, Motor Freight Carriers Association; 
Judy Mazo, Senior Vice President/Director of Research, The 
Segal Company; and Andy Scoggin, Vice President for Labor 
Relations, Albertsons, Inc.
    On June 22, 2005, the Subcommittee on Employer-Employee 
Relations approved H.R. 2830, as amended, and ordered the bill 
favorably reported to the full Committee, by voice vote. On 
June 30, 2005, the full Committee approved H.R. 2830, as 
amended, and ordered the bill favorably reported to the House 
of Representatives by a roll call vote of 27 yeas, 0 nays, and 
22 present. H.R. 2830, as amended and reported to the House, 
included several provisions contained within H.R. 2831.

                                Summary


                    TITLE I--SINGLE EMPLOYER REFORMS

    The main component of H.R. 2830, the Pension Protection 
Act, changes the way plan sponsors calculate their plan 
liabilities, which in turn determines the amount of minimum 
required contributions they must make to their plans. There are 
a number of technical features to the funding rule changes, 
including:
    Determining Plan Liabilities with a Modified Yield Curve. 
H.R. 2830 includes a modified yield curve approach that 
provides a permanent interest rate for employers to calculate 
their pension contributions and more accurately measure current 
pension liabilities as they come due. This replaces the 
composite corporate bond interest rate which is currently 
scheduled to expire at the end of 2005.
    Generally speaking, under H.R. 2830, each pension plan has 
a unique schedule of future benefit payments that depends on 
the characteristics of the plan's demographics. For example, 
plans with more retirees and older workers, more lump sum 
pension payments, and shrinking workforces will make a greater 
percentage of their pension payments in the near future, while 
plans with younger workers, fewer retirees, fewer lump sums, 
and growing workforces will make a greater percentage of 
payments in later years as these obligations come due. The 
comprehensive funding reforms included in H.R. 2830 recognize 
the different timing of various pension payments and require 
plan sponsors to fund for such payments accordingly. This 
change will ensure that employers progressively make more 
contributions to pension plans as participant demographics 
mature, so that they can meet their pension promises when 
workers retire. It also provides greater certainty and 
predictability for employers as they make financial decisions 
and budget to meet their future pension obligations.
    The modified yield curve interest rate that employers will 
use under H.R. 2830 to calculate their required contributions 
is based on the future date at which a pension plan's benefit 
obligations come due, as defined in three categories or 
``segments:'' liabilities due within five years, liabilities 
due between six and twenty years, and liabilities due after 
twenty years until the estimated end of the plan's obligations. 
For purposes of calculating a plan's total liabilities for a 
plan year, otherwise known as the plan's ``funding target,'' 
employers will use the plan's effective interest rate. The 
effective interest rate of a plan is the rate of interest 
which, if used to determine the present value of the plan's 
liabilities, would result in an amount equal to the total plan 
liabilities of the plan each year.
    For purposes of determining the plan's liabilities for 
short-term, mid-term, and long-term durations, the interest 
rates to be used are based on the three segment rates applied 
to a plan's liabilities for each duration segment. The segment 
rates are determined by the Secretary of the Treasury on the 
basis of the portion of the corporate bond yield curve for 
yields of bonds maturing in each short-term, mid-term, and 
long-term segment. The segment rates should reflect the average 
of all AAA, AA, and A bonds for each year on the yield curve. 
The Committee intends for the Secretary of the Treasury to 
develop one corporate bond yield curve based on a three-year 
weighted average of yields on investment grade corporate bonds 
reflecting AAA, AA, and A bonds.
    The modified yield curve approach in H.R. 2830 is designed 
to ensure employers more accurately measure and fund their 
short-term, mid-term, and long-term pension obligations with 
greater predictability and certainty about their future pension 
costs. The use of the modified yield curve for calculating plan 
liabilities is phased in over three years.
    Special Rules For At-Risk Plans. Special funding rules 
apply to certain severely underfunded plans that are considered 
``at-risk,'' which are plans that have a funding target of less 
than 60%. These plans not only represent a financial risk to 
the PBGC, but the retirement security of the participants and 
beneficiaries in these plans is also threatened. For at-risk 
plans, a plan's actuary would have to assume that all 
participants would elect benefits at the earliest available 
time and in the forms that will result in the highest present 
value of liabilities. In other words, a plan's at-risk funding 
target is the sum of the present value of all liabilities of 
participants and beneficiaries under the plan for the plan year 
determined using additional assumptions that assume all 
participants will elect benefits at the times and in the forms 
that will result in the highest possible present value of 
liabilities. At-risk plans are also subject to an additional 
``loading factor'' equal to $700 per participant plus 4 percent 
of at-risk liability. However, it is the Committee's intent 
that once a plan's funded status is at 60 percent or greater, 
it is no longer considered at-risk; therefore, all future 
shortfall amortization payments are based on the plan's funding 
target liability shortfall.
    The transition between a plan's normal funding target and 
its at-risk funding target is five years. In other words, if a 
plan is less than 60 percent funded for a consecutive period of 
fewer than five plan years, the plan must pay 20 percent of its 
at-risk required contribution multiplied by the number of plan 
years that the plan is less than 60 percent funded. The purpose 
of the at-risk liability assumption changes and loading factor 
is to recognize that these plans pose a greater risk to the 
PBGC and that there is a greater likelihood the plan may have 
to pay benefits on an accelerated basis or terminate.
    Ensuring Underfunded Pension Plans Make Up Shortfalls. 
Under current law, pension funding rules permit underfunded 
plans to make up funding shortfalls over too long a period of 
time, putting workers at risk of having their plans terminate 
without adequate funding. The current rules contain several 
amortization periods for making up a shortfall, which in some 
cases can be up to 30 plan years. Moreover, today's rules 
generally only require plans to meet a 90 percent funded status 
target, or in some cases only 80 percent.\2\
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    \2\ See ERISA Sec. 302(d).
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    It is the view of the Committee that extended amortization 
schedules increase the risk of plan termination because smaller 
payments are made to a plan each year. H.R. 2830 requires 
employers to make sufficient and consistent contributions to 
ensure that plans meet a 100 percent funding target. If a plan 
has a funding shortfall, the bill requires employers to make 
additional contributions to erase the shortfall over a seven-
year period. A plan has a funding shortfall for a plan year if 
the plan's funding target for the year exceeds the value of the 
plan's assets. If a plan has established a funding shortfall in 
any year, the remaining present values of the amortization 
payments that are due are included in plan assets. Any new 
amortization shortfall, which is determined as of the valuation 
date of the plan, requires a new, seven-year level payment 
schedule to be established. The present value of any shortfall 
payment made to a plan is determined by using the appropriate 
segment rates for the plan year.
    The minimum required contribution required under H.R. 2830 
is the sum of a plan's target normal cost for the plan year, 
which is the present value of all benefits that a plan is 
expected to accrue or to be earned during the plan year, and 
any required shortfall amortization charge for a plan that is 
less than 100 percent funded. However, for plans that were not 
subject to the deficit reduction contribution for the 2005 plan 
year, the 100 percent funding target is phased in over a five-
year period, and a plan is required to be 100 percent funded by 
2010. These new funding requirements will ensure employers have 
strong incentives to properly and adequately fund their plans 
in a timely manner.
    Making Smoothing More Effective for Plans and Participants. 
Under current law, interest rates used to calculate pension 
assets and liabilities are ``smoothed,'' or averaged, over 
approximately five years for assets and four years for 
liabilities. Such smoothing is intended to reduce pension 
funding volatility and help make employer contribution 
requirements more predictable. However, some have expressed 
concern that this is too long a period to smooth these interest 
rates and assets. H.R. 2830 reduces the smoothing of interest 
rates to calculate liabilities using a weighted average of the 
three most recent plan years (50 percent from the most recent 
plan year, 35 percent from the second year, and 15 percent from 
the third year). Asset smoothing is also reduced to a maximum 
of three years; however, the smoothed value of plan assets may 
not vary more or less than 10 percent of the fair market value 
of such assets. The overall reduced smoothing method protects 
pension plans against market and funding volatility on an 
annual basis while providing plan sponsors the ability to 
predict and budget their pension contributions.
    Prohibiting Underfunded Plans from Using Credit Balances. 
In general, a plan accumulates a credit balance if an employer 
contributes more than the minimum required contribution in any 
plan year. However, the credit balance rules under current law 
contribute to plan underfunding by allowing employers with 
underfunded plans to replace cash contributions with credit 
balances accrued in previous years. In addition, current law 
allows the credit balance to accrue additional interest based 
on a plan's rate of return regardless of the actual market 
performance of a plan's general assets. These provisions allow 
underfunded plans to skip pension payments, even if the plans 
are severely underfunded, by using artificially inflated credit 
balances that mask the true funded status of plans.
    H.R. 2830 prohibits employers from using credit balances to 
offset minimum required contributions if their pension plans 
are funded at less than 80 percent of the plan's funding 
target. The bill further requires that old credit balances 
(funding standard carryover balance) as well as any new credit 
balance (pre-funding balance, which is any credit balance 
accumulated after the 2005 plan year), reflect actual market 
gains and losses based on a plan's net asset gains and losses. 
In order to determine whether a plan is at least 80 percent 
funded, any credit balance accumulated prior to plan year 2006 
is not subtracted from plan assets; any new credit balance, 
however, is subtracted from plan assets. All credit balances 
may be used to determine whether a plan has a funding 
shortfall. If a plan does have a funding shortfall for any plan 
year, credit balances must be subtracted from plan assets in 
order to determine the actual shortfall. A plan may elect to 
reduce its credit balances and assume that such balance is part 
of the general plan assets for any reason; however, the credit 
balance may no longer be used to offset any minimum required 
contribution. With respect to ordering, any pre-funding balance 
may not be used to satisfy a minimum required contribution 
until all of the funding standard carryover balance is used. 
Finally, if a plan is 100 percent funded or more (including 
plan assets as well as any funding standard carryover balance 
and pre-funding balance), the benefit restriction provisions 
under the bill do not apply.
    Restricting the use of credit balances for plans that are 
below 80 percent funded will ensure that plan sponsors are 
making actual cash contributions to their plans consistently. 
This provision will increase a plan's funded status as well as 
protect participants and beneficiaries in the future.
    Mortality Table Changes. Under current law, plans are 
generally required to use the 1983 Group Annuity Mortality 
(``GAM'') Table in calculating plan liabilities. The use of 
this table assumes that the actual mortality experience of a 
plan has not changed since 1983. The use of the 1983 GAM table 
to calculate plan liabilities is outdated and may cause certain 
plans to appear better funded with fewer liabilities. H.R. 2830 
requires plans to use an updated mortality table, the RP-2000 
Combined Mortality Table, using Scale AA, in order to calculate 
plan liabilities. The use of the RP-2000 Table should result in 
a more accurate measure of plan liabilities by reflecting an 
updated mortality experience and the projected trends for 
plans. H.R. 2830 directs that the Secretary of the Treasury 
update the table every 10 years. Additionally, H.R. 2830 allows 
a plan to apply to the Secretary of the Treasury to use a 
substitute mortality table if the Secretary determines that the 
substitute table reflects the actual experience and projected 
trends in experience of the plan and that the use of the RP-
2000 Combined Mortality Table is inappropriate for the plan. 
The Department of the Treasury has 180 days to determine 
whether the substitute table is not appropriate and that, 
therefore, a plan must use the RP-2000 Combined Mortality 
Table. This provision includes a five-year phase-in. The use of 
the RP-2000 mortality table will ensure that pension plans are 
adequately funding for their liabilities based on reasonable 
and updated mortality assumptions which will result in better 
plan funding overall.
    Timing of Plan Contribution and Valuation Date. Under 
current law, plans that have a current liability percentage of 
less than 100 percent are required to make quarterly 
contributions, which are due on the 15th day following the end 
of each quarter in a plan year. The amount of the quarterly 
contributions is 25 percent of the lesser of 90 percent of the 
plan's current year minimum funding requirements or 100 percent 
of the plan's minimum funding requirements for the preceding 
plan year.\3\ It is the Committee's intent that the required 
annual payment for plan year 2006 is to be based on 90 percent 
of the minimum funding requirements under H.R. 2830. 
Furthermore, it is the intent of the Committee that, for plan 
years beginning after 2006, the amount of quarterly 
contributions is 25 percent of the lesser of 90 percent of the 
plan year's current minimum funding requirements or 100 percent 
of the plan's minimum funding requirements for the preceding 
plan year.
---------------------------------------------------------------------------
    \3\ See ERISA Sec. 302(e).
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    H.R. 2830 requires plans to use the first day of the plan 
year for a plan's valuation date. However, plans with 500 or 
fewer participants may use any valuation date. Contributions 
made after the valuation date are to be credited against the 
minimum required contribution for the year based on its present 
value as of the valuation date, discounted from the date the 
contribution is actually made using a plan's effective interest 
rate.
    Limits on Benefit Increases and Accruals for Underfunded 
Plans. Too often, employers and union leaders have negotiated 
benefit increases when plans are underfunded, which ultimately 
results in increasing plan underfunding. This, in turn, results 
in an even greater likelihood that the PBGC will be forced to 
assume responsibility for paying the benefits, often at reduced 
levels, of terminated plans. H.R. 2830 restricts the ability of 
employers and union leaders to promise additional benefits when 
a plan is underfunded. Specifically, the bill prohibits 
employers and union leaders from increasing benefits or 
providing lump sum distributions if a pension plan is less than 
80 percent funded for the prior year, unless the plan sponsor 
immediately makes the necessary contribution to fund the entire 
increase. If a plan is greater than 80 percent funded, but 
adopts a plan amendment which results in a plan with a funded 
status of less than 80 percent, the plan sponsor must 
immediately make the necessary contribution to ensure that the 
plan's funded status is at least 80 percent. The restriction 
for lump sum distributions does not apply to plans that have 
previously adopted amendments that effectively freeze all 
future accruals. H.R. 2830 also prohibits future benefit 
accruals for severely underfunded plans, which effectively 
freezes the plan. Plan amendments are required in order to 
resume any lump sum distributions or plan accruals once the 
plan is above the respective thresholds.
    In addition to these limitations, H.R. 2830 also prohibits 
the payment of shutdown benefit and other unpredictable 
contingent event benefits. The Committee believes that because 
such benefits are not funded and cannot reasonably be funded 
with any accuracy, these unfunded benefits are more similar to 
severance benefits than pension benefits. Shutdown benefits 
have increased PBGC's deficit when the agency assumes the 
liabilities of terminated plans that include such unfunded 
promises. It is the Committee's view that shutdown benefits and 
other unpredictable contingent event benefits should not be 
considered pension benefits and should not be payable from plan 
assets.
    The effective date of the benefit restriction provisions 
set forth above is 2006. However, in the case of a collectively 
bargained plan, the effective date applies to any plan year 
beginning the earlier of: (1) the date on which the last 
collective bargaining agreement expires, or (2) 2009. This 
effective date ensures that any current collective bargaining 
agreements are not disrupted and that employees are given ample 
time to discuss the effects of the benefit restrictions with 
their respective unions and employers.
    Prohibiting Executive Compensation Arrangements If Rank-
and-File Plans Are Severely Underfunded. H.R. 2830 addresses a 
problem recently seen in the airline industry where executives 
of companies in financial difficulty are given generous 
nonqualified deferred compensation arrangements while the 
retirement security of rank-and-file workers is at risk due to 
poorly funded qualified plans. The Committee believes that it 
is inappropriate for companies with underfunded qualified 
defined benefit pension plans to fund nonqualified deferred 
compensation plans covering executives. While rank-and-file 
employees have little control over a company's decision to fund 
its pension plans, executives often have control in determining 
whether nonqualified deferred compensation plans will be 
funded. In addition, executives who are covered by a 
nonqualified deferred compensation plan may also be 
instrumental in deciding how much to contribute to the defined 
benefit pension plan, thus determining the funded status of the 
pension plan. The Committee believes that if any defined 
benefit pension plan of an employer is not sufficiently funded, 
executives should be required to recognize current income 
inclusion (i.e., be taxed) upon the funding of their 
nonqualified deferred compensation plans.
    H.R. 2830 provides that if an employer's defined benefit 
pension plan is in at-risk status and the employer sets aside 
amounts for purposes of paying deferred compensation under a 
nonqualified deferred compensation plan, the amounts set aside 
are treated as property transferred in connection with the 
performance of services. Thus, participants for whom such 
amounts are set aside would be subject to current income 
inclusion under the provision. In addition, interest and an 
additional 20 percent tax would apply.
    H.R. 2830 specifically provides that if during any period 
in which a qualified defined benefit pension plan of an 
employer is below 60 percent funded, any assets that are set 
aside, directly or indirectly, in a trust or other arrangement 
as determined by the Secretary of the Treasury, or transferred 
to such a trust or other arrangement, for purposes of paying 
deferred compensation, such assets are treated as property 
transferred in connection with the performance of services, 
regardless of whether or not such assets are available to 
satisfy the claims of general creditors. Furthermore, if a 
nonqualified deferred compensation plan of an employer provides 
that assets will be restricted to the provision of benefits 
under the qualified plan, such assets are treated as property 
transferred in connection with the performance of services, 
regardless of whether or not such assets are available to 
satisfy the claims of general creditors. If the plan sponsor's 
qualified defined benefit plan is below 60 percent funded, any 
subsequent increases in the value of, or any earnings with 
respect to, transferred or restricted assets are treated as 
additional transfers of property to the individual. In addition 
to current income inclusion, interest at the underpayment rate 
plus one percentage point is imposed on the underpayments that 
would have occurred had the amounts been includible in income 
for the taxable year in which first deferred or, if later, the 
first taxable year not subject to a substantial risk of 
forfeiture. The amount required to be included in income is 
also subject to an additional 20 percent tax.
    H.R. 2830 requires the plan administrator to provide notice 
to plan participants and beneficiaries within 30 days after the 
plan has become subject to any of the above benefit 
restrictions. Any failure to provide notice will automatically 
result in a civil penalty.

    TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

    Multiemployer pension plans are defined benefit pension 
plans maintained by two or more employers in a particular trade 
or industry, such as trucking or construction, which are 
collectively bargained between an employer and a labor union. 
These plans are managed by a board of trustees, which must be 
comprised of an equal number of employer and union 
representatives. While multiemployer and single employer 
pension plans have some similarities, there are also 
fundamental differences. While single employer plan sponsors 
generally may adjust their pension contributions to meet 
funding requirements, the contributions of individual employers 
in multiemployer plans cannot be easily modified because their 
benefit contributions are fixed by the terms of a collective 
bargaining agreement.
    Multiemployer contributions are tied directly to the total 
number of hours worked by active workers; thus, any reduction 
in the number of active participants results in lower 
contributions to multiemployer plans. One of the major 
challenges facing the multiemployer system is that these 
pension plans are funded by a declining number of employers 
making contributions on behalf of a declining number of active 
workers, while paying benefits to a rapidly growing number of 
retirees. This ``risk pooling'' pension funding concept was 
designed for a 1940s era workforce that expected the 
multiemployer labor base to continue to grow; in reality, it 
has not. Indeed, only five new multiemployer plans have been 
formed since 1992. This has resulted in funding problems the 
Committee believes must be immediately addressed.
    Multiemployer Funding Reforms. H.R. 2830 establishes a 
structure for identifying troubled multiemployer pension plans 
by providing appropriate triggers for determining when plans 
are underfunded as well as quantifiable benchmarks for 
measuring a plan's funding improvement. The bill quantifies the 
health of certain underfunded multiemployer pension plans and 
separates them into two broad categories: (1) endangered plans, 
which are plans that are not in immediate financial danger, but 
are not considered well-funded plans; and (2) critical plans, 
which are plans in serious financial trouble and are expected 
to experience an accumulated funding deficiency in the near 
future. Present-law reorganization and insolvency rules 
continue to apply.
    H.R. 2830 provides that, in general, a plan's actuary must 
certify to the Secretary of the Treasury, within 90 days after 
the first day of the plan year, whether the plan is in 
endangered or critical status. If the certification is not made 
within this period, the plan is presumed to be in critical 
status. In making the determination whether a plan is in 
endangered or critical status, the plan actuary must make 
projections for the current and succeeding plan years, using 
reasonable actuarial assumptions and methods, of the current 
value of plan assets and the present value of liabilities, as 
set forth in the actuarial statement for the preceding plan 
year. If a plan is certified to be in endangered or critical 
status for the plan year or is presumed to be in critical 
status because no certification was made, notice must be 
provided within 30 days to participants, beneficiaries, 
bargaining parties, the PBGC, and the Secretaries of Labor and 
the Treasury.
    Endangered Multiemployer Plans. H.R. 2830 requires that, if 
a plan is less than 80 percent funded or will experience a 
funding deficiency in the next seven years, the plan is 
considered to be in endangered status. The plan's trustees must 
design and adopt a program, within 240 days after a plan is 
certified as endangered, that will improve the health of the 
plan by one-third within 10 years, unless the plan's actuary 
certifies that the plan cannot meet that improvement benchmark. 
If the plan cannot meet the one-third improvement benchmark 
within 10 years, the plan must develop a program to improve the 
health of the plan by one-fifth within fifteen years; however, 
the plan's actuary must certify each year, until the expiration 
of the collective bargaining agreement, that the plan is unable 
to meet the \1/3\ improvement benchmark within 10 years.
    For endangered plans that are funded between 65 and 70 
percent, the trustees must create a program to improve the 
funded status of the plan by one-fifth within fifteen years. In 
addition, the bill prohibits trustees from increasing benefits 
if the increase would cause the plan to fall below 65 percent 
funded status. Plan trustees also must adopt certain other 
measures for increasing contributions and restricting benefit 
increases until the plan meets the one-third benchmark.
    The funding improvement period for the plan to reach the 
required benchmarks is the 10 year period beginning on the 
earlier of: (1) the second anniversary of the date of adoption 
of the funding improvement plan, or (2) the first day of the 
first plan year following the year in which collective 
bargaining agreements covering at least 75 percent of active 
participants have expired.
    Pending approval of the funding improvement plan, the plan 
sponsor must take all actions (consistent with the terms of the 
plan and present law) to ensure an increase in the plan's 
funded percentage and a postponement of an accumulated funding 
deficiency for at least one additional plan year. These 
applications include, but are not limited to, applications for 
extensions of amortization periods, use of the shortfall 
funding method in making funding standard account computations, 
amendments to the plan's benefit structure, and reductions in 
future benefit accruals.
    Pending approval of a funding improvement plan, the plan 
may not be amended to provide for the following: (1) a 
reduction in the level of contributions for participants who 
are not in pay status; (2) a suspension of contributions with 
respect to any service; or (3) any new direct or indirect 
exclusion of younger or newly hired employees from plan 
participation.
    Critical Multiemployer Plans. H.R. 2830 includes a series 
of requirements to address multiemployer plans that are 
severely underfunded and face significant and immediate funding 
problems. H.R. 2830 strengthens the funding requirements for 
critical plans and requires trustees to develop and adopt, 
within 240 days from the plan's critical status certification, 
a rehabilitation plan to exit the critical zone within 10 
years. A plan is considered to be in critical status if it 
meets one of the following tests: (1) as of the beginning of 
the plan year, the funded percentage of the plan is less than 
65 percent and the sum of the market value of plan assets plus 
the present value of reasonably anticipated contributions for 
the current and six succeeding plan years is less than the 
present value of all nonforfeitable benefits for all 
participants and beneficiaries projected to be payable under 
the plan during the current and six succeeding plan years; (2) 
as of the beginning of the plan year, the sum of the market 
value of plan assets plus the present value of the reasonably 
anticipated contributions for the current and four succeeding 
plan years (assuming the same collective bargaining agreement 
is in effect) is less than the present value of all 
nonforfeitable benefits for participants and beneficiaries 
projected to be payable under the plan during the current and 
four succeeding plan years; (3) as of the beginning of the plan 
year, the funded percentage of the plan is less than 65 percent 
and the plan has an accumulated funding deficiency for the 
current or four succeeding plan years (taking into account any 
amortization extension); (4) the plan's normal cost for the 
year, plus interest (determined at the rate used for 
determining costs under the plan) for the current plan year on 
the amount of unfunded benefit liabilities under the plan as of 
the last date of the preceding plan year exceeds the present 
value, as of the beginning of the plan year, of the reasonably 
anticipated contributions for the year plus the present value 
of the nonforfeitable benefits of the inactive participants is 
greater than the present value, as of the beginning of the plan 
year, of the nonforfeitable benefits of active participants, 
and the plan is projected to have an accumulated funding 
deficiency for the current or four succeeding plan years; or 
(5) the funded percentage of the plan is greater than 65 
percent for the current plan year and the plan is projected to 
have an accumulated funding deficiency for the current or three 
succeeding plan years.
    The rehabilitation period for the plan to reach the 
required benchmarks is the 10 year period beginning on the 
earlier of: (1) the second anniversary of the date of adoption 
of the rehabilitation plan, or (2) the first day of the first 
plan year following the year in which collective bargaining 
agreements covering at least 75 percent of active participants 
have expired.
    H.R. 2830 requires that a rehabilitation plan for a 
critical plan must include a combination of employer 
contribution increases, expense reductions, funding relief 
measures, restrictions on future benefit accruals, and benefit 
reductions of certain ancillary benefits. These changes must be 
adopted by all bargaining parties. The bill also provides for a 
surcharge to the plan by employers until the parties adopt a 
rehabilitation plan and allows the trustees of the plan, in the 
most dire circumstances, to reduce certain ancillary benefits. 
If the plan cannot emerge from the critical zone within 10 
years, the rehabilitation plan must describe alternatives, 
explain why emergence from the critical zone is not feasible, 
and develop actions that the trustees must take to postpone 
insolvency. Until a rehabilitation plan is adopted, a critical 
plan is subject to the same restrictions as an endangered plan; 
however, subject to certain exceptions, no amendment may be 
adopted which increases the liabilities of the plan by reason 
of any increase in benefits, any change in accrual of benefits, 
or any change in the rate at which benefits become 
nonforfeitable.
    Other Multiemployer Plan Reforms: In addition to the new 
funding reforms, H.R. 2830 includes new requirements for 
multiemployer pension plans irrespective of funding status. 
Specifically, the bill streamlines all amortization payments to 
a maximum of 15 years. However, the new amortization periods do 
not apply to amounts attributable to amortization schedules 
established for plan years beginning before 2006. H.R. 2830 
increases the maximum deductible limit up to the excess of 140 
percent of current liability, providing additional funding 
flexibility for plans each year in order to respond to 
different economic markets.
    Amortization Extensions: H.R. 2830 provides that upon a 
plan's application, the Secretary of the Treasury shall grant 
an extension of the amortization period for up to five plan 
years for any unfunded past service liability, investment loss, 
or experience loss. An applicant must demonstrate to the 
satisfaction of the Secretary that the notice of the 
application has been provided to each organization representing 
employees covered by the plan and to the PBGC. The Secretary 
may also grant an amortization extension for an additional five 
years beyond the automatic extension. The standard for 
determining whether an additional extension may be granted is 
the same as under present law; however, the rate applicable to 
the waived funding deficiencies and extensions of amortization 
periods is the greater of: (1) 150 percent of the federal mid-
term rate, or (2) the rate of interest used under the plan in 
determining costs.
    Finally, H.R. 2830 also includes withdrawal liability 
reforms in order to strengthen and clarify current law 
withdrawal rules and provide certain privately-held, small 
employers with the ability to grow and/or modify their business 
to meet the needs of a dynamic economy. Such reforms may not, 
however, be made with any attempt to evade or avoid any 
obligations to contribute to a multiemployer plan. The 
Committee believes that withdrawal liability reforms are needed 
in order to ensure the future of these plans, and that 
employers continue to participate in the multiemployer pension 
system.

          TITLE III--INTEREST RATE FOR LUMP SUM DISTRIBUTIONS

    H.R. 2830 requires employers to use the three appropriate 
segment rates under the modified yield curve to calculate 
minimum lump sum distributions for participants. In other 
words, the modified yield curve must be applied to each 
projected annuity payment in converting to a lump sum.
    In general, current law requires lump sum distributions to 
be calculated using the artificially-low 30-year Treasury rate; 
this has the effect of inflating lump sum distributions, which 
drains plan assets and represents a major source of systemic 
pension underfunding. Using the same interest rates to 
calculate both employer pension contributions and lump sum 
distributions will ensure that these benefits are calculated 
and funded properly and fairly without having an adverse impact 
on the remaining workers and retirees in the plan. It is the 
Committee's intent that employers use the RP-2000 Combined 
Mortality Table in calculating lump sum distributions and use 
the assumption that an equal number of men and women will take 
lump sum distributions. There is a five-year phase-in of the 
modified yield curve rate from the 30-year Treasury rate for 
the purpose of calculating lump sum distributions. If a plan 
offers lump sum distributions, however, the assumption 
regarding the probability of when payments will be made is 
required to be taken into account for funding purposes.
    Amendment to the ERISA Prohibited Transaction Rules Adopted 
by the Committee: H.R. 2830 outlines eight prohibited 
transaction exemptions to facilitate easier, faster, and less 
expensive transactions between private pension plans and 
service providers. The purpose of this provision is to ensure 
that pension plans are not denied certain investment 
opportunities or overburdened by unnecessary or duplicative 
regulatory structures that result in higher administrative 
costs. The eight exemptions include the following:
    Definition of ``Amount Involved.'' This provision clarifies 
the term ``amount involved'' with respect to certain types of 
investment which is used in calculating the civil penalties 
imposed and the appropriate amount for correcting a prohibited 
transaction. The ``amount involved'' in a transaction is 
clarified as the amount of money and the fair market value of 
property either given or received as of the date on which the 
prohibited transaction occurs.
    Exemption for Block Trading. This provision allows pension 
assets to be included in block trades in order to achieve 
better execution and reduced costs and provides for more 
efficient plan asset transactions.
    Bonding Relief. This provision amends ERISA's bonding rules 
to reflect the regulation of broker-dealers and investment 
advisers under federal securities law.
    Conforming ERISA's Prohibited Transaction Provision to the 
Federal Employees' Retirement System Act (FERSA). This 
provision exempts fair market value exchanges from the 
prohibited transaction requirements to reduce pension plan 
costs.
    Relief for Foreign Exchange Transactions. This provision 
allows broker-dealers and affiliates to provide ancillary 
services to plans (such as currency conversions) which results 
in overall lower administrative costs and burdens.
    Definition of Plan Asset Vehicle. This provision excludes 
the underlying assets of entities which hold less than 50 
percent of plan assets from the fiduciary rules under ERISA to 
allow plans the flexibility to participate in greater 
investment opportunities.
    Exemption for Electronic Communication Network. This 
provision allows plans to conduct transactions on electronic 
trading networks that are owned in part or whole by any plan 
service provider, which will result in reduced plan costs and 
enhanced efficiency.
    Correction Period for Certain Transactions Involving 
Securities and Commodities. This provision provides a 14-day 
``correction'' period for any transactions that occur by 
mistake between a plan and a party-in-interest or fiduciary.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

    Two important steps are essential to improving the 
financial condition of the PBGC and ensuring its long-term 
solvency: (1) reforming pension funding rules to ensure 
pensions are more adequately and consistently funded; and (2) 
increasing premiums paid by employers to the PBGC in a 
responsible fashion. It is important to note that ensuring 
employers fund their plans appropriately will prove more 
helpful to the overall defined benefit system than additional 
premiums paid to the PBGC. However, Congress has not raised 
premiums since 1991, so a reasonable increase is both prudent 
and necessary.
    Flat-Rate Premiums. The Pension Protection Act raises flat-
rate, per participant premiums employers pay to the PBGC, but 
phases the increases in over time instead of increasing them 
immediately. For pension plans that are less than 80 percent 
funded, the bill raises the flat per-participant rate premium 
from the current $19 to $30 over three years. For plans funded 
at more than 80 percent, the premium increase is phased in over 
five years. The bill indexes the flat-rate premium annually to 
worker wage growth.
    Variable Rate Premiums. Under H.R. 2830, variable rate 
premiums are charged to a plan based on the amount of plan 
underfunding below 100 percent. Employers are required to pay 
$9 for every $1000 dollars of unfunded vested benefits to the 
PBGC.

                          TITLE V--DISCLOSURE

    While ERISA includes a number of reporting and disclosure 
requirements that provide workers with information about their 
benefits, the timeliness and usefulness of this information 
should be improved. Too often in recent years, participants 
have mistakenly believed that their pension plans were well 
funded, only to receive a shock when the plan is terminated. 
Without basic information, workers, contributing employers, 
lawmakers, and the federal agencies that oversee pension plans 
are left without the most complete and accurate information 
about the true funded status of these pension plans. This has 
troubling implications for workers who are relying on this 
information for their retirement, and taxpayers who ultimately 
face the risk of bailing out these plans. The Pension 
Protection Act provides workers, investors, and lawmakers more 
timely and useful information about the status of defined 
benefit pension plans to ensure greater transparency and 
accountability.
    New Notice to Workers and Retirees. Within 90 days after 
the close of the plan year, H.R. 2830 requires both single and 
multiemployer pension plans to notify participants and 
beneficiaries of the actuarial value of assets and projected 
liabilities and the funded percentage of their plan. Such 
notice must also include the plan's funding policy and asset 
allocations based on a percentage of overall plan assets. This 
notice is due for plan years beginning after 2005.
    For multiemployer plans already subject to this provision, 
such notice must also include a statement of the ratio of 
inactive participants to active participants in a plan, as of 
the end of the plan year to which the notice relates. Inactive 
participants are considered those participants who are not in 
covered service under the plan and are in pay status or have a 
nonforfeitable right to benefits under the plan. It is the 
Committee's intent that covered service includes a period of 
service of no less than 12 consecutive months.
    With respect to multiemployer plan disclosure under current 
law, contributing employers of multiemployer plans have little 
access to any information regarding the health of the pension 
plan to which they contribute. H.R. 2830 requires multiemployer 
plans to make available certain information within 30 days of a 
request by contributing employers or labor organizations, 
including: (1) copies of all actuary reports received by the 
plan for a plan year; and (2) copies of all financial reports 
prepared by plan fiduciaries, including plan investment 
managers and advisors, and/or plan service providers.
    Enhancing Form 5500 Notice Requirements. The principal 
source of information about private sector defined benefit 
plans is the Form 5500, the equivalent of a pension plan's 
federal tax return. H.R. 2830 requires both single and 
multiemployer plans to include more information on their Form 
5500 filings. Specifically, if plans merge and file one Form 
5500, the plan must provide the funded percentage for the 
preceding plan year and the new funded percentage after the 
plan merger. In addition, a plan's enrolled actuary must 
explain the basis for all plan retirement assumptions on the 
Schedule B, which is the actuarial statement filed along with 
Form 5500 that provides information on the plan's assets, and 
liabilities. Finally, H.R. 2830 requires multiemployer plans to 
include on Form 5500 filings the number of contributing 
employers in the plan as well as the number of employees in the 
plan that no longer have a contributing employer on their 
behalf.
    Making Form 4010 Disclosure Publicly Available. Under 
current law, employers who sponsor single employer defined 
benefit plans that are underfunded, in the aggregate, by more 
than $50 million must disclose to the PBGC certain information 
annually on Form 4010. H.R. 2830 provides for certain 
information included in a plan sponsor's Form 4010 filing to be 
disclosed to participants and beneficiaries.
    Under the bill, if a plan is less than 60 percent funded, 
H.R. 2830 requires employers to provide certain additional 
information to workers and retirees within 90 days after Form 
4010 is due. This new notice must include: (1) notice that a 
plan has made a Form 4010 filing for the year; (2) the 
aggregate amount of assets, liabilities, and funded ratio of 
the plan; (3) the number of plans maintained by the employer 
that are less than 60 percent funded (``at-risk'' liability); 
and (4) the assets, liabilities, and funded ratio for those at-
risk plans that are less than 60 percent funded.
    The PBGC may also request that a plan sponsor file a 4010 
and provide notice to its participants if a plan is less than 
75 percent funded and such plan is sponsored by an employer in 
an industry that is experiencing substantial unemployment or 
underemployment and in which sales and profits are depressed or 
declining.
    Multiemployer Withdrawal Liability Notice. H.R. 2830 
requires a multiemployer plan to notify a contributing employer 
of its withdrawal liability amount within 180 days of a written 
request. The notice may only be provided once within a 12-month 
period and may be subject to a reasonable fee. The notice must 
also include the cost of all participants and beneficiaries in 
the plan without a contributing employer.
    Summary Annual Report. The summary annual report (SAR) 
provides basic disclosure of information from the Form 5500 to 
workers and retirees. However, under current law, because this 
notice isn't required until 110 days after the Form 5500 is 
filed, the information is often out of date. The bill requires 
both single and multiemployer pension plans to provide this 
notice within 15 days following the Form 5500 filing deadline. 
The bill also requires the Department of Labor to publish a 
model SAR notice for plans sponsors.

                      TITLE VI--INVESTMENT ADVICE

    The Pension Protection Act includes a comprehensive 
investment advice proposal that has passed the House three 
times in the last several years with significant Democrat 
support (twice in the 107th Congress and once in the 108th 
Congress). It allows employers to provide rank-and-file workers 
with access to a qualified investment adviser who can inform 
them of the need to diversify and help them choose appropriate 
investments. The bill also includes tough fiduciary and 
disclosure safeguards to ensure that advice provided to 
employees is solely in their best interest.
    Important Fiduciary Safeguards. H.R. 2830 includes 
important fiduciary safeguards and new disclosure protections 
to ensure that workers receive quality advice that is solely in 
their best interests. Under the bill, only qualified 
``fiduciary advisers'' who are fully regulated by applicable 
banking, insurance, and securities laws may offer investment 
advice; this ensures that only qualified individuals may 
provide advice. Under the bill, investment advisers who breach 
their fiduciary duty are personally liable for any failure to 
act solely in the interest of the worker, and may be subject to 
civil and criminal penalties by the Labor Department and civil 
penalties by the worker, among other sanctions. In addition, 
existing federal and state laws that regulate individual 
industries will continue to apply.
    Comprehensive Disclosure Protections. In order to provide 
advice under H.R. 2830, advice providers must disclose in 
plain, easy-to-understand language any fees or potential 
conflicts. The bill requires advisers to make these disclosures 
when advice is first given, at least annually thereafter, 
whenever the worker requests the information, and whenever 
there is a material change to the adviser's fees or 
affiliations. The disclosure must also be reasonably 
contemporaneous with the advice so that employees can make 
informed decisions with the advice they receive.
    Clarifies the Role of the Employer. H.R. 2830 clarifies 
that employers are not responsible for the individual advice 
given by professional advisers to individual participants; this 
liability is assumed by the individual adviser. Under current 
law, employers are discouraged from providing this benefit 
because liability issues are ambiguous and employers may be 
held liable for specific advice that is provided to their 
employees. Under the bill, employers will remain responsible 
under ERISA fiduciary rules for the prudent selection and 
periodic review of any investment adviser and the advice given 
to employees.
    Voluntary Process. The bill does not require any employer 
to contract with an investment adviser nor is any employee 
under any obligation to accept or follow any advice. Workers, 
not the adviser, will have full control over their investment 
decisions.

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

    Hybrid pension plans generally combine the best features of 
both defined benefit and defined contribution plans by 
providing a meaningful retirement benefit to all employees, 
regardless of age. Hybrid plans are similar to defined benefit 
plans because they are funded by employers and the benefits are 
protected by the PBGC. In addition, employers bear the 
responsibility for any market gains and losses. However, these 
plans are also similar to defined contribution plans, such as 
401(k) plans, because benefits are provided through individual 
``hypothetical accounts.''
    In recent years, the legality of these plans has been 
challenged as violating the age discrimination provisions in 
ERISA. H.R. 2830 ends the legal uncertainty surrounding cash 
balance pension plans and ensures that such plans remain a 
viable retirement security option for workers and employers. In 
general, the bill establishes a simple age discrimination 
standard for all defined benefit plans that clarifies current 
law with respect to age discrimination requirements under ERISA 
on a prospective basis. The age discrimination clarification in 
the bill specifies that if a participant's entire accrued 
benefit, as of any date under the formula for determining 
benefits as set forth in the text of the plan documents, is 
equal to or greater than that of a similarly situated, younger 
employee, or provides for lump sum distributions equal to a 
participant's hypothetical account, the plan is not considered 
age discriminatory under ERISA. Two employees are considered 
similarly situated if they are, and always have been, identical 
in every respect, including but not limited to, any period of 
service, compensation, position, date of hire, or work history, 
except for age.
    In determining the entire accrued benefit of a participant, 
the subsidized portion of any early retirement benefit 
(including any early retirement subsidy that is fully or 
partially included or reflected in an employee's opening 
account balance or other transition benefits, in the case of a 
hybrid pension plan) shall be disregarded.
    As stated above, it is the intent of the Committee to 
confirm the legality of all defined benefit plans, including 
certain plans that index benefits for inflation. As such, H.R. 
2830 provides that a plan formula does not fail to satisfy the 
requirements of this provision if the formula provides for the 
indexing of pre- or post-retirement benefits. For example, a 
plan may index benefits to protect the economic value of a 
participant's benefit by providing for a cost-of-living 
adjustment. However, it is the intent of the Committee to 
prohibit any pre-retirement indexing which results in a 
cumulative negative adjustment in a participant's benefit.
    With respect to lump sum distributions, it is the 
Committee's intent that if a defined benefit plan determines a 
participant's benefit by reference to the balance in a 
hypothetical account (or by reference to a current value equal 
to an accumulated percentage of a participant's final average 
of compensation), the plan does not fail to meet the 
requirements of this provision if a lump sum distribution is 
made equal to the participant's nonforfeitable accrued benefit 
expressed as the value of a hypothetical account (or of the 
present value of the accumulated percentage of final average 
compensation).

        TITLE VIII--INCREASING MAXIMUM DEDUCTIBLE CONTRIBUTIONS

    Current pension funding rules often force employers into 
the difficult position of being unable to make additional 
contributions to pension plans during good economic times, but 
then subject to accelerated contribution requirements during an 
economic downturn or market fluctuation. H.R. 2830 permits 
employers to make additional contributions up to a new higher 
maximum deductible amount equal to the greater of: (1) the 
excess of the sum of 150 percent of the plan's funding target 
plus the target normal cost over the value of plan assets, or 
(2) the excess of the sum of the plan's at-risk normal cost and 
at-risk funding target for the plan year over the value of plan 
assets. In determining the maximum deductible amount, plan 
assets are not reduced by any pre-funding balance or funding 
standard carryover balance. The Committee believes that giving 
employers more flexibility to make generous contributions 
during good economic times will help provide workers and 
retirees greater retirement security by increasing the assets 
available to finance retirement benefits.
    In the case of a multiemployer defined benefit plan, the 
maximum deductible amount is not less than 140 percent of 
current liability over the value of plan assets.

                            Committee Views

    The defined benefit pension system is rapidly declining due 
to a complex statutory and regulatory structure, expensive 
administrative costs, and changing workforce demographics. The 
financial health of defined benefit plans is a critical issue 
for the millions of workers that participate in these plans. 
Moreover, the funding of these plans has become more 
challenging for many employers because of a climate of low 
interest rates, a lackluster economy, stock market losses, and 
an increasing number of retirees. As a result, the number of 
employers offering defined benefit pension plans has declined 
and some employers have frozen or terminated their traditional 
pension plans altogether.
    The Committee believes that the defined benefit pension 
system must be strengthened in order to ensure a protected and 
reliable retirement system. Employees need greater pension 
security in order to prepare for retirement. Employers must 
have the ability to accurately measure and predict pension 
liabilities and other funding issues in order to properly 
determine their capital allocations and expenditures for 
business planning purposes. The Committee recognizes that 
pensions are voluntary benefits provided by employers and that 
Congress must take a balanced approach to reforming the system 
that addresses current failings without overburdening plan 
sponsors to the extent that it becomes impractical for them to 
provide such benefits to their employees. Peter R. Fisher, 
Under Secretary for Domestic Finance, U.S. Department of 
Treasury, testified on the need for a balanced approach to 
comprehensive reforms of the defined benefit pension system, 
and in particular, to funding reforms, in order to protect the 
interest of workers and retirees:

          Americans have broadly shared interest in adequate 
        funding of employer-provided defined benefit pensions. 
        Without adequate funding, the retirement income of 
        America's workers will be insecure. This by itself is a 
        powerful reason to pursue improvements in our pension 
        system. At the same time, we must remember that the 
        defined benefit pension system is a voluntary system. 
        Firms offer defined benefit pensions to their workers 
        as an employee benefit, as a form of compensation. Our 
        pension rules should thus be structured in ways that 
        encourage, rather than discourage, employer 
        participation. Key aspects of the current system 
        frustrate participating employers while also failing to 
        produce adequate funding. We thus have multiple 
        incentives to improve our pension system, and to thus 
        better ensure both the availability and the viability 
        of worker pensions. We owe it to the nation's workers, 
        retirees, and companies to roll up our sleeves and to 
        create a system that more clearly and effectively funds 
        pension benefits.\4\
---------------------------------------------------------------------------
    \4\ Joint Hearing on ``Examining Pension Security and Defined 
Benefit Plans: The Bush Administration's Proposal to Replace the 30-
Year Treasury Rate,'' before the Subcommittee on Employer-Employee 
Relations of the Committee on Education and the Workforce and the 
Subcommittee on Select Revenue Measures of the Committee on Ways and 
Means, U.S. House of Representatives, 108th Congress, First Session, 
July 15, 2003, Serial No. 108-26.

    The Committee believes that the current defined benefit 
pension system does not contain appropriate rules, including 
funding and disclosure rules, to ensure that pension plans are 
properly funded and that participants and beneficiaries receive 
sufficient information. Maintaining the status quo is clearly 
unacceptable to the remaining 44 million workers and retirees 
participating in the defined benefit pension system. Ann L. 
Combs, Assistant Secretary of the Employee Benefits Security 
Administration (EBSA), U.S. Department of Labor, testified on 
the need for comprehensive reforms to the current defined 
---------------------------------------------------------------------------
benefit pension rules:

          Defined benefit plans are intended to provide a 
        secure source of retirement income that lasts a 
        lifetime. Recent volatility in the stock market has 
        reminded workers of the value of such plans where 
        corporate plan sponsors bear investment risk. As our 
        aging workforce begins to prepare for retirement and 
        think about how to manage its savings wisely, there is 
        a renewed interest in guaranteed annuity payouts that 
        last a lifetime. If we do nothing but paper over the 
        problems facing defined benefit plans and the companies 
        and unions that sponsor them, we will ill-serve 
        America's workers threatened by unfunded benefits and 
        potentially broken promises.\5\
---------------------------------------------------------------------------
    \5\ Id.
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                     SINGLE EMPLOYER PENSION PLANS

    Title I of ERISA addresses the rules and required conduct 
for the establishment, operation, and termination of qualified 
pension plans.\6\ The minimum funding requirements under ERISA 
permit an employer to fund defined benefit plans over a certain 
period of time, regardless of whether a plan is considered 
fully funded.\7\ As a result, pension plans may be terminated 
when plan assets are not sufficient to provide for all benefits 
accrued by employees under the plan. In order to protect 
participants from losing retirement benefits if a plan 
terminates without sufficient assets to pay vested, accrued 
benefits, the PBGC, a corporation within the Department of 
Labor, was created in 1974 under ERISA to provide an insurance 
program for the payment of benefits from certain terminated 
pension plans maintained by private employers.\8\
---------------------------------------------------------------------------
    \6\ See ERISA Sec. 4(b). There are certain types of pension plans 
which are not covered under Title I of ERISA and thus are not qualified 
ERISA plans. For example, plans sponsored by a government or a church 
are not qualified ERISA plans.
    \7\ See ERISA Sec. 302. In general, the funding requirements under 
ERISA provide that a plan is considered fully funded at 90 percent, and 
in some cases, 80 percent.
    \8\ See ERISA Sec. 4021(b)(13). Plans sponsored by professional 
service employers, such as physicians and lawyers, with 25 or fewer 
employees are not covered by the PBGC single-employer insurance 
program.
---------------------------------------------------------------------------

The need for legislation

    It is the view of the Committee that the role of the PBGC 
in protecting the retirement benefits of over 44 million 
Americans participating in both single employer and 
multiemployer defined benefit plans is crucial.\9\ However, the 
current system does not contain appropriate funding rules to 
ensure that pension plans are adequately funded. Over the past 
few years, the terminations of severely underfunded pension 
plans have threatened the retirement security of the 
participants and beneficiaries who earned these benefits. 
Furthermore, the recent terminations of several notable and 
chronically underfunded pension plans has placed an increasing 
financial strain on the PBGC single employer pension insurance 
program, and has threatened its long-term viability.
---------------------------------------------------------------------------
    \9\ The PBGC currently guarantees payment of basic pension benefits 
of participants in approximately 31,000 defined benefit plans.
---------------------------------------------------------------------------
    In fact, recent statistical evidence suggests that PBGC's 
long-term financial health may be in jeopardy. The Executive 
Director of the PBGC, Bradley D. Belt, testified on the 
financial condition of the PBGC:

          The pension insurance programs administered by the 
        PBGC have come under severe pressure in recent years 
        due to an unprecedented wave of pension plan 
        terminations with substantial levels of underfunding. 
        This was starkly evident in 2004, as the PBGC's single 
        employer insurance program posted its largest year-end 
        shortfall in the agency's 30-year history. Losses from 
        completed and probable pension plan terminations totals 
        $14.7 billion for the year, and the program ended with 
        a deficit of $23.3 billion. That is why the Government 
        Accountability Office has once again placed the PBGC's 
        single employer insurance program on its list of ``high 
        risk'' government programs in need of attention.\10\
---------------------------------------------------------------------------
    \10\ Hearing on ``The Retirement Security Crisis: The 
Administration's Proposal for Pension Reform and Its Implications for 
Workers and Taxpayers,'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 109th Congress, First 
Session, March 2, 2005, Serial No. 109-3.

    The latest plan sponsor filings with the PBGC reveal an 
unprecedented and systematic pension underfunding problem 
within the defined benefit pension system. On June 7, 2005, the 
PBGC issued a press release stating that companies with 
underfunded pension plans reported a record shortfall of $353.7 
billion in their filings with the PBGC, which represents a 27 
percent increase from the previous year. The 2004 reports, 
filed with the PBGC by April 15, 2005, were submitted by 1,108 
pension plans covering approximately 15 million workers and 
retirees. In total, the filings indicated that underfunded 
plans had only $786.8 billion in assets to cover more than 
$1.14 trillion in liabilities, for an average funded ratio of 
approximately 69 percent.
    It is important to note that the PBGC has acknowledged that 
it has the adequate resources to continue paying benefits into 
the future; however, its financial condition will continue to 
deteriorate without comprehensive reforms made to the entire 
defined benefit pension system. Mr. Belt specifically testified 
on the current financial condition of the PBGC as well as its 
ability to pay benefits in the future:

          Notwithstanding our record deficit, I want to make 
        clear that the PBGC has sufficient assets on hand to 
        continue paying benefits for a number of years. 
        However, with $62 billion in liabilities and only $39 
        billion in assets as of the end of the past fiscal 
        year, the single employer program lacks the resources 
        to fully satisfy its benefit obligations.\11\
---------------------------------------------------------------------------
    \11\ Id.

    The PBGC is required through statutory mandates to maintain 
premiums at the lowest levels consistent with carrying out the 
agency's statutory obligations. However, these premiums have 
not been increased in over fourteen years and are simply not 
adequate for the payment of guaranteed benefits. H.R. 2830 
responsibly increases flat-rate premiums paid by plan sponsors 
maintaining certain qualified defined benefit pension plans by 
phasing-in the current $19 per participant to $30 over a 
maximum period of 5 years, depending upon the plan's funded 
status. This increase is needed in order to assist the PBGC in 
continuing to provide benefits to participants and 
beneficiaries in terminated pension plans.
    It is the view of the Committee that comprehensive funding 
rule changes are needed in order to address the systematic 
pension underfunding crisis that continues to threaten the 
financial security of millions of participants. Ann Combs, 
Assistant Secretary of EBSA, testified this year on the need 
for funding reform changes:

          The increasing PBGC deficit and high levels of plan 
        underfunding are themselves a cause for concern. More 
        importantly, they are symptomatic of serious structural 
        problems in the private defined benefit system. It is 
        important to strengthen the defined benefit pension 
        system now.\12\
---------------------------------------------------------------------------
    \12\ Id.

    Assistant Secretary Combs also testified on the 
---------------------------------------------------------------------------
inadequacies of the current funding rules:

          Under the current funding rules, financially weak 
        companies can promise new benefits and make lump sum 
        payments that the plan cannot afford. Workers, 
        retirees, and their families who rely on these empty 
        promises can face serious financial hardship if the 
        pension plan is terminated.\13\
---------------------------------------------------------------------------
    \13\ Id.

    The need for pension reform has been echoed further by 
professional organizations that performs services for all 
defined benefit plans. Kenneth A. Kent, Academy Vice-President, 
American Academy of Actuaries, testified from the perspective 
of professional pension actuaries on the need for comprehensive 
---------------------------------------------------------------------------
reforms:

          Do we need reform? The need is evident by the 
        continuing decline in the number of defined benefit 
        pension plans. Defined benefit programs are a 
        fundamental vehicle for providing financial security 
        for millions of Americans. Unlike other programs, they 
        provide lifetime benefits to retirees, no matter how 
        long they live and regardless of how well they do on 
        their individual investments. However, recent market 
        conditions of low interest rates and low market returns 
        have caused more dramatic declines in the number of 
        covered employees. There are many contributing factors, 
        including regulatory and administrative burdens derived 
        from years of amendments to ERISA, which have had a 
        long-term detrimental impact. These programs need your 
        support through major reform of the current laws.\14\
---------------------------------------------------------------------------
    \14\ Hearing on ``Examining Long-Term Solutions to Reform and 
Strengthen the Defined Benefit Pension System,'' before the 
Subcommittee on Employer-Employee Relations, Committee on Education and 
the Workforce, U.S. House of Representatives, 108th Congress, Second 
Session, April 29, 2004, Serial No. 108-55.

    In addition to the Administration, Congress, and 
professional associations, corporations, business groups, and 
trade associations also recognize the need for comprehensive 
pension reforms. Kenneth W. Porter, Director of Corporate 
Insurance and Global Benefits Financial Planning for the DuPont 
Company, testifying on behalf of the American Benefits Council, 
the American Council of Life Insurers, the Business Roundtable, 
the ERISA Industry Committee, the National Association of 
Manufacturers, and the U.S. Chamber of Commerce, testified on 
the need for overall comprehensive reforms to the single 
---------------------------------------------------------------------------
employer defined benefit pension system:

          Not only do we agree that funding rules need to be 
        strengthened, we also agree that broader, more timely 
        disclosure to plan participants is needed, and the 
        proposals to allow employers to make larger 
        contributions during good economic times is long 
        overdue.\15\
---------------------------------------------------------------------------
    \15\ Hearing on ``The Retirement Security Crisis: The 
Administration's Proposal for Pension Reform and Its Implications for 
Workers and Taxpayers,'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 109th Congress, First 
Session, March 2, 2005, Serial No. 109-3.
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Modified yield curve

    The Committee believes that in order to protect the 
retirement security interests of participants, beneficiaries, 
and retirees, comprehensive reforms must include permanent 
interest rate reforms that generally reflect the timing of when 
such liabilities are to be paid out. The general matching of 
discount rates of differing maturities to pension obligations 
is the most accurate and practical way to measure today's cost 
of meeting pension obligations. Therefore, a yield curve 
concept represents one of the most important reforms to the 
defined benefit pension system. Bart Pushaw, an actuary for 
Milliman, Inc., testified on the appropriateness of using a 
modified yield curve to measure pension liabilities:

          The bill . . . updates ERISA greatly and simplifies 
        relevant provisions and fixes some of these weaknesses. 
        The yield curve is not a widely familiar concept, and 
        it has only recently begun to enter into use by the 
        pension industry. Thirty years after ERISA was enacted, 
        pension plans now have a wide range of maturity from 
        new plans with hordes of new hires at young ages to 
        plans which have retired populations and liabilities on 
        their balance sheets which dwarf that of the plan 
        sponsor. These vastly differing plan profiles have, in 
        the past, all been treated identically for valuation 
        purposes, grossly and materially erring relative to the 
        market value. Erroneous, inaccurate valuations mean no 
        money to pay benefits. Using yield curves is the right 
        answer. The market, arguably, incorporates more 
        information about expectations in the yield curve than 
        any other single measure . . . leading to higher levels 
        of benefit security for participants and thus 
        strengthening the financial security of millions.\16\
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    \16\ Hearing on ``H.R. 2830, the Pension Protection Act,'' before 
the Committee on Education and the Workforce, U.S. House of 
Representatives, 109th Congress, First Session, June 15, 2005 (to be 
published).

    Mr. Pushaw further testified on the simplicity of the 
---------------------------------------------------------------------------
modified yield curve approach:

          The modified yield curve approach in this bill is a 
        good simplification to ease administrative 
        implementation by small plans but rigorous to develop 
        market-based valuations for the largest of plans, 
        reflective of their plan's liability profiles and, 
        hence, emerging cash flow needs.\17\
---------------------------------------------------------------------------
    \17\ Id.

    It is the view of the Committee that the Secretary of the 
Treasury should construct one yield curve representing the 
three-year weighted average of AAA, AA, and A bond markets. The 
three segment rates, which are to be used for each of the three 
duration periods in the modified yield curve, should reflect 
the average of all AAA, AA, and A bonds for each year in each 
respective segment. The Committee believes these markets are 
interrelated; therefore, the modified yield curve should 
incorporate the interrelated connection between these markets.

Lump sum distribution rates

    The Committee also believes that the modified yield curve 
should be used to calculate the value of lump sum distributions 
to participants, and the prevalence of lump sum distributions 
must be assumed when determining a plan's funding target. In 
addition, the mortality table that must be used for calculating 
lump sums is the same table required for minimum funding 
purposes (the RP-2000 Combined Mortality Table, as published by 
the Society of Actuaries). The mortality assumptions should 
also take into account an equal number of men and women 
receiving lump sums. Currently, lump sum distributions are 
calculated using the artificially-low 30-year Treasury rate; 
this has the effect of inflating lump sum distributions, which 
drains plan assets and represents a major source of systemic 
pension underfunding. Using the same interest rates to 
calculate both employer pension contributions and lump sum 
distributions will ensure these benefits are calculated and 
funded properly and fairly without having an adverse impact on 
the rest of the workers and retirees in the plan. Robert D. 
Krinsky, A.S.A, E.A., Chairman, The Segal Company, on behalf of 
the American Benefits Council, testified on the impact of the 
current rate used to determine lump sum distributions and the 
need for it to be changed:

          [T]he payment of lump sum distributions to defined 
        benefit plan participants exacerbates funding problems 
        for many plans. In part, because lump sum calculations 
        are currently based on the obsolete 30-year Treasury 
        rate, lump sum payments are artificially inflated, and 
        inappropriately drain plan assets. It is important to 
        address the growing prevalence and use of the lump sum 
        distribution option and determine whether this 
        necessitates changes in the funding rules.\18\
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    \18\ Hearing on ``The Pension Underfunding Crisis: How Effective 
Have Reforms Been?'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 108th Congress, First 
Session, October 29, 2003, Serial No. 108-40.
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Reducing volatility and ensuring predictability

    The Committee understands that plan sponsors need the 
ability to predict and budget for pension contributions in 
order for defined benefit plans to remain a practical pension 
plan to offer to its employees. The Committee considered the 
need for contribution predictability with less volatility in 
the multiple hearings on defined benefit pension reform. As a 
result, the Committee believes that a modified yield curve 
concept which incorporates smoothing techniques \19\ is 
appropriate for calculating pension contributions and plan 
assets. Mr. Greg Heaslip, Vice President of Benefits, PepsiCo, 
Inc., testified on the need for companies to predict and budget 
for pension contributions:
---------------------------------------------------------------------------
    \19\ In general, smoothing refers to averaging of interest rates 
used to calculate plan liabilities as well as the averaging of plan 
assets. Smoothing generally is used to allow plan fiduciaries to 
predict future pension contributions. It also is used to mitigate 
short-term market fluctuations. Since pension obligations are 
considered long-term obligations, it is the view of the Committee that 
such fluctuations need not be recognized as they occur. Under current 
law, interest rates are smoothed over four years and assets are 
generally smoothed over six years.

          Certainty, predictability, and stability are things 
        that you'll hear me reiterate . . . At PepsiCo and at 
        other plan sponsors, defined benefit pension plans have 
        grown to a size where they have a material impact on 
        the company's overall financial results. Our pension 
        expense impacts our profits, our share price. Funding 
        impacts our balance sheet and our credit rating. For 
        any expense . . . companies have to know in advance for 
        the next three to five years what costs and funding 
        requirements will be with reasonable certainty . . . It 
        is really not the cost of defined benefit pension plans 
        that scares companies. We understand that and that's 
        what we signed up for while we implemented them. It's 
        the unpredictability, the volatility, and the 
        uncertainty surrounding them that make them very, very 
        difficult and challenging to sponsor.\20\
---------------------------------------------------------------------------
    \20\ Hearing on ``Examining Long-Term Solutions to Reform and 
Strengthen the Defined Benefit Pension System,'' before the 
Subcommittee on Employer-Employee Relations, Committee on Education and 
the Workforce, U.S. House of Representatives, 108th Congress, Second 
Session, April 29, 2004, Serial No. 108-55.
---------------------------------------------------------------------------

Limiting the use of credit balances

    In addition to implementing a permanent interest rate, the 
Committee believes that companies should be required to 
adequately and consistently fund their pension plans. Under 
current law, plan sponsors are allowed to take advantage of 
``contribution holidays'' instead of making actual 
contributions to their plans by using a ``credit balance.'' A 
credit balance can be either actual assets or an accounting 
credit that is used to increase plan assets and offset future 
contributions. However, the use of credit balances has 
contributed greatly to the current funding problems. Bradley D. 
Belt, Executive Director of the Pension Benefit Guaranty 
Corporation, testified on how the current law use of credit 
balances negatively impacts the financial status of the PBGC as 
well as participants and beneficiaries:

          The funding rules allow contribution holidays for 
        seriously underfunded plans. Bethlehem Steel made no 
        cash contributions to its plan for three years prior to 
        termination, and US Airways made no cash contributions 
        to its pilots' plan for four years before termination. 
        One reason for contribution holidays is that companies 
        build up a ``credit balance'' for contributions above 
        the minimum required amount. They can treat the credit 
        balance as a payment of future required contributions, 
        even if the assets in which the extra contributions 
        were invested have lost much of their value. Indeed, 
        some companies have avoided making cash contributions 
        for several years through the use of credit balances, 
        heedlessly ignoring the substantial contributions that 
        may be required when the balances are used up.\21\
---------------------------------------------------------------------------
    \21\ Hearing on ``The Retirement Security Crisis: The 
Administration's Proposal for Pension Reform and Its Implications for 
Workers and Taxpayers,'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 109th Congress, First 
Session, March 2, 2005, Serial No. 109-3.
---------------------------------------------------------------------------

Limiting benefit increases

    In addition to comprehensive reforms to the funding rules, 
it is the view of the Committee that plan sponsors should not 
be able to continue to increase benefits when a plan is 
underfunded. This practice perpetuates systematic underfunding 
and is a moral hazard which threatens the retirement security 
of the participants and beneficiaries as well as the future of 
the defined benefit pension system. David C. John, Research 
Fellow of the Thomas A. Roe Institute for Economic Policy 
Studies at the Heritage Foundation, testified on the negative 
effects of increasing benefits in underfunded plans:

          Companies that are in severe financial trouble often 
        try to keep their workers happy by promising them 
        higher pension benefits. Similarly, companies in 
        bankruptcy sometimes seek to improve pension benefits 
        in return for salary concessions. In both cases, these 
        higher pension promises often get passed on to the 
        PBGC, and thus to the taxpayers, for payment when the 
        company seeks to terminate its pension plan.\22\
---------------------------------------------------------------------------
    \22\ Hearing on ``The Pension Underfunding Crisis: How Effective 
Have Funding Reforms Been?'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 108th Congress, First 
Session, October 29, 2003, Serial No. 108-40.

    Ann Combs, Assistant Secretary of EBSA, also testified on 
the need for limitations on benefit increases, as well as the 
---------------------------------------------------------------------------
prohibition on lump sum distributions, for underfunded plans:

          The current rules encourage some plans to be 
        chronically underfunded, in part, because they shift 
        potential losses to third parties. This is what 
        economists refer to as a ``moral hazard.'' Under 
        current law, sponsors of underfunded plans can continue 
        to provide for additional accruals and, in some 
        situations, even make new benefit promises, while 
        pushing the cost of paying for those benefits off into 
        the future. For this reason, some companies have an 
        incentive to provide generous pension benefits that 
        they cannot currently finance, rather than increase 
        wages. The company, its workers, and any union 
        officials representing them know that at least some of 
        the additional benefits will be paid, if not by their 
        own plan, then by other plan sponsors in the form of 
        PBGC guarantees . . . If a company's plan is poorly 
        funded, the company should be precluded from adopting 
        further benefit increases unless it fully funds them, 
        especially if it is in a weak financial position. If a 
        plan is severely underfunded, retiring employees should 
        not be able to elect lump sums and similar accelerated 
        benefits. The payment of those benefits allows those 
        participants to receive the full value of their 
        benefits while depleting the plan assets for the 
        remaining participants.\23\
---------------------------------------------------------------------------
    \23\ Hearing on ``The Retirement Security Crisis: The 
Administration's Proposal for Pension Reform and Its Implications for 
Workers and Taxpayers,'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 109th Congress, First 
Session, March 2, 2005, Serial No. 109-3.
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Prohibiting shutdown and unpredictable contingent event benefits

    In addition to limitations on benefit increases and certain 
distributions, the Committee believes that shutdown benefits 
and other unpredictable contingent event benefits, should be 
eliminated. Unpredictable contingent event benefits are 
benefits that become payable under special circumstances 
relating to the closure of a plant, division or facility, or to 
layoffs of employees of a certain group or class; because they 
are a severance-type subsidy payment, they may trigger 
significantly disproportionate increases in plan liabilities. 
The PBGC guarantees all nonforfeitable benefits, other than 
benefits that become nonforfeitable solely on account of the 
termination of a plan. Shutdown benefits become nonforfeitable 
when the shutdown or layoff occurs, not when the plan 
terminates. As a result, shutdown benefits may be guaranteed by 
the PBGC if the shutdown occurs before the termination date, 
but they are not guaranteed if the shutdown occurs after plan 
termination.
    Shutdown benefits are not funded. Indeed, precisely because 
a plant shutdown is inherently unpredictable, it is extremely 
difficult to recognize the costs of these benefits in advance 
so funding for shutdown benefits is nearly impossible. Thus, 
upon shutdown, a plan's liabilities may be increased 
dramatically. The PBGC is responsible for paying these unfunded 
benefits, yet employers are not obligated to contribute money 
to pay for them.
    Plant shutdown benefits increase plan terminations and 
impose unreasonable costs on the PBGC, and should not be 
permitted. A recurring problem in pension funding has been that 
a plan may provide special benefits that are only payable in 
the event that the location at which workers are employed 
ceases operations. Such events are inherently unpredictable, 
such that it is difficult to recognize the costs of these 
benefits in advance. Current law does not include in any 
current liability calculation the cost of benefits arising from 
future unpredictable contingent events. Yet these benefits can 
dramatically increase the level of underfunding in a plan and 
by themselves have been a considerable source of pension 
funding problems. Moreover, allowing and guaranteeing plant 
shutdown benefits raises fairness issues, since other 
participants and plan sponsors may bear the burden of paying 
for these unfunded benefits.
    It is the view of the Committee that shutdown benefits are 
not similar to pension benefits. Shutdown benefits are not paid 
upon retirement from a plan. They are more like severance pay 
benefits provided to an employee upon termination from 
employment. Accordingly, HR 2830 prohibits a plan from 
providing benefits payable due to a plant shutdown or any other 
unpredictable contingent event. The bill defines 
``unpredictable contingent event'' as an event other than the 
attainment of any age, the performance of any service, the 
receipt or derivation of any compensation, the occurrence of 
death or disability, or any other event which is reasonably and 
reliably predictable (as determined by the Secretary of 
Treasury).
    Bradley D. Belt, Executive Director of the PBGC shares the 
Committee's concerns, and testified on April 26, 2005, before 
the Subcommittee on Retirement Security and Aging, Committee on 
Health, Education, Labor, and Pensions, United States Senate. 
Mr. Belt stated:

          The Administration believes that shutdown benefits 
        are severance benefits that should not be paid by 
        pension plans. These benefits generally are not funded 
        until the shutdown occurs, by which time it is often 
        too late, and no PBGC premiums are paid for them. 
        However, despite the lack of funding, shutdown benefits 
        may be guaranteed if the shutdown occurs before the 
        plan termination date, often imposing large losses on 
        the insurance program.
          The Administration proposal would prospectively 
        eliminate the guarantee of certain unfunded contingent 
        liability benefits and prohibit such benefits under 
        pension plans. These severance benefits generally are 
        not funded and no PBGC premiums are paid for them. Such 
        benefits could continue to be provided outside the 
        pension plan.

Improving disclosure

    Another crucial aspect of comprehensive pension reform is 
improved disclosure to participants and beneficiaries. The 
Committee believes that additional and timely disclosure of 
plan information is imperative for employees to have in order 
to understand the financial status of their pension plan for 
their retirement security. In general current law requires plan 
sponsors to disclose ``current liability'' to participants and 
beneficiaries, which is not an accurate proxy for the 
disclosure of the financial health of a plan.\24\ Participants 
and beneficiaries should be provided information on the general 
health of their pension plan, including an estimate of plan 
assets, liabilities, and the funded ratio, on a timely basis. 
Barbara D. Bovbjerg, Director of Education, Workforce, and 
Income Security Issues, U.S. General Accounting Office, 
testified on the need for additional disclosure of pension plan 
information:
---------------------------------------------------------------------------
    \24\ Current liability means the present value of all accrued 
liabilities attributable to participants and beneficiaries under the 
plan.

          In addition, only participants in plans below a 
        certain funding threshold receive annual notices of the 
        funding status of their plans. As a result, many plan 
        participants, including participants of the Bethlehem 
        Steel pension plan, did not receive such notifications 
        in the years immediately preceding the termination of 
        their plans. Expanding the circumstances under which 
        sponsors must notify participants of plan underfunding 
        might give sponsors an additional incentive to increase 
        plan funding and would enable more participants to 
        better plan their retirement.\25\
---------------------------------------------------------------------------
    \25\ Hearing on ``The Pension Underfunding Crisis: How Effective 
Have Reforms Been?'' before the Committee on Education and the 
Workforce, U.S. House of Representatives, 108th Congress, First 
Session, October 29, 2003, Serial No. 108-40.
---------------------------------------------------------------------------

Increasing the maximum deductible amount

    It is the view of the Committee that the rules relating to 
the maximum amount of deductible contributions that plan 
sponsors may make to a qualified pension plan must be reformed 
in order to encourage plan sponsors to make additional 
contributions. The current rules prohibit plan sponsors from 
making additional contributions to pension plans during good 
economic times, but impose accelerated contribution 
requirements on plan sponsors during an economic downturn or 
even a slight market fluctuation. Additionally, employers are 
generally subject to an excise tax for making contributions in 
excess of the maximum deductible amount.
    H.R. 2830 permits employers to make additional 
contributions up to a new higher maximum deductible of up to 
the greater of: (1) the excess of the sum of 150 percent of a 
plan's funding target plus the normal cost for the plan year 
over the value of plan assets, or (2) the excess of the sum of 
the plan's at-risk funding target plus the at-risk normal cost 
for the plan year over the value of plan assets. Giving 
employers more flexibility to make generous contributions 
during good economic times will help provide workers and 
retirees greater retirement security by increasing the assets 
available to finance retirement benefits.
    In a report released to the Committee on Education and the 
Workforce on October 29, 2003, the General Accounting Office 
indicated that raising the level of tax deductible 
contributions was one of the steps that could be taken to 
enhance incentives to increase funding of plans:

          IRC and ERISA restrict tax-deductible contributions 
        to prevent plan sponsors from contributing more to 
        their plan than is necessary to cover accrued future 
        benefits. This can prevent employers from making plan 
        contributions during periods of strong profitability. 
        Raising these limitations might result in pension plans 
        being better funded, decreasing the likelihood that 
        they will be underfunded should they terminate.\26\
---------------------------------------------------------------------------
    \26\ United States General Accounting Office, ``Private Pensions: 
Changing Funding Rules and Enhancing Incentives Can Improve Plan 
Funding,'' No. GAO-04-176T.

    In recent years, plan sponsors have also expressed their 
concern that market volatility limits their ability to make 
additional contributions. Increasing the level of maximum 
deductible contributions is an important incentive to encourage 
plan sponsors to make additional contributions to their plans, 
which will ultimately result in a system with plans that are 
better funded. Lynn Franzoi, Senior Vice President of Benefits 
for Fox Entertainment Group, recently testified on the need for 
increasing the maximum deductible amount of contributions to 
---------------------------------------------------------------------------
pension plans:

          [I]ncreasing the maximum deductible contribution 
        limit is long overdue. Employers should be able to 
        contribute more to their plans in good times and not be 
        forced to increase contributions during bad economic 
        times. Some employers with plans that are now 
        experiencing funding deficiencies would have liked to 
        have increased contributions when they had cash on 
        hand. However, they were limited by the maximum 
        deductibility rules. Not only would their additional 
        contributions have been nondeductible, but they would 
        have had to pay a significant excise tax on the 
        contributions. This cap on contributions works against 
        companies and plan participants by requiring 
        contributions when companies are financially strapped 
        and prohibiting contributions when companies are 
        prosperous. Thus, companies cannot insulate themselves 
        and their plan participants against cyclical changes in 
        the economy. Therefore, we fully support the increases 
        to the maximum deductible contributions for defined 
        benefit plans.\27\
---------------------------------------------------------------------------
    \27\ Hearing on H.R. 2830, the ``Pension Protection Act of 2005,'' 
before the Committee on Education and the Workforce, U.S. House of 
Representatives, 109th Congress, First Session, June 15, 2005 (to be 
published).
---------------------------------------------------------------------------

Ensuring the viability of hybrid pension plans

    Recent statistics show that the traditional defined benefit 
pension system is declining. Although the PBGC provides 
insurance protection to approximately 29,000 single employer 
pension plans covering 34.6 million people, the percentage of 
private sector workers covered by a defined benefit pension 
plan has dropped from 39 percent in 1975 to 21 percent in 
2004.\28\ The Committee believes that hybrid pension plans, 
such as cash balance plans, may reverse this trend if the rules 
surrounding these plans are clarified. It is the view of the 
Committee that hybrid pension plans represent the future of the 
defined benefit pension system and are a valuable tool in 
providing benefits that are not subject to market fluctuations 
and guaranteed by the PBGC.
---------------------------------------------------------------------------
    \28\ ``The Future of the Defined Benefit System and the Pension 
Benefit Guaranty Corporation,'' General Accounting Office, Report No. 
GAO-05-578SP.
---------------------------------------------------------------------------
    Under hybrid plans, participants earn portable benefits 
more evenly over a career span, not just at the very end of a 
participant's career. This can result in greater retirement 
savings for workers who do not remain with the same employer 
for their entire career. As a result, a broader group of 
participants, including lower-income employees and women, earn 
greater benefits with shorter service under hybrid plans than 
traditional plans. On June 22, 2004, the Committee released a 
fact sheet which shows the benefits of hybrid plans and dispels 
some of the myths surrounding these plans:


     ``For example, if an employer wanted to offer 
employees a more portable retirement benefit through a cash 
balance formula that provides annual credits of five percent of 
pay, mandatory choice might lead the employer to instead freeze 
its defined benefit plan and adopt a 401(k) plan that provides 
contributions of five percent of pay. Under the 401(k) plan, 
employees would bear the entire risk of stock market 
declines.'' Mitchell & Mulvey, Pension Research Council, 
Wharton School, University of Pennsylvania, Possible 
Implications of Mandating Choice in Corporate Defined Benefit 
Plans (2003).
    Nancy M. Pfotenhauer, President, Independent Women's Forum, 
testified on the impact of hybrid plans on the retirement 
security of women:

          In the opinion of the Independent Women's Forum, 
        traditional retirement and pension approaches simply 
        fail to meet the needs of our changing society. 
        Succinctly, they do not reflect the work patterns and 
        demographics of American women. Whether it's the Wall 
        Street Journal or Family Circle magazine, today's 
        commentators agree that movement in and out of the 
        workforce for American mothers has become the ``new 
        normal.'' In fact, many are noting a current trend of 
        mothers going back home when their children become 
        teenagers . . . Luckily, pension innovations in the 
        private sector hold promise. Cash balance, pension 
        equity, and other hybrid plans combine attractive 
        features of a traditional defined benefit plan 
        (employer funding, employer assumption of risk of poor 
        investment, government insurance and spousal 
        protections) with attractive features of a defined 
        contribution plan (individual accounts, an easily 
        understood benefit formula and portability).\29\
---------------------------------------------------------------------------
    \29\ Hearing on ``Examining Cash Balance Pension Plans: Separating 
Myth From Fact,'' before the Committee on Education and the Workforce, 
U.S. House of Representatives, Second Session, July 7, 2004, Serial No. 
108-67.

    It is the view of the Committee that the clarification of 
the current age discrimination rules under ERISA preserves the 
current ability of plan sponsors to amend or modify their 
pension plans prospectively in order to maximize plan sponsor 
flexibility and ensure the future of these valuable defined 
benefit plans for participants and beneficiaries. The private, 
employer-sponsored employee benefit system is voluntary; 
therefore, placing restrictions on plan sponsors regarding plan 
design or conversion approaches and mandating that plan 
sponsors guarantee a certain level of benefits, even benefits 
that have not been earned by participants, should be 
prohibited. Ms. Pfotenhauer also testified on the importance of 
---------------------------------------------------------------------------
maintaining a voluntary pension system:

          [A]ny adoption of restrictions that effectively limit 
        the ability of companies to transition to hybrid plans 
        places the financial well-being of the relatively few 
        employees who have had the luxury of staying with one 
        company for a long period of time (decades), have had 
        the luxury of taking early retirement, and have had the 
        luxury of taking their pension benefits in the form of 
        an annuity rather than as a lump sum, ahead of all the 
        employees who do not have these options. Regardless of 
        one's perspective, any discussion about transition is 
        appropriately done within the context of a clear 
        understanding that these plans are voluntarily 
        sponsored by employers. As such, an employer currently 
        could decide to freeze benefit accruals or completely 
        terminate plans altogether if costs become too 
        burdensome.\30\
---------------------------------------------------------------------------
    \30\ Id.

    The need for clarification of the hybrid age discrimination 
issue is critical to the future of the defined benefit pension 
system. Congress must clarify the existing rules to ensure that 
companies continue to offer these valuable benefits. Ellen 
Collier, Director of Benefits, Eaton Corporation, testified on 
the issues and concerns that many plan sponsors face 
surrounding the uncertainty of sponsoring a hybrid pension 
---------------------------------------------------------------------------
plan:

          Now that the basic hybrid designs have been called 
        into question, employers facing a set of circumstances 
        similar to ours would have far fewer options. One 
        choice would be to stay with the traditional pension 
        design, which tends to deliver meaningful retirement 
        benefits to a relatively small number of career-long 
        workers, has limited value as a recruitment device in 
        today's marketplace, and makes integration of new 
        employees difficult. The other alternative would be to 
        exit the defined benefit system and provide only a 
        defined contribution plan, which while an important and 
        popular benefit offering, provides none of the security 
        guarantees inherent in defined benefit plans. Clearly, 
        it is employees that lose out as a result of today's 
        uncertainty surrounding hybrid plans.\31\
---------------------------------------------------------------------------
    \31\ Id.
---------------------------------------------------------------------------

Providing for personalized investment advice

    In addition to comprehensive defined benefit reforms, the 
Committee believes that all defined contribution participants, 
regardless of their income, net worth, or position, should be 
afforded the opportunity to receive personalized investment 
advice in order to strengthen the retirement security of the 
millions of American workers participating in these plans. The 
ability to provide workers with individualized investment 
advice has passed the house three times with bipartisan 
support. Most recently, investment advice legislation passed 
the House of Representatives on May 14, 2003, by a vote of 271-
157, including 49 Democrats, as part of H.R. 1000, the 
``Pension Security Act.''
    Assistant Secretary of EBSA Ann Combs addressed the 
importance of the investment advice provisions in the Pension 
Security Act:

          It's clear that people who participate in 401(k) 
        plans want their employers and plans to provide more 
        investment advice. According to a survey recently 
        released by CIGNA Retirement and Investment Services, 
        89 percent of 401(k) investors want ``specific 
        information on investment decision-making.''
          Investment advice also encourages participation in 
        employer-provided retirement plans. Studies conducted 
        on behalf of the investment advisory firm Power show 
        workers who receive advice are more likely to 
        participate in savings plans and to save more than 
        workers who never get any guidance . . . For many 
        workers, investment advice decisions are intimidating. 
        The Department is encouraged to see growing interest in 
        the adoption of an alternative method sanctioned by the 
        advisory opinion where workers turn over their decision 
        making to the financial services firm who manages their 
        accounts in accordance with the independent adviser's 
        decisions.\32\
---------------------------------------------------------------------------
    \32\ Hearing on ``The Pension Security Act: New Pension Protections 
to Safeguard the Retirement Savings of American Workers,'' before the 
Subcommittee on Employer-Employee Relations, Committee on Education and 
the Workforce, U.S. House of Representatives, 108th Congress, First 
Session, February 13, 2003, Serial No. 108-2.

    Scott Sleyster, Senior Vice President and President of 
Retirement Services and Guaranteed Products, Prudential 
Financial, testified about the importance of investment advice 
and addressed the so-called ``conflict'' issue claimed by 
---------------------------------------------------------------------------
opponents of individualized investment advice:

          [F]irst and foremost, you need to remember that the 
        choices, the options that are being offered in DC 
        [defined contribution] plans have already been reviewed 
        by the plan sponsor. The industry has demanded open 
        architecture for some time. So you typically have 11 to 
        15 choices and in most cases, our funds and any 
        company's funds would probably only represent about a 
        third of that. Second, the most important decision here 
        isn't the individual fund or even fund manager. The 
        most important issue in managing a portfolio is asset 
        allocation. And models are built to design asset 
        allocation, and that is really what designs the choices 
        you have. So, that if you have 15 funds, you don't have 
        15 growth funds; you have some that are growth, some 
        that are international, some that are small capped, 
        some that are fixed income, [and] some that are stable 
        value. And I think that what really drives this is 
        asset allocation.
          [T]he issue here is how are we going to get advice to 
        people in a cost effective manner. While you can 
        probably come up with more esoteric and elegant 
        solutions that seem pure, if you are asking the company 
        to fund that or you are asking the participant to pay 
        an additional fee for that, then you are going to end 
        up with what we have ended up with already, which is 
        tools out there that aren't utilized or options that 
        plan sponsors don't want to pay for. Any you know, 
        quite frankly, that is really the issue: How do we get 
        investment advice to the average employee--remember, 
        the average 401(k) balance, 45 percent of plan 
        participants have less than $10,000. People aren't 
        typically trying to go after those customers to sell 
        them other products. The real question is, how do we 
        get them advice that is as close to unbiased as 
        possible, but also in a very cost efficient and simple 
        manner.\33\
---------------------------------------------------------------------------
    \33\ Id.
---------------------------------------------------------------------------

Additional prohibited transaction reforms

    In addition to investment advice, it is the view of the 
Committee that, in general, the prohibited transaction rules 
under ERISA, which were passed over 30 years ago, must be 
updated in order for pension plans to provide the best 
retirement benefits to participants and beneficiaries. 
America's financial markets are the most efficient, dynamic, 
and transparent in the world. The dynamic marketplace of today 
is extremely different than it was 30 years ago with the 
introduction of electronic trading, new financial products, and 
faster execution. Furthermore, the financial services industry 
has dramatically consolidated, which makes the current 
prohibited transaction rules onerous and detrimental to the 
entire employee benefits system. In order to improve the 
overall operation and maintenance of pension plans, which will 
ultimately result in greater efficiency and, therefore, lower 
costs and fees paid by these plans, while continuing to protect 
the interests of participants and beneficiaries, the prohibited 
transaction rules should be safely updated to ensure that all 
pension plans are able to function with ease and efficiency in 
our current marketplace. Representative John Kuhl (R-NY) 
addressed the need for specific changes to the current 
prohibited transaction system:

          [T]hese are very targeted changes that will help 
        solve many of the most pressing issues our financial 
        markets are facing because of ERISA. They will benefit 
        our pension plans and those who rely on efficient 
        investment for their retirement security without 
        undercutting important protections for investors.\34\
---------------------------------------------------------------------------
    \34\ Consideration of H.R. 2830, the ``Pension Protection Act of 
2005,'' by the Committee on Education and the Workforce, U.S. House of 
Representatives, June 29, 2005.

    Representative Rob Andrews (D-NJ) also addressed the need 
to reform the prohibited transaction exemption rules within the 
current framework of ERISA in order to ensure the protections 
---------------------------------------------------------------------------
currently afforded to participants and beneficiaries:

          [T]hese changes will lower some transaction costs by 
        eliminating redundant bonding; eliminating some other 
        administrative responsibilities that really don't add 
        any protection or value from the point of view of the 
        pensioner, but do add costs, and therefore reduce 
        return.\35\
---------------------------------------------------------------------------
    \35\ Id.
---------------------------------------------------------------------------

                         MULTIEMPLOYER REFORMS

    There is considerable attention surrounding single employer 
defined benefit reforms because of the recent and notable 
terminations of several large, underfunded traditional defined 
benefit pension plans as well as the PBGC's $23.3 billion 
deficit. However, it is the view of the Committee that the 
multiemployer pension system must also be reformed in order to 
ensure that all stakeholders, including participants, 
beneficiaries, and contributing employers, are protected from 
the possible negative consequences currently facing the system.

The need for legislation

    There are currently 9.8 million workers and retirees 
participating in 1,587 multiemployer plans. Unfortunately, the 
major provisions in ERISA that govern multiemployer plans have 
not been amended since 1980. Until 2003, the PBGC's 
multiemployer insurance program had shown growing financial 
strength since enactment of the 1980 amendments. During 2003, 
however, the program (which is vulnerable to the same economic 
and demographic pressures that have threatened the single-
employer program) sustained a net loss of $419 million, the 
largest one-year drop in the program's history. As a result, 
the program reported a year-end deficit of $261 million, the 
program's largest shortfall ever and its first year-end deficit 
in over 20 years. By the end of 2004, that deficit had declined 
to $236 million as the program reported net income of $25 
million.
    Since 1980, PBGC has received requests for financial 
assistance from 39 multiemployer plans. During 2004, 27 of 
these plans received assistance. At the end of fiscal year 
2004, the multiemployer program had assets of $1.07 billion and 
total liabilities of $1.306 billion. Most of these 
liabilities--$1.295 billion--represent non-recoverable future 
financial assistance to the 27 plans currently receiving 
financial assistance and to other plans expected to receive 
such assistance in the future.
    A March 2004 GAO report to the Subcommittee on Employer-
Employee Relations discussed problems in multiemployer pension 
system:

          Following two decades of relative financial 
        stability, multiemployer plans as a group appeared to 
        have suffered recent and significant funding losses, 
        while long-term declines in participation and new plan 
        formation continued unabated. At the close of the 
        1990s, the majority of multiemployer plans reported 
        assets exceeding 90 percent of total liabilities. 
        Recently, however, stock market declines, coupled with 
        low interest rates and poor economic conditions, appear 
        to have reduced assets and increased liabilities for 
        many plans. PBGC reported an accumulated net deficit of 
        $261 million for its multiemployer program in 2003, the 
        first since 1981. Meanwhile, since 1980, the number of 
        plans has declined from over 2,200 to fewer than 1,700 
        plans, and there has been a long-term decline in the 
        total number of active workers. PBGC monitors those 
        multiemployer plans, which may, in PBGC's view, present 
        a risk of financial insolvency.\36\
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    \36\ ``Private Pensions: Multiemployer Plans Face Short- and Long-
Term Challenges,'' General Accounting Office, Report No. GAO-04-423.

    The PBGC does not trustee the administration of insolvent 
multiemployer plans as it does with single-employer plans; 
however, it provides technical and financial assistance to 
troubled plans and guarantees a minimum level of benefits to 
participants in insolvent plans. PBGC loans have been rare, 
with loans to only 33 plans totaling $167 million since 1980.

Challenges facing the multiemployer pension system

    The GAO report revealed several factors that pose 
challenges to the long-term prospects of the multiemployer 
system. Some are inherent to the multiemployer regulatory 
framework, such as the greater perceived financial risk and 
reduced flexibility for employers compared to other plan 
designs, which suggest that fewer employers will find these 
plans attractive. Furthermore, the long-term decline of 
collective bargaining results in fewer new participants to 
expand or create new multiemployer plans. Other factors 
threaten all defined benefit plans, including multiemployer 
plans: the growing trend among employers to choose defined 
contribution plans; the increasing life expectancy of workers, 
which raises the cost of plans; and continuing increases in 
employer health insurance costs, which compete with pensions 
for employer funding.\37\
---------------------------------------------------------------------------
    \37\ See id.
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    It is the Committee's view that the multiemployer system 
has had a history of financial stability due to the fact that 
these plans pool their risk and that retiree benefits are not 
generally dependent upon the economic viability of one company. 
However, despite these facts, the multiemployer system faces 
some serious long-term structural issues. It is the Committee's 
view that the multiemployer pension system must be self 
sustaining for the long-term on behalf of workers and 
employers.
    Barbara D. Bovbjerg, Director of Education, Workforce, and 
Income Security Issues at the General Accounting Office, echoed 
those concerns, citing the facts that individual employers in 
multiemployer plans cannot easily adjust their plan 
contributions in response to the firm's own financial 
circumstances, the long-term decline in collective bargaining 
growth, and an increasing number of retirees in comparison to 
active workers in the system:

          Although available evidence suggests that 
        multiemployer plans are not experiencing anywhere near 
        the magnitude of the problems that have recently 
        afflicted the single employer plans, there is cause for 
        concern . . . a number of factors pose challenges to 
        the multiemployer plan system over the long term.\38\
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    \38\ Hearing on ``Reforming and Strengthening Defined Benefit 
Plans: Examining the Health of the Multiemployer Pension System,'' 
before the Subcommittee on Employer-Employee Relations, U.S. House of 
Representatives, 108th Congress, Second Session, March 18, 2004, Serial 
No. 108-49.

    John McDevitt, Senior Vice President, United Parcel 
---------------------------------------------------------------------------
Service, noted the need for long-term reform:

          It is important to understand that the underlying 
        problems are not simply caused by economic swings in 
        the stock markets, which could be cured by ``waiting 
        out'' the downturn. The problems are structural to the 
        trucking industry, to the labor market in general, and 
        to the past management of multiemployer pension plans. 
        Short-term fixes dependent on market changes will not 
        correct the financial solvency problems of 
        multiemployer pension plans; therefore a need for real 
        multiemployer pension plan reform is urgently needed. 
        Doing nothing is not an option.\39\
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    \39\ Id.

    Scott Weicht, Executive Vice President of Adolfson and 
Peterson Construction, talked about the importance of 
---------------------------------------------------------------------------
strengthening multiemployer plans on behalf of workers:

          I believe that these plans are a secure and viable 
        way . . . to provide pension benefits to workers. In 
        the construction arena, workers follow the job, not 
        necessarily the company, and these plans provide the 
        proverbial third leg of the retirement stool for people 
        who would otherwise be left with only Social Security 
        and whatever savings that they could muster. I know 
        that Congress is extremely interested in retirement 
        security, and I believe that these plans are an 
        essential part of that discussion.\40\
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    \40\ Id.
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Improving and preserving the multiemployer pension system

    The Committee believes that the multiemployer pension 
funding and benefit structure needs to be reformed as soon as 
possible, including the addition of quantifiable measures of 
improvement and adjustments to the benefit structures for 
severely underfunded plans, in order to maintain the health of 
the plans that are in existence. Timothy Lynch, President and 
CEO of the Motor Freight Carriers Association, testified on the 
need for overall reforms which plan trustees should consider in 
order to improve the financial health of multiemployer plans:

          As multiemployer legislation is considered, serious 
        consideration should be given to whether additional 
        procedural or legal controls over the management of the 
        plans could prevent serious funding issues. Something 
        as simple as imposing funding policy guidelines that 
        mandate clear targets for the plan's unfunded 
        liability. The Teamsters Western Pension Fund has long 
        had a funding policy that established the funding 
        levels and requires the trustees to adjust benefits 
        based on the levels. Plan modifications are virtually 
        automatic.
          Additionally, consideration should be given to 
        requiring that the level of plan benefits be more 
        closely tied to the level of plan contributions and 
        available assets. This may require a hard look at anti-
        cutback provisions. If trustees want to increase 
        benefits during good times, there should be less 
        restriction on their ability to reduce benefits during 
        bad times.\41\
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    \41\ Hearing on ``Examining Long-Term Solutions to Reform and 
Strengthen the Defined Benefit Pension System,'' before the 
Subcommittee on Employer-Employee Relations, Committee on Education and 
the Workforce, U.S. House of Representatives, 108th Congress, Second 
Session, April 29th, 2004, Serial No. 108-55.

    It is the Committee's view that H.R. 2830 includes the 
much-needed reforms for multiemployer pension plans. As noted 
previously, the bill provides for quantifiable measures of 
improvement for plans that are underfunded at certain levels. A 
wide-ranging coalition of employer and labor groups have made 
significant progress in reaching consensus on proposals for 
reforms, and the H.R. 2830 includes many of these reforms. Andy 
Scoggin, Vice President for Labor Relations at supermarket 
retailer Albertsons, Inc., praised the Committee for addressing 
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the problem:

          We believe that it provides a reasonable and rational 
        framework for multiemployer pension plans to work 
        through the problems now facing all pension plans. The 
        reforms in H.R. 2830 are not a government bailout . . . 
        instead, the proposed legislation will provide the 
        tools which will allow multiemployer plans to solve our 
        own pension problems without direct government 
        intervention and without putting additional financial 
        pressure on the Pension Benefit Guaranty Corporation . 
        . . we believe, if Congress acts now, multiemployer 
        plans can solve their own problems so that they do not 
        become a burden on the federal government or the 
        taxpayer.\42\
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    \42\ Hearing on H.R. 2830, the ``Pension Protection Act of 2005,'' 
before the Committee on Education and the Workforce, U.S. House of 
Representatives, 109th Congress, First Session, June 15, 2005 (to be 
published).

    Timothy Lynch, President and CEO of the Motor Freight 
Carriers Association, agreed and testified on the need for 
Congress to act on reforming the multiemployer pension system 
in order to protect the pension benefits of workers and 
---------------------------------------------------------------------------
retirees could be at risk:

          [E]mployers are concerned about the current framework 
        for multiemployer pension plans and strongly believe 
        that if not properly addressed, the problems will 
        increase and possibly jeopardize the ability of 
        contributing employers to finance the pension plans. 
        The end result could put at risk the pension benefits 
        of their employees and retirees . . . we believe that 
        H.R. 2830 meets the overall objective of alleviating 
        the short-term consequences of funding deficits while 
        promoting long-term funding reform for multiemployer 
        pension plans.\43\
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    \43\ Id.

    Judy Mazo, Senior Vice President and Director of Research 
for The Segal Company provides consulting services for many of 
the nation's multiemployer plans, said the status quo was 
---------------------------------------------------------------------------
unacceptable:

          Our aim is to make sure that, in the end, the 
        environment for multiemployer plans will be improved, 
        so that they, their contributing employers and their 
        participants are all well-served . . . the alternative 
        is not the continuation of the status quo, but a much 
        worse fate that includes: the loss not only of accrued 
        ancillary benefits, but a substantial portion of a 
        participant's normal retirement benefit as plans are 
        assumed by the PBGC; the demise of potentially large 
        numbers of small businesses and the loss, not only of 
        pension benefits, but the jobs from which such benefits 
        stem; and an increase in taxpayer exposure at the PBGC, 
        an agency that is already overburdened.\44\
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    \44\ Id.

    It is the view of the Committee that multiemployer plans 
provide valuable, guaranteed benefits to union workers and 
retirees. The reforms included in H.R. 2830 will help to ensure 
the continuation of these plans by providing much-needed 
restrictions for underfunded plans and additional requirements 
for all parties with a vested interest in the health and future 
of these plans.

                              Present Law


                     SINGLE EMPLOYER PENSION PLANS

    Minimum Funding Rules. Single employer defined benefit 
pension plans are subject to minimum funding requirements under 
ERISA and the Internal Revenue Code (``IRC'').\45\ In general, 
the amount of contributions required for a plan year under the 
minimum funding rules is the amount needed to fund benefits 
earned during a plan year, which is considered a plan's 
``normal cost'' for the year, plus that year's portion of other 
liabilities that are amortized over a period of years, such as 
investment losses or increased benefits related to past service 
credit.\46\ The amount of required annual contributions is 
determined under one of a number of acceptable actuarial cost 
methods. Additional contributions are required under the 
deficit reduction contribution rules in the case of certain 
underfunded plans (described below). No contribution is 
required under the minimum funding rules in excess of the full 
funding limit (described below).
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    \45\ See ERISA Sec. 301-308 and IRC Sec. 412. Under section four of 
ERISA, certain plans are not subject to the minimum funding rules, 
including governmental plans, certain church plans, foreign plans, 
excess benefit plans, and certain plans maintained for the purpose of 
complying with applicable workers' compensation, unemployment 
compensation, or disability insurance laws.
    \46\ See ERISASec. 3(28). The term ``normal cost'' is defined as 
the annual cost of future pension benefits and administrative expenses 
assigned, under an actuarial cost method, to years subsequent to a 
particular valuation date of a plan.
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    Funding Standard Account. As an administrative aid in the 
application of the funding requirements, a defined benefit 
pension plan is required to maintain a special account called a 
``funding standard account'' to which specified charges and 
credits are made for each plan year, including a charge for 
normal cost and credits for contributions to the plan. Other 
credits or charges may apply as a result of increases or 
decreases in past service liability as a result of plan 
amendments, experience gains or losses, gains or losses 
resulting from a change in actuarial assumptions, or a waiver 
of minimum required contributions.
    In determining plan funding under an actuarial cost method, 
a plan's actuary generally makes certain assumptions regarding 
the future experience of a plan. These assumptions typically 
involve rates of interest, mortality, disability, salary 
increases, and other factors affecting the value of assets and 
liabilities. If the plan's actual unfunded liabilities are less 
than those anticipated by the actuary on the basis of these 
assumptions, then the excess is an experience gain. If the 
actual unfunded liabilities are greater than those anticipated, 
then the difference is an experience loss. Experience gains and 
losses for a year are generally amortized as credits or charges 
to the funding standard account over five years. If the 
actuarial assumptions used for funding a plan are revised and, 
under the new assumptions, the accrued liability of a plan is 
less than the accrued liability computed under the previous 
assumptions, the decrease is a gain from changes in actuarial 
assumptions. If the new assumptions result in an increase in 
the accrued liability, the plan has a loss from changes in 
actuarial assumptions. The accrued liability of a plan is the 
actuarial present value of projected pension benefits under the 
plan, including projected future benefit increases, which will 
not be funded by enough future contributions to meet the plan's 
normal cost. The gain or loss for a year from changes in 
actuarial assumptions is amortized as credits or charges to the 
funding standard account over ten years.
    If minimum required contributions are waived, in accordance 
with the waiver rules and procedures established by the 
Secretary of the Treasury, the waived amount (referred to as a 
``waived funding deficiency'') is credited to the funding 
standard account. The waived funding deficiency is then 
amortized over a period of five years, beginning with the year 
following the year in which the waiver is granted. Each year, 
the funding standard account is charged with the amortization 
amount for that year unless the plan becomes fully funded. If, 
as of the close of the plan year, charges to the funding 
standard account exceed credits to the account, then the excess 
is referred to as an ``accumulated funding deficiency.''
    If, as of the close of a plan year, the funding standard 
account reflects credits at least equal to charges, the plan is 
generally treated as meeting the minimum funding standard for 
the year and there is no required contribution.
    In applying the funding rules, all costs, liabilities, 
interest rates, and other factors are required to be determined 
on the basis of actuarial assumptions and methods, each of 
which is reasonable (taking into account the experience of the 
plan and reasonable expectations), or which, in the aggregate, 
result in a total plan contribution equivalent to a 
contribution that would be obtained if each assumption and 
method were reasonable. In addition, the assumptions are 
required to offer the actuary's best estimate of anticipated 
experience under the plan.
    Normal costs and other required amortization payments under 
a plan are determined on the basis of an actuarial valuation of 
the assets and liabilities of a plan. An actuarial valuation of 
plan assets and liabilities is required annually and is made as 
of a date within the plan year or within one month before the 
beginning of the plan year. However, a valuation date within 
the preceding plan year may be used if, as of that date, the 
value of a plan's assets is at least 100 percent of a plan's 
current liability.\47\ For funding purposes, the actuarial 
value of plan assets may be used, rather than fair market 
value. The actuarial value of plan assets is the value 
determined under a reasonable actuarial valuation method that 
takes into account fair market value and is permitted under 
Department of Treasury regulations. However, any actuarial 
valuation method used must result in a value of plan assets 
that is not less than 80 percent of the fair market value of 
the assets and not more than 120 percent of the fair market 
value. In addition, if the valuation uses the average value of 
the plan assets, the values may not be averaged for more than 
the five most recent plan years, including the current year.
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    \47\ Current liability is generally defined as the present value of 
all liabilities attributable to participants and beneficiaries accrued 
to date under the plan.
---------------------------------------------------------------------------
    Credit Balances. If credits to the funding standard account 
exceed charges, the plan is considered to have a ``credit 
balance.'' Typically, a plan maintains a credit balance if 
contributions are made in excess of minimum required 
contributions or a plan experiences significant investment 
gains. The amount of the credit balance increases each year 
with interest at the rate used under the plan to determine 
costs, regardless of whether other plan assets experience 
investment losses. Credit balances can be used to reduce future 
required contributions.
    Additional Contributions for Underfunded Plans. Under 
special funding rules known as the deficit reduction 
contribution rules, an additional charge to a plan's funding 
standard account is generally required for a plan year if the 
plan's funded current liability percentage for the plan year is 
less than 90 percent.\48\ A plan's funded current liability 
percentage is generally the actuarial value of plan assets as a 
percentage of the plan's current liability.\49\ As stated 
above, a plan's current liability means the present value of 
all liabilities to employees and their beneficiaries under the 
plan.
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    \48\ Under an alternative test, a plan is not subject to the 
deficit reduction contribution rules for a plan year if: (1) the plan's 
funded current liability percentage for the plan year is at least 80 
percent, and (2) the plan's funded current liability percentage was at 
least 90 percent for each of the two immediately preceding plan years 
or each of the second and third immediately preceding plan years. The 
deficit reduction contribution rules apply to single employer plans, 
other than single employer plans with no more than 100 participants on 
any day in the preceding plan year. Single employer plans with more 
than 100 but not more than 150 participants are generally subject to 
lower contribution requirements under these rules.
    \49\ In determining a plan's funded current liability percentage 
for a plan year, the value of the plan's assets is generally reduced by 
the amount of any credit balance under the plan's funding standard 
account. However, this reduction does not apply in determining the 
plan's funded current liability percentage for purposes of whether an 
additional charge is required under the deficit reduction contribution 
rules.
---------------------------------------------------------------------------
    The deficit reduction contribution is the sum of: (1) the 
``unfunded old liability amount;'' (2) the ``unfunded new 
liability amount;'' and (3) the expected increase in current 
liability due to benefits accruing during the plan year. The 
``unfunded old liability amount'' is the amount needed to 
amortize certain unfunded liabilities under 1987 and 1994 
transition rules.\50\ The ``unfunded new liability amount'' is 
the applicable percentage of the plan's unfunded new current 
liability, which is the amount by which the plan's current 
liability exceeds the actuarial value of plan assets. The 
applicable percentage is generally 30 percent, but decreases by 
.4 of one percentage point for each percentage point by which 
the plan's funded current liability percentage exceeds 60 
percent.\51\ A plan may provide for unpredictable contingent 
event benefits, which are benefits that depend on contingencies 
that are not reliably and reasonably predictable, such as 
facility shutdowns or reductions in workforce due to company 
layoffs. The value of any unpredictable contingent event 
benefit is not considered in determining additional 
contributions until the event has occurred. As a result, plan 
sponsors are not able or required to fund for these benefits.
---------------------------------------------------------------------------
    \50\ The transition rules were included in the 1987 Pension 
Protection Act and the 1994 Retirement Protection Act.
    \51\ For example, if a plan's funded current liability percentage 
is 85 percent (i.e., it exceeds 60 percent by 25 percentage points), 
the applicable percentage is 20 percent (30 percent minus 10 percentage 
points (25 multiplied by .4)). Under this calculation, the value of the 
plan's assets is reduced by the amount of any credit balance 
accumulated in the plan's funding standard account.
---------------------------------------------------------------------------
    The amount of the additional charge required under the 
deficit reduction contribution rules is the sum of two amounts: 
(1) the excess, if any, of (a) the deficit reduction 
contribution over (b) the contribution required under the 
normal funding rules; and (2) the amount (if any) required with 
respect to unpredictable contingent event benefits. The amount 
of the additional charge cannot exceed the amount needed to 
increase the plan's funded current liability percentage to 100 
percent, taking into account any expected increase in current 
liability due to benefits accruing during the plan year.
    Required Interest Rate and Mortality Table. Specific 
interest rate and mortality assumptions must be used in 
determining a plan's current liability for purposes of the 
special funding rule. For plan years beginning before January 
1, 2004, the interest rate used to determine a plan's current 
liability must be within a permissible range of the weighted 
average of the interest rates on 30-year Treasury securities 
for the four-year period ending on the last day before the plan 
year begins.\52\ The permissible range is generally from 90 
percent to 105 percent (120 percent for plan years beginning in 
2002 or 2003).\53\ The interest rate used under the plan 
generally must be consistent with the assumptions which reflect 
the group annuity purchase rates which would be used by 
insurance companies to satisfy the liabilities under the 
plan.\54\
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    \52\ The weighting used for this purpose is 40 percent, 30 percent, 
20 percent and 10 percent, starting with the most recent year in the 
four-year period. Notice 88-73, 1988-2 C.B. 383.
    \53\ If the Secretary of the Treasury determines that the lowest 
permissible interest rate in this range is unreasonably high, the 
Secretary may prescribe a lower rate, but not less than 80 percent of 
the weighted average of the 30-year Treasury rate.
    \54\ See ERISA Sec. 302(b)(5)(B)(iii)(II).
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    Under the Pension Funding Equity Act of 2004 (``PFEA''), a 
special interest rate applies in determining current liability 
for plan years beginning in 2004 or 2005.\55\ For these plan 
years, the interest rate used must be within a permissible 
range of the weighted average of the rates of interest on 
amounts invested conservatively in long-term investment-grade 
corporate bonds during the four-year period ending on the last 
day before the plan year begins. The permissible range for 
these years is from 90 percent to 100 percent. The interest 
rate is to be determined by the Secretary of the Treasury on 
the basis of two or more indices that are selected periodically 
by the Secretary and are in the top three quality levels 
available. The Secretary of the Treasury is required to 
prescribe mortality tables and to periodically review, at least 
every five years, and update such tables to reflect the 
actuarial experience of pension plans and projected trends in 
such experience.\56\ The Secretary of the Treasury has required 
the use of the 1983 Group Annuity Mortality Table.\57\
---------------------------------------------------------------------------
    \55\ Pub. L. No. 108-218. In addition, if certain requirements are 
met, reduced contributions under the deficit reduction contribution 
rules apply for plan years beginning after December 27, 2003, and 
before December 28, 2005, for plans maintained by commercial passenger 
airlines, employers primarily engaged in the production or manufacture 
of a steel mill product or in the processing of iron ore pellets, or a 
certain labor organization.
    \56\ See ERISA Sec. 302(d)(7)(C)(ii).
    \57\ Rev. Rul. 95-28.
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    Deduction Limit. Contributions to single employer pension 
plans are deductible up to certain limits. In general, a plan 
sponsor may deduct the greater of: (1) the amount necessary to 
satisfy the minimum funding requirement for the plan year; or 
(2) the amount of the plan's normal cost for the year plus the 
amount necessary to amortize certain unfunded liabilities over 
10 years, subject to the full funding limitation for the year 
(see explanation of a plan's full funding limitation below). 
The maximum deductible amount is not less than the present 
value of the plan's unfunded current liability.\58\
---------------------------------------------------------------------------
    \58\ In general, single employer plans are subject to a maximum 
deductible amount of not less than 120 percent of current liability 
over the value of plan assets.
---------------------------------------------------------------------------
    If an employer sponsors both a defined benefit and a 
defined contribution plan that includes the same participants, 
the total deduction allowable for the employer in a year is the 
greater of: (1) 25 percent of employee compensation; or (2) the 
contribution necessary to meet the defined benefit plan's 
minimum funding requirement.
    In general, employers are subject to a 10 percent excise 
tax for the amount of any nondeductible contributions made to a 
plan in a plan year.
    Full Funding Limitation. Under ERISA, no contributions are 
required under the minimum funding rules in excess of the full 
funding limitation. The full funding limitation is the excess, 
if any, of the accrued liability under the plan, including 
normal cost, over the lesser of (a) the market value of plan 
assets, or (b) the actuarial value of plan assets. However, the 
full funding limitation may not be less than the excess, if 
any, of 90 percent of the plan's current liability over the 
actuarial value of plan assets.
    Timing of Plan Contributions. In general, plan 
contributions required to satisfy the funding rules must be 
made within 8\1/2\ months after the end of the plan year. If 
the contribution is made by such due date, the contribution is 
treated as if it were made on the last day of the plan year. In 
the case of a plan with a funded current liability percentage 
of less than 100 percent for the preceding plan year, estimated 
contributions for the current plan year must be made in 
quarterly installments during the current plan year.\59\ As 
stated above, the amount of each required installment is 25 
percent of the lesser of 90 percent of the amount required to 
be contributed for the current plan year or 100 percent of the 
amount required to be contributed for the preceding plan year.
---------------------------------------------------------------------------
    \59\ See ERISA Sec. 302(e).
---------------------------------------------------------------------------
    Failure to Make Required Contributions. An employer is 
generally subject to an excise tax of 10 percent of the amount 
of the funding deficiency if it fails to make minimum required 
contributions and fails to obtain a waiver from the Internal 
Revenue Service.\60\ In addition, a tax of 100 percent may be 
imposed if the funding deficiency is not corrected within a 
certain period. If the total of the contributions the employer 
fails to make, with interest, exceeds one million dollars and 
the plan's funded current liability percentage is less than 100 
percent, a lien arises in favor of the plan with respect to all 
property of the employer and the members of the employer's 
controlled group. The amount of the lien is the total amount of 
the missed contributions, including interest.
---------------------------------------------------------------------------
    \60\ See ERISA Sec. 303. In general, the Secretary of the Treasury 
is permitted to waive all or a portion of a plan's minimum required 
contributions or extend the amortization periods applicable to any net 
experience loss.
---------------------------------------------------------------------------
    Limitations on Benefit Increases, Distributions, and 
Accruals. ERISA provides that a defined benefit plan may not 
adopt an amendment which results in an increase in the plan's 
current liability if the funded current liability percentage of 
a plan is less than 60 percent, including any amendment that 
would cause a plan's current liability percentage to fall below 
60 percent, unless the plan sponsor provides security, such as 
real property or equities.\61\ Other than the above limitation, 
ERISA only provides for a prohibition on benefit increases if a 
plan is involved in a bankruptcy proceeding. ERISA also limits 
certain benefit payments if a plan has a liquidity shortfall, 
which occurs if a plan's liquid assets are less than the 
disbursements from the plan in the preceding plan year.
---------------------------------------------------------------------------
    \61\ See ERISA Sec. 307.
---------------------------------------------------------------------------
    Under current law, plans are not permitted to provide 
severance benefits; however, plans may provide for subsidized 
early retirement benefits and unpredictable contingent event 
benefits. Unpredictable contingent event benefits are benefits 
that depend on certain events or other contingencies that are 
not reasonably predictable, such as a facility shutdown. These 
benefits are considered protected benefits under ERISA and may 
not be eliminated.
    Disclosure. ERISA requires plan administrators/fiduciaries 
to file an annual report with the Secretary of Labor, known as 
a Form 5500. This report includes certain plan information, 
including an actuarial report containing plan asset and 
liability information, information regarding participant 
distributions, and plan contributions. This form is due on the 
last day of the seventh month after the end of the plan year. 
The summary of this report, otherwise known as a plan's summary 
annual report, must be provided to participants within two 
months after the due date of the annual report.
    Single employer defined benefit plan participants have the 
right to certain notices regarding their plan's funded status. 
In general, if an employer is subject to a variable rate 
premium (discussed below) because the plan is underfunded, 
participants are entitled to receive a notice regarding the 
plan's funded status and PBGC benefit guarantee limits.\62\ The 
employer is also required to notify plan participants if it 
fails to make the required contributions.\63\ In addition, the 
PFEA requires multiemployer plans to provide an annual funding 
notice to participants, contributing employers, labor 
organizations, and the PBGC regarding the plan's funded 
status.\64\
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    \62\ See ERISA Sec. 4011.
    \63\ See ERISA Sec. 101(d).
    \64\ See ERISA Sec. 101(f).
---------------------------------------------------------------------------
    Executive Compensation. Amounts deferred under a 
nonqualified deferred compensation plan for all taxable years 
are currently includable in gross income to the extent not 
subject to a substantial risk of forfeiture and not previously 
included in gross income, unless certain requirements are 
satisfied.\65\ For example, distributions from a nonqualified 
deferred compensation plan may be allowed only at certain times 
and upon certain events. Rules also apply for the timing of 
elections. If the requirements are not satisfied, in addition 
to current income inclusion, interest at the underpayment rate 
plus one percentage point is imposed on the underpayments that 
would have occurred had the compensation been includable in 
income when first deferred, or if later, when not subject to a 
substantial risk of forfeiture. The amount required to be 
included in income is also subject to a 20 percent additional 
tax.
---------------------------------------------------------------------------
    \65\ See IRC Sec. 409A.
---------------------------------------------------------------------------
    In the case of assets set aside in a trust (or other 
arrangement) for purposes of paying nonqualified deferred 
compensation, such assets are treated as property transferred 
in connection with the performance of services under Internal 
Revenue Code section 83 at the time set aside if such assets 
(or trust or other arrangement) are located outside of the 
United States or at the time transferred if such assets (or 
trust or other arrangement) are subsequently transferred 
outside of the United States. A transfer of property in 
connection with the performance of services under Code section 
83 also occurs with respect to compensation deferred under a 
nonqualified deferred compensation plan if the plan provides 
that upon a change in the employer's financial health, assets 
will be restricted to the payment of nonqualified deferred 
compensation. In addition to current income inclusion, interest 
at the underpayment rate plus one percentage point is imposed 
on the underpayments that would have occurred had the 
compensation been includable in income when first deferred, or 
if later, when not subject to a substantial risk of forfeiture. 
The amount required to be included in income is also subject to 
a 20 percent additional tax.
    Benefit Accruals. ERISA provides that benefit accruals may 
not decrease on account of the attainment of any age. Under a 
defined benefit plan, an employee's benefit accrual may not 
cease or be reduced because of the attainment of any age.\66\ 
Furthermore, accrued benefits may not decrease on account of 
increasing age or service.\67\ However, a plan does not fail to 
satisfy the benefit accrual rules by imposing a limitation on 
the amount of benefits that a plan provides or a limitation on 
the number of years of service or participation that are taken 
into account in determining accrued benefits. Furthermore, a 
plan does not fail the benefit accrual rules because the 
subsidized portion of an early retirement benefit is 
disregarded in determining benefit accruals. Finally, ERISA 
does not prohibit the modification of any benefit formula on a 
prospective basis. In other words, ERISA does not require a 
plan to provide a minimum benefit level or vest participants in 
benefits that have not been earned under the plan's formula.
---------------------------------------------------------------------------
    \66\ See ERISA Sec. 204(b)(1)(H).
    \67\ See ERISA Sec. 204(b)(1)(G).
---------------------------------------------------------------------------
    PBGC Premiums. ERISA requires all single employer plans 
covered by the PBGC insurance program to pay flat-rate 
premiums. Flat-rate premiums are based on the number of plan 
participants. Under current law, the premium is set at $19 per 
participant. ERISA also requires certain underfunded plans to 
pay a variable rate premium. The amount of the variable rate 
premium is also set by statute and is $9 per $1000 of unfunded 
vested benefits; however, there is an exemption from this 
requirement if the plan meets its full funding limit. In 
determining the amount of unfunded vested benefits, the 
interest rate used is 85 percent of the annual rate of interest 
of the corporate bond rate provided under the PFEA.\68\
---------------------------------------------------------------------------
    \68\ The PFEA rate will expire on December 31, 2005. The interest 
rate to be used after the expiration of the PFEA is 85 percent of the 
interest rate on 30-year Treasury bonds.
---------------------------------------------------------------------------

                      MULTIEMPLOYER PENSION PLANS

    As stated above, multiemployer pension plans are defined 
benefit pension plans maintained by two or more employers in a 
particular trade or industry, such as trucking or construction, 
that are collectively bargained between an employer and a labor 
union. While single employer plan sponsors generally may adjust 
their pension contributions to meet funding requirements, the 
contributions of individual employers in multiemployer plans 
cannot be easily modified because level of contributions to 
such plans is generally set as part of the bargaining process, 
and the level of benefits is determined by the plan trustees.
    Multiemployer plans have certain characteristics that are 
different from single employer plans. While multiemployer plans 
are subject to many of the same rules as single employer plans, 
present law also applies special rules to such plans in 
recognition of their differing features.
    Multiemployer Funding Rules. In general, multiemployer 
plans are subject to the same general minimum funding rules as 
single employer plans. However, special rules apply to 
multiemployer plans in some instances. For example, the 
amortization of a plan's experience gains and losses is 
extended over a longer period of time. Furthermore, 
multiemployer plans are not subject to the additional deficit 
reduction contribution rules if a plan becomes underfunded by a 
certain percentage.
    Like single employer plans, multiemployer plans are 
required to maintain a funding standard account to which 
specified charges and credits are made for each plan year, 
including a charge for normal cost and credits for 
contributions to the plan as well as charges and credits for 
any decreases or increases in past service liability \69\ as a 
result of plan amendments or experience gains or losses, gains 
or losses resulting from a change in actuarial assumptions, or 
a waiver of minimum required contributions.
---------------------------------------------------------------------------
    \69\ Past service liability is a term used to describe different 
amortization charges to the funding standard account. For plans in 
existence on January 1, 1974, past service liability is amortized over 
40 years. For plans in existence after January 1, 1974, past service 
liability is amortized over 30 years. Any plan amendments which result 
in past service liabilities to a plan are amortized over 30 years.
---------------------------------------------------------------------------
    A multiemployer pension plan is required to use an 
acceptable actuarial cost method to determine the above factors 
included in the plan's funding standard account each year. 
Generally, an actuarial cost method divides the cost of 
benefits under the plan into annual charges consisting of two 
elements for each plan year which include the plan's normal 
cost and the amortized portions of any additional costs of the 
plan. The plan's normal cost for a plan year represents the 
cost of current and future benefits allocated to the year by 
the funding method used by the plan for active and inactive 
employees. The amortized portions of any additional costs of 
the plan for a plan year are the cost of future benefits that 
would not be met by future normal costs, including any costs 
that may be attributable to net experience losses, changes in 
actuarial assumptions, and amounts necessary to make up funding 
deficiencies for which a waiver was obtained.
    In general, the portion of the cost of a plan that is 
required to be paid for a particular year depends upon the 
nature of the cost. The normal cost for a year is generally 
required to be funded currently; however, many plans today 
cannot afford to do this. The other costs associated with the 
plan are amortized over a period of years. In the case of a 
multiemployer plan, past service liability is amortized over 40 
or 30 years depending on how the liability arose, experience 
gains and losses \70\ are amortized over 15 years, gains and 
losses from changes in actuarial assumptions \71\ are amortized 
over 30 years, and waived funding deficiencies are amortized 
over 15 years. The above plan costs, which are charged to the 
funding standard account, require an offsetting credit by 
employer contributions.
---------------------------------------------------------------------------
    \70\ Experience gains and losses are determined by a plan actuary's 
assumptions regarding the future experience of a plan. These 
assumptions generally include interest rates, mortality, disability, 
salary increases, and other factors affecting the value of assets and 
liabilities.
    \71\ Gains and losses from changes in actuarial assumptions 
generally arise if the plan's assumptions are modified. A plan will 
have a gain if the accrued liability of a plan using the new 
assumptions is less than the accrued liability calculated using the 
previous assumptions. A plan will have a loss if the accrued liability 
of a plan using the new assumptions is greater than the accrued 
liability calculated using the previous assumptions. Accrued 
liabilities are the excess of the present value of all projected future 
benefits cost and administrative expenses for all plan participants and 
beneficiaries over the present value of all future contributions for 
the normal cost to a plan.
---------------------------------------------------------------------------
    As with single employer plans, if, as of the close of the 
plan year, charges to the funding standard account exceed 
credits to the account, then the excess is referred to as an 
accumulated funding deficiency. If credits to the funding 
standard account exceed charges, the plan has a credit balance 
which can be used to reduce future required contributions.
    Similar to single employer plans, the actuarial value of 
plan assets may be used, rather than fair market value, with 
the same applicable valuation methods that must result in a 
value of plan assets that is not less than 80 percent of the 
fair market value of the assets and not more than 120 percent 
of the fair market value or an average value that may not be 
averaged over more than the five most recent plan years, 
including the current year. In applying the funding rules to a 
multiemployer plan, all costs, liabilities, interest rates, and 
other factors are required to be determined on the basis of 
actuarial assumptions and methods, which in the aggregate, are 
reasonable (taking into account the experiences of the plan and 
reasonable expectations). In addition, the assumptions are 
required to offer the actuary's best estimate of anticipated 
experience under the plan.

Funding waivers and amortization of waived funding deficiencies

    In general, the Secretary of the Treasury is permitted to 
waive all or a portion of the contributions required under the 
minimum funding standard for the year. In the case of a 
multiemployer plan, a waiver may be granted if 10 percent or 
more of the contributing employers cannot make the required 
contribution without substantial business hardship and if 
requiring the contribution would be adverse to the interests of 
plan participants in the aggregate. The minimum funding 
requirements may not be waived with respect to a multiemployer 
plan for more than five out of any 15 consecutive years.
    If a funding deficiency is waived for a multiemployer plan, 
the waived amount is credited to the funding standard account 
and amortized over a period of 15 years. Each year, the funding 
standard account is charged with the amortization amount for 
that year unless the plan becomes fully funded.\72\
---------------------------------------------------------------------------
    \72\ See IRC Sec. 1274. The rate used to determine the amortization 
on the waived amount is 150 percent of the federal mid-term rate.
---------------------------------------------------------------------------
    Extension of Amortization Periods. The Secretary of the 
Treasury may extend any amortization periods for up to 10 years 
if the Secretary finds that the extension would carry out the 
purposes of ERISA and would provide adequate protection for 
participants under the plan and if such Secretary determines 
that the failure to permit such an extension would: (1) result 
in a substantial risk to the voluntary continuation of the plan 
or a substantial curtailment of pension benefit levels or 
employee compensation; and (2) be adverse to the interests of 
plan participants in the aggregate.\73\
---------------------------------------------------------------------------
    \73\ The interest rate with respect to extensions of amortization 
periods is the same as that used with respect to waived funding 
deficiencies.
---------------------------------------------------------------------------
    Withdrawal Liability. The Multiemployer Pension Plan 
Amendments Act of 1980 (``MEPPA'') amended ERISA to require 
that employers pay withdrawal liability to a multiemployer plan 
if the employer withdraws from the plan.\74\ Prior to the 
enactment of the withdrawal liability rules, employers who had 
an obligation to contribute to the plan within five years of 
the plan's termination were liable to the PBGC for a share of 
unfunded benefits; however, certain employer withdrawals from a 
multiemployer plan would not necessarily impair the financial 
health of the plan if the industry was stable and the 
contributing employer was replaced by a new employer or by an 
expansion of covered employment by other contributing 
employers. However, concerns were raised that the withdrawal of 
larger contributing employers may result in increased financial 
burdens on remaining contributing employers. Therefore, the 
withdrawal liability rules included in MEPPA were designed to 
address these concerns and help promote the financial health of 
multiemployer plans by requiring certain withdrawing employers 
to pay a portion of unfunded benefits for their employees that 
exist at the time of withdrawal.
---------------------------------------------------------------------------
    \74\ See Public Law No. 96-364.
---------------------------------------------------------------------------
    Determination of Withdrawal Liability. In general, 
contributing employers may withdraw from a multiemployer plan 
either by a ``complete'' or a ``partial'' withdrawal liability. 
Current law requires that certain employers who withdraw from a 
multiemployer plan in a complete or partial withdrawal are 
liable to the plan in the amount determined to be the 
employer's withdrawal liability.\75\ In general, a ``complete 
withdrawal'' occurs when the contributing employer has 
permanently ceased operations under the plan or has permanently 
ceased to have an obligation to contribute.\76\ In determining 
if there is a complete withdrawal, special rules apply in the 
case of the building and construction industry, the 
entertainment industry, and employers primarily engaged in the 
long and short haul trucking industry, the household goods 
moving industry, or the public warehousing industry.\77\
---------------------------------------------------------------------------
    \75\ See ERISA Sec. 4201.
    \76\ ERISA Sec. 4203.
    \77\ In the case of employers engaged in the long and short haul 
trucking industry, the household goods moving industry, or the public 
warehousing industry, a complete withdrawal occurs only if: (1) an 
employer permanently ceases to have an obligation to contribute under 
the plan or permanently ceases all covered operations under the plan; 
and (2) the PBGC determines that the plan has suffered substantial 
damage to its contribution base as a result of such cessation, or the 
employer fails to furnish a bond or amount held in escrow in an amount 
equal to 50 percent of the withdrawal liability of the employer.
---------------------------------------------------------------------------
    A ``partial withdrawal'' occurs if, on the last day of a 
plan year, there is a 70 percent contribution decline by 
contributing employers for such plan year or there is a partial 
cessation of an individual employer's contribution 
obligation.\78\ A partial cessation of the employer's 
obligation occurs if: (1) the employer permanently ceases to 
have an obligation to contribute under one or more, but fewer 
than all, collective bargaining agreements under which 
obligated to contribute, but the employer continues to perform 
work in the jurisdiction of the collective bargaining 
agreement; or (2) an employer permanently ceases to have an 
obligation to contribute under the plan with respect to work 
performed at one or more, but fewer than all, of its 
facilities, but continues to perform work at the facility of 
the type for which the obligation to contribute ceased.\79\
---------------------------------------------------------------------------
    \78\ See ERISA Sec. 4205(a).
    \79\ See ERISA Sec. 4205(b)(2).
---------------------------------------------------------------------------
    When a contributing employer withdraws from a multiemployer 
plan, the plan sponsor is required to calculate the amount of 
the employer's withdrawal liability, notify the employer of the 
amount of the withdrawal liability, and collect the amount of 
the withdrawal liability from the employer. The contributing 
employer's withdrawal liability is based on the plan's unfunded 
vested benefits for the plan years preceding the withdrawal. 
After the withdrawal, the plan sponsor must notify the 
contributing employer of the amount of liability and schedule 
of payments. In general, amounts are required to be paid over 
the period of years necessary to amortize the amounts in level 
annual payments; however, in certain instances where the 
amortization period exceeds 20 years, the employer's liability 
is limited to the first 20 annual payments.\80\
---------------------------------------------------------------------------
    \80\ See ERISA Sec. 4219(c).
---------------------------------------------------------------------------
    Current law provides rules limiting withdrawal liability in 
certain instances. The amount of unfunded vested benefits 
allocable to an employer is limited in the case of certain 
sales of all or substantially all of the employer's assets and 
in the case of an insolvent employer undergoing liquidation or 
dissolution.\81\ A multiemployer plan, other than a plan which 
primarily covers employees in the building and construction 
industry, may adopt a rule that an employer who withdraws from 
the plan is not subject to withdrawal liability if: (1) the 
employer first had an obligation to contribute to the plan 
after the date of enactment of MEPPA; (2) contributed to the 
plan for no more than the lesser of six plan years or the 
number of years required for vesting under the plan; (3) was 
required to make contributions to the plan for each year in an 
amount equal to less than two percent of all employer 
contributions for the year; and (4) never avoided withdrawal 
liability because of the special rule.\82\
---------------------------------------------------------------------------
    \81\ See ERISA Sec. 4225.
    \82\ See ERISA Sec. 4210.
---------------------------------------------------------------------------
    Under ERISA, the plan sponsor's assessment of withdrawal 
liability is presumed correct unless the employer shows by a 
preponderance of the evidence that the plan sponsor's 
determination of withdrawal liability was unreasonable or 
erroneous. In other words, the employer has the burden of proof 
to show that his withdrawal from the plan was not to evade or 
avoid withdrawal liability.\83\ Disputes between an employer 
and plan sponsor concerning withdrawal liability are resolved 
through arbitration, which can be initiated by either party. 
The first payment of withdrawal liability determined by the 
plan sponsor is generally due no later than 60 days after 
demand, even if the employer contests the determination of 
liability. If the employer contests the determination, payments 
of withdrawal liability must be made by the employer until the 
arbitrator issues a final decision with respect to the 
determination submitted for arbitration.\84\
---------------------------------------------------------------------------
    \83\ See ERISA Sec. 4212(c).
    \84\ See ERISA Sec. 4221(f). The plan sponsor has the burden of 
proof that the principal purpose of a transaction that occurred before 
January 1, 1999, was to evade or avoid withdrawal liability if the 
transaction occurred at least 5 years before the date of withdrawal. 
Employers are not obligated to make withdrawal liability payments until 
a final decision is rendered.
---------------------------------------------------------------------------
    Multiemployer Plan Reorganization and Insolvency. If a 
multiemployer plan experiences severe financial problems, 
certain modifications to the single-employer plan funding rules 
apply and these plans are considered to be in ``reorganization 
status.'' A plan is in reorganization status if contributions 
needed to equal the charges and credits to its funding standard 
account exceed the amount of a plan's vested benefits 
charge.\85\ The plan's vested benefits charge is generally the 
amount needed to amortize, in equal annual installments, 
unfunded vested benefits under the plan over: (1) 10 years in 
the case of obligations attributable to participants in pay 
status; and (2) 25 years in the case of obligations 
attributable to other participants. A plan in reorganization 
status must increase funding to specified levels and may reduce 
benefits to the level guaranteed by the PBGC. A cap on year-to-
year contribution increases and other relief is available to 
employers that continue to contribute to the plan. Any failure 
to make the required contributions results in a funding 
deficiency.
---------------------------------------------------------------------------
    \85\ See ERISA Sec. 4241.
---------------------------------------------------------------------------
    The plan sponsor must provide notice that the plan is in 
reorganization status and that, if contributions to the plan 
are not increased, accrued benefits under the plan may be 
reduced and/or an excise tax may be imposed.\86\ Notice must be 
provided to every employer who has an obligation to contribute 
under the plan and to each employee organization representing 
plan participants.
---------------------------------------------------------------------------
    \86\ See id.
---------------------------------------------------------------------------
    Benefit limitations and adjustments also apply to plans in 
reorganization status including limitations on lump sum 
distributions \87\ and adjustments in accrued benefits.\88\
---------------------------------------------------------------------------
    \87\ See ERISA Sec. 4241(c).
    \88\ See ERISA Sec. 4244A.
---------------------------------------------------------------------------
    In addition, the law presumes there is an increased 
likelihood that a plan in reorganization will become 
insolvent.\89\ In general, insolvent plans do not have 
sufficient resources to pay benefits under the plan when they 
are due. If a multiemployer plan is insolvent, benefit payments 
must be reduced to level of benefits that the plan can pay with 
its available resources.
---------------------------------------------------------------------------
    \89\ See ERISA Sec. 4245.
---------------------------------------------------------------------------
    PBGC's Role. PBGC's insurance programs were created as part 
of ERISA in 1974 to assure retirees pension benefit protection. 
In 1980, MEPPA strengthened the pension protection program for 
multiemployer plans. As stated above, the amendments 
established mandatory requirements for financially weak 
multiemployer plans in reorganization and imposed new financial 
requirements on employers withdrawing from multiemployer plans.
    PBGC's multiemployer program is funded and maintained 
separately from the single employer program. Each multiemployer 
plan pays an annual insurance premium of $2.60 per participant 
to the PBGC. Under the multiemployer program, PBGC provides 
financial assistance through loans to plans that are insolvent. 
Before a plan receives financial assistance from PBGC, it must 
suspend payment of all benefits in excess of the guaranteed 
level.
    MEPPA established a benefit guarantee limit for 
participants in multiemployer plans equal to the participant's 
years of service multiplied by the sum of: (1) 100 percent of 
the first five dollars of the monthly benefit accrual rate; and 
(2) 75 percent of the next fifteen dollars of the accrual rate. 
For a participant with 30 years of service under the plan, the 
maximum PBGC-guaranteed benefit was $5,850 per year. This 
benefit guarantee formula remains in effect for participants in 
multiemployer plans that received financial assistance from 
PBGC at any time during the period from December 22, 1999, to 
December 21, 2000. The Consolidated Appropriations Act of 
2001,\90\ signed into law on December 21, 2000, increased the 
benefit guarantee in multiemployer plans to the product of a 
participant's years of service multiplied by the sum of: (1) 
100 percent of the first $11 of the monthly benefit accrual 
rate; and (2) 75 percent of the next $33 of the accrual rate. 
For someone with 30 years of service, this raised the 
guaranteed limit to approximately $13,000.
---------------------------------------------------------------------------
    \90\ Public Law No. 106-554.
---------------------------------------------------------------------------
    ERISA's Prohibited Transaction Rules. ERISA prohibits 
certain transactions between a qualified plan and a party-in-
interest.\91\ Under current law, a party-in-interest to a plan 
includes plan fiduciaries, plan service providers, an employer, 
employee organizations with members participating in a plan, 
and certain persons with an ownership interest in the plan 
sponsor.
---------------------------------------------------------------------------
    \91\ See ERISA Sec. 3(14).
---------------------------------------------------------------------------
    In general, for a party-in-interest, the transaction rules 
prohibit: (1) the sale, exchange, or leasing of property; (2) 
the lending of money or extension of credit; (3) the furnishing 
of goods, services, or facilities; and (4) the transfer to or 
use by or for the benefit of the income or assets of the 
plan.\92\ Fiduciaries are also subject to additional rules 
which include: (1) any self-dealing with the plan's assets in 
his own interest or account; (2) any transactions for himself 
or on behalf of another party whose interests are adverse to 
the interest of the plan or its participants and beneficiaries; 
or (3) the receipt of any consideration for his own personal 
account from any party dealing with the plan.
---------------------------------------------------------------------------
    \92\ See ERISA Sec. 406(a).
---------------------------------------------------------------------------
    An excise tax and, in certain instances, a civil penalty is 
assessed against any person who engages in a prohibited 
transaction.

                           Section-by-Section


Sec. 1. Short title and table of contents

    This Act may be cited as the Pension Protection Act of 
2005.

 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

    Section 101 repeals sections 302-308 of the Employee 
Retirement Income Security Act of 1974 and establishes new 
minimum funding standards that single employer defined benefit 
plans must meet. Minimum required contributions must be paid by 
the employer(s) responsible for making contributions to the 
plan. The bill also provides for waivers to the minimum funding 
standards in the case of business hardship when an employer is 
operating at an economic loss, when there is substantial 
unemployment or under employment in the trade or business, when 
the sales and profits of the industry concerned are depressed 
or declining, and when it is reasonable to conclude the plan 
will be continued only if the waiver is granted. The 
application for a waiver must be submitted to the Secretary of 
the Treasury no later than 2\1/2\ months after the close of the 
plan year. Prior to the granting of a waiver, a notice is 
required to be provided to each participant, beneficiary, and 
employee organization of the filing of the application of the 
waiver.

Sec. 102. Funding rules for single-employer defined benefit pension 
        plans

    Under section 102, a single employer plan's minimum 
required contribution for a plan year is the target normal cost 
of the plan for the year plus any shortfall amortization charge 
(if applicable) for the plan year and any waiver amortization 
charge (if applicable) for the plan year. The target normal 
cost of a plan for a plan year is the present value of all 
liabilities attributable to benefits which are expected to 
accrue or to be earned under the plan during the plan year. If 
a plan's assets (not including any pre-funding balance and 
funding standard carryover balance) are greater than the plan's 
funding target (the present value of all liabilities under the 
plan for the plan year),\93\ the minimum required contribution 
for a plan year is the target normal cost minus any excess 
assets held by the plan. A shortfall amortization charge 
applies if a plan has any unfunded liability shortfall as of 
the first day of any plan year. The shortfall amortization 
charge for any plan year is the amount necessary to amortize 
any unfunded liability shortfall for a plan year over the 
current and six succeeding plan years in level payments, using 
the effective rate of interest for the plan. Unfunded liability 
shortfall, otherwise known as a funding shortfall, is defined 
as the excess (if any) of a plan's funding target for the plan 
year over the value of plan assets for any plan year (not 
including the value of any assets held in a plan's pre-funding 
balance and carryover balance). If a plan's assets for any plan 
year (including any funding standard carryover balance 
attributable to the funding rules in effect prior to January 1, 
2006, plus any assets held in the plan's pre-funding balance, 
unless the pre-funding balance is intended to be used to reduce 
the minimum required contribution for the plan year) exceed the 
plan's liabilities for the plan year, any shortfall 
amortization charge applicable for any previous plan year is 
reduced to zero.
---------------------------------------------------------------------------
    \93\ A plan's funding target attainment percentage is the ratio, 
expressed as a percentage, which the value of plan assets for the year 
bears to the funding target for the year.
---------------------------------------------------------------------------
    For purposes of determining whether a plan has a funding 
shortfall and is, therefore, subject to the variable rate 
premium requirements, a funding target transition rule shall 
apply to any plan that was not subject to the deficit reduction 
contribution requirements for the plan year beginning in 2005. 
The applicable percentage of the funding target is as follows.

------------------------------------------------------------------------
  In the case of a plan year beginning in     The applicable percentage
               calendar year:                            is:
------------------------------------------------------------------------
2006.......................................  92 percent.
2007.......................................  94 percent.
2008.......................................  96 percent.
2009.......................................  98 percent.
------------------------------------------------------------------------

    Credit for excess assets: If the value of plan assets which 
are held by the plan immediately before the valuation date 
exceed the funding target of the plan for the plan year, the 
minimum required contribution with respect to the plan is the 
target normal cost, reduced by the excess assets.
    Funding target: The funding target of a plan for a plan 
year is the present value of all liabilities attributable to 
participants and beneficiaries under the plan for the plan 
year.
    Waiver amortization charge: A waiver amortization charge 
(if any) for a 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 five preceding 
plan years. The plan sponsor determines, with respect to the 
waiver amortization base of the plan for any plan year, the 
amounts necessary to amortize the waiver amortization base in 
five level, annual installments, using the applicable segment 
rates determined under the modified yield curve. The waiver 
amortization base of a plan for a plan year is the amount of 
the waived funding deficiency.
    Reduction of minimum required contribution by pre-funding 
balance and funding standard carryover balance: Any plan assets 
that are included in a plan's funding standard account as a 
positive balance as a result of contributions made in excess of 
a plan's required minimum contribution prior to the date of 
enactment of the bill remain intact. These additional plan 
assets are referred to as a funding standard carryover balance. 
Any new contributions made in excess of the minimum required 
contribution for a plan will be credited to a pre-funding 
balance. Each year, the pre-funding balance and the funding 
standard carryover balance must reflect the same fair market 
value of gains and losses as the plan assets experience for 
each year.\94\ In other words, the actual rate of return is the 
net fair market value gain or loss experienced by all plan 
assets, taking into account plan contributions, distributions 
and other payments in accordance with regulations issued by the 
Secretary of the Treasury.
---------------------------------------------------------------------------
    \94\ The plan assets will continue to be actuarially adjusted.
---------------------------------------------------------------------------
    Application of balances: To determine whether a plan meets 
its funding target for a plan year, plan assets will not be 
reduced by the value of any carryover credit balance or any new 
pre-funding balance. Plan assets are required to be reduced by 
both the carryover credit balance and the pre-funding account 
balance for the following calculations: (a) to determine 
whether the plan's target normal cost can be reduced by any 
excess assets credit for a plan that is over 100 percent 
funded; (b) to determine the shortfall amortization charge for 
a plan year (if required to be made); (c) to determine whether 
the plan is in at-risk status; (d) to determine whether there 
is an increase in quarterly payments of a plan; and (e) to 
determine whether any benefit limitations apply. However, if 
all plan assets (including a plan's funding standard carryover 
balance and pre-funding balance) equal the plan's funding 
target, the benefit limitations provided under this bill do not 
apply. In addition, a plan may elect to apply the balances 
against a plan's minimum required contribution. However, a plan 
may not elect to reduce its minimum required contribution for a 
plan year if the plan's target liability for the preceding plan 
year is less than 80 percent. For purposes of determining 
whether a plan's funding target is at least 80 percent funded 
and can apply the pre-funding balance to offset its minimum 
required contribution for a plan year, such pre-funding balance 
is subtracted from the plan's assets. Plan assets are not 
reduced by any funding standard carryover balance in 
determining whether a plan's funding target is at least 80 
percent funded. Plan assets are not reduced by any funding 
standard carryover balance for purposes of calculating a plan's 
target normal cost for the plan year if the plan is funded 
above 80 percent. Any balance in the pre-funding account, as 
well as any carryover credit balance, is reduced each year by 
the amount of reduction of the minimum required contribution.
    A plan cannot use the carryover balance to reduce the 
minimum required contribution for a plan if it is also used to 
increase plan assets in order to avoid any shortfall 
amortization charge in the same plan year. In addition, no 
amount of the pre-funding balance may be used to offset a 
plan's minimum required contribution if the plan has a funding 
standard carryover balance greater than zero.
    Valuation date for plan assets and liabilities: The 
valuation date for plans with greater than 500 participants is 
the first day of the plan year. If a plan has less than 500 
participants, the plan may choose any day during the plan year 
as its valuation date. For plans that were not in existence 
prior to the enactment of this bill, the plan shall take into 
account the number of participants that the plan is reasonably 
expected to have on days during the first plan year.
    Determining value of plan assets: The value of plan assets 
is determined on the basis of any reasonable actuarial method 
of valuation which takes into account the fair market value of 
assets. If assets are averaged, any method used by the plan may 
not provide for averaging of such values over more than three 
plan years. In addition, the averaging method used by the plan 
may not result in a valuation of averaged assets greater than 
110 percent or lower than 90 percent of the fair market value 
of the plan's assets.
    Accounting for contribution receipts: For purposes of 
determining the value of plan assets for any current plan year, 
any contributions allocable to amounts owed for the previous 
year that are made after the plan's valuation date for the 
current plan year are taken into account, except that any 
contribution made during any current plan year beginning after 
2006 are taken into account only in an amount equal to its 
present value (determined using the plan's effective interest 
rate for the preceding plan year) as of the valuation date of 
the plan for the current plan year. However, any contributions 
made to any plan for the current plan year are not taken into 
account and any interest earned on such contributions must be 
disregarded for calculating the value of plan assets.
    Accounting for plan liabilities: In determining the value 
of liabilities under a plan for a plan year, liabilities 
attributable to benefits accrued as of the first day of the 
plan year are taken into account. Any benefits which are 
expected to accrue during a plan year are not taken into 
account. If a plan is collectively bargained, any anticipated 
benefit increases scheduled to take effect during the plan year 
are included as part of a plan's liabilities for the plan year.
    Actuarial assumptions and methods: For purposes of 
calculating a plan's liabilities for a plan year, the effective 
interest rate of a plan must be used. The effective interest 
rate of a plan is the rate of interest which, if used to 
determine the present value of the plan's liabilities, would 
result in an amount equal to the funding target of the plan for 
a plan year.
    For purposes of determining the plan's funding target, the 
interest rates used in calculating the present value of the 
plan's liabilities are based on three segment rates applied to 
a plan's short-term, mid-term, and long-term liabilities. 
Short-term liabilities are plan liabilities which are payable 
within five years. Mid-term liabilities are plan liabilities 
which are payable in between six and twenty years. Long-term 
liabilities are plan liabilities which are payable after twenty 
years. The segment rates, with respect to any month, are 
determined by the Secretary of the Treasury on the basis of the 
appropriate corporate bond yield curve. The first segment rate 
is based on the portion of the corporate bond yield curve for 
yields of bonds maturing in five years or less; the second 
segment rate is based on the portion of the corporate bond 
yield curve for yields of bonds maturing between six and 20 
years; and the third segment rate is based on the corporate 
bond yield curve for yields of bonds maturing over 20 years.
    The Secretary of the Treasury will develop the corporate 
bond yield curve which is based on a 3-year weighted average of 
yields on investment grade corporate bonds.\95\ The term ``3-
year weighted average'' means an average determined by using a 
methodology under which the most recent year's rates are 
weighted 50 percent, the preceding year's rates are weighted 35 
percent, and the second preceding year's rates are weighted 15 
percent. The Secretary must publish each month the corporate 
bond yield curve and each segment rate. The Secretary must also 
publish a description of the methodology used to determine the 
corporate bond yield curve and the segment rates which is 
sufficiently detailed to enable plans to make reasonable 
projections regarding the yield curve and segment rates for 
future months based on the plan's projection of future interest 
rates.
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    \95\ Under current law, interest rates used to calculate pension 
assets and liabilities are ``smoothed,'' or averaged, over four years. 
Such smoothing is intended to reduce pension funding volatility and 
help make contribution requirements more predictable.
---------------------------------------------------------------------------
    Transition period: The interest rate transition will be the 
following: For plan year 2006, a plan is required to use of \1/
3\ of the modified yield curve and \2/3\ of the current rate. 
For plan year 2007, a plan is required to use of \2/3\ of the 
modified yield curve and \1/3\ of the current rate. For plan 
year 2008, all plans must use the modified yield curve for 
calculating pension liabilities.
    Mortality table: In order to determine the present value of 
liabilities for a plan, the plan must use the RP 2000 Combined 
Mortality Table using scale AA. The Secretary of the Treasury 
is required to make projected improvements to the table to 
reflect the actual experience of plans and projected trends in 
such experience at least once every ten years. The use of the 
RP 2000 Combined Table is phased in ratably over a five year 
period.
    Upon request by the plan sponsor and approval by the 
Secretary of the Treasury, a plan may use a different mortality 
table if the Secretary determines that the table reflects the 
actual experience of the pension plan and that it is 
significantly different from the RP 2000 Combined Mortality 
Table. The Secretary has 180 days, beginning on the date of 
submission, to disapprove of the use of a table other than the 
RP 2000 Combined Mortality Table if the table fails to meet the 
above requirements.
    Probability of benefit payments in the form of lump sum or 
other optional forms: For purposes of determining the present 
value of a plan's liabilities, the probability that future 
benefit payments under the plan, including lump sums and other 
optional forms of benefits, must be taken into account and 
included in the plan's funding target.
    Special rules for at-risk plans: A plan is considered to be 
``at-risk'' if its funding target is less than 60 percent. At-
risk liability is based on the same benefits and assumptions as 
a plan's normal funding target, except that the valuation of 
those benefits would require the use of certain actuarial 
assumptions that would take into account the fact that there is 
a greater likelihood the plan may have to pay benefits on an 
accelerated basis or terminate. These modified actuarial 
assumptions are acceleration in retirement rates using the 
earliest retirement age, and benefits being distributed in a 
lump sum payment (or in whatever form results in the most 
valuable benefit). At-risk liability also includes a ``loading 
factor'' of $700 per participant plus four percent of the at-
risk liability before the loading factor to reflect the 
additional administrative cost of purchasing a group annuity if 
the plan were to terminate. At-risk normal cost is the same as 
ongoing normal cost, except that at-risk normal cost is 
calculated using the assumptions that are used for determining 
at-risk liability. The transition between a plan's normal 
funding target and its at-risk funding target is five years. In 
other words, if a plan has a funding target of less than 60 
percent for a consecutive period of fewer than five plan years, 
the plan must pay 20 percent of its at-risk required 
contribution multiplied by the number of plan years that the 
plan is less that 60 percent funded.
    Payment of minimum required contributions: The due date for 
the payment of minimum required contribution for any plan year 
is 8\1/2\ months after the close of the plan year. Any minimum 
contribution payment made after the valuation date is increased 
by the effective rate of interest for a plan from the valuation 
date to the payment date.
    Accelerated quarterly contributions: If a plan is less than 
100 percent funded in the prior plan year, quarterly 
contributions are required to be paid by the plan. The minimum 
required quarterly contribution is increased by the amount 
equal to the interest on the amount of underpayment for the 
period of the underpayment. The interest rate used is the 
excess of 175 percent of the federal mid-term rate over the 
effective rate of the plan.\96\ The amount of the underpayment 
is the excess of the required installment over the amount of 
the installment contributed to or under the plan on or before 
the due date for the installment. The amount of the required 
installment is 25 percent of the required annual payment. The 
required annual payment is 90 percent of the minimum required 
contribution (without regard to any waiver) or, for a plan year 
beginning after 2006, 100 percent of the minimum required 
contribution to the plan for the preceding plan year (without 
regard to any waiver). The deadline for the final contribution 
for the year is 8\1/2\ months after the end of the plan year. A 
contribution made after the valuation date for the year would 
be credited against the minimum required contribution for the 
year based on its present value as of the valuation date, 
discounted from the date actually contributed and determined 
using the average effective interest rate that applied in the 
determination of the plan's liabilities. A plan is treated as 
failing to pay the full amount of any required installment to 
the extent that the value of the liquid assets paid in the 
installment is less than the liquidity shortfall, regardless of 
whether the liquidity shortfall exceeds the amount of the 
installment required to be paid.\97\
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    \96\ See ERISA Sec. 302(e). The rate of interest used is equal to 
the greater of: (1) 175 percent of the federal mid-term rate, or (2) 
the rate of interest used under the plan in determining costs.
    \97\ A liquidity shortfall is defined, with respect to any required 
installment, as an amount equal to the excess (as of the last day of 
the first quarter for which the installment is made) of the base amount 
of the quarterly installment (three times the sum of the adjusted 
disbursements from the plan for the 12 months ending on the last day of 
the quarter) over the value of the plan's liquid assets as of the last 
day of the quarter.
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    Imposition of lien where failure to make required 
contributions: For plans covered by the PBGC insurance program, 
any plan sponsor who fails to make a required contribution to 
the plan before the due date of a payment where the unpaid 
balance of the payment (including interest), when added to the 
aggregate balance of all prior payments not made before the due 
date (including interest) exceeds $1,000,000, a lien is imposed 
in favor of the plan upon all property and rights to property, 
whether real or personal, belonging to the plan sponsor and any 
other controlled group member in the amount equal to the total 
aggregate unpaid balance of the contributions. The plan sponsor 
must notify the PBGC of such failure within 10 days of the due 
date for the required contribution. The lien begins on the due 
date for the required contribution payment and continues until 
the last day of the first plan year in which the plan ceases to 
have an aggregate balance of prior missed payments in excess of 
$1,000,000. Any lien may be perfected and enforced only by or 
at the direction of the PBGC.
    Qualified transfers to health benefit accounts: This 
section allows any plan assets over 100 percent of a plan's 
funding target but not above 125 percent of the sum of the 
target liability amount and the target normal cost to be 
transferred to a qualified welfare benefit plan for the purpose 
of providing certain health benefits. Any transfer of plan 
assets made shall result in a reduction of plan assets by the 
amount of the transfer.

Sec. 103. Benefit limitations under single employer plans

    Section 103 prohibits benefits payable due to a plant 
shutdown or any other unpredictable contingent event. An 
unpredictable contingent event is defined as any event other 
than the attainment of any age, performance of any service, 
receipt or derivation of any compensation, the occurrence of 
death or disability, or any event which is reasonably and 
reliably predictable, as determined by the Secretary of 
Treasury.
    This section further provides that if a plan's funding 
target is less than 80 percent as of the plan's valuation date, 
the plan may not adopt an amendment that has the effect of 
increasing the plan's liabilities by reason of increases in 
benefits, establishment of new benefits, a change in the rate 
of benefit accrual, or any change in the rate at which benefits 
become non-forfeitable. Subject to this general rule, a plan 
may avail itself of the following exceptions: (a) if a plan's 
funding target is less than 80 percent in a plan year, as of 
the plan's valuation date, a plan sponsor may adopt an 
amendment which increases plan liabilities only if the plan 
sponsor makes a contribution to the plan in that year equal to 
the amount of the increase in the minimum required contribution 
attributable to the plan amendment and the amount of the 
increase in the plan's funding target; or (b) if a plan's 
funding target is over 80 percent in a plan year, as of the 
plan's valuation date, a plan sponsor may adopt an amendment 
which increases plan liabilities to the extent that the plan's 
funding target is no longer at 80 percent if the plan sponsor 
makes a contribution in the amount necessary to ensure that the 
plan's funding target is at least 80 percent. This provision is 
not applicable to a new plan for the first five years.
    Section 103 prohibits lump sum distributions or any other 
accelerated form of benefits if a plan's funding target is less 
than 80 percent as of the plan's valuation date. However, this 
provision does not apply to any plan for any plan year if the 
terms of the plan (as in effect prior to or beginning on June 
29, 2005) provide for no benefit accruals with respect to any 
participant.
    The bill prohibits all future benefit accruals for plans 
that have a funding target of less than 60 percent. This 
provision does not apply to a new plan for the first five plan 
years. If a plan is subject to any of the above benefit 
limitations and restrictions, the plan must provide notice of 
same to all participants and beneficiaries within such time 
that the plan sponsor knew or should have know that the plan 
would be subject to the benefit limitations.
    Timing rules to implement limitations: A series of special 
timing rules apply for determining whether a plan's funded 
percentage is below one of the thresholds for applying the 
benefit limitation thresholds, based on annual certifications 
that are to be provided by the plan actuary. If a plan was 
subject to a benefit limitation in the prior year, then the 
funding percentage is presumed not to have improved in the 
current year until the plan actuary certifies that the funded 
status at the valuation date for the current plan year has 
improved sufficiently so that the benefit limitation does not 
apply for the current year. If a benefit limitation did not 
apply in the prior year, but the funding percentage for that 
year was no more than 10 percentage points above the threshold 
for applying that benefit limitation, then the plan's funding 
percentage is automatically presumed to have been reduced by 10 
percentage points for the current plan year as of the first day 
of the fourth month of the plan year unless and until the 
actuary certifies that the funded status is such that the 
benefit limitation does not apply for the current plan year. If 
an actuarial certification fails to be completed by the first 
day of the 10th month of the plan year, then the plan's funding 
percentage for the plan year is presumed not to exceed 60 
percent for the current year for purposes of the benefit 
limitations.
    Restoration of plan benefits: Plans that are frozen or for 
which lump sums or other accelerated benefit forms are 
prohibited would be permitted to resume accruals and 
accelerated benefit forms in a subsequent plan year only by a 
plan amendment. The plan amendment may be adopted at any time 
after the first valuation date on which the plan's assets 
exceed the applicable threshold percentage. If a plan's 
accruals are ceased by reason of a failure of its actuary to 
make an appropriate certification, the restoration of such plan 
benefits does not require a plan amendment.
    Notice requirement: The plan administrator must provide 
written notice to plan participants and beneficiaries within 30 
days after the plan has become subject to any of the above 
restrictions. Any failure to provide notice will automatically 
result in a civil penalty.
    Effective date: The benefit limitation provisions apply to 
a plan after 2006, with the exception that in the case of a 
collectively bargained plan, the benefit limitation provisions 
apply to plan years beginning the earlier of: (1) the date on 
which the last collective bargaining agreement expires; or (2) 
2009. A plan does not fail to meet the requirements of the 
anti-cutback rule under ERISA or the IRC solely by reason of 
compliance with the requirements of this section.\98\
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    \98\ See ERISA Sec. 204(g) and IRC Sec. 411(d)(6).
---------------------------------------------------------------------------

      Subtitle B--Amendments to the Internal Revenue Code of 1986


                      Subtitle C--Other Provisions


Sec. 121. Modification of transition rule to pension funding 
        requirements

    Section 121 creates a transition rule to the pension 
funding requirements for any plan sponsored by a company that 
is engaged primarily in the interurban or interstate passenger 
bus service for any plan year beginning after 2005. For 
purposes of the quarterly contributions requirement, the plan 
is treated as not having a funding shortfall for any plan year; 
therefore, no quarterly contributions are required. The plan 
may also use its own mortality table and not the standard table 
prescribed under the bill for purposes of determining any 
present value or making any calculation under the minimum 
funding rules for the plan and the amount of unfunded vested 
benefits under the plan for purposes of calculating PBGC 
variable rate premiums.
    For the purpose of calculating the plan's funding target 
under this section, the applicable percentage is determined in 
accordance with the following table:

------------------------------------------------------------------------
  In the case of a plan year beginning in     The applicable percentage
               calendar year:                            is:
------------------------------------------------------------------------
2006.......................................  90 percent.
2007.......................................  92 percent.
2008.......................................  94 percent.
2009.......................................  96 percent.
2010.......................................  98 percent.
------------------------------------------------------------------------

Sec. 122. Treatment of nonqualified deferred compensation plans when 
        employer defined benefit plan is in at-risk status

    Section 122 provides that, if during any period in which a 
defined benefit pension plan of an employer is in at-risk 
status, assets are set aside (directly or indirectly) in a 
trust (or other arrangement as determined by the Secretary of 
the Treasury), or transferred to such a trust or other 
arrangement, for purposes of paying deferred compensation, such 
assets are treated as property transferred in connection with 
the performance of services (whether or not such assets are 
available to satisfy the claims of general creditors) under 
section 83 of the Internal Revenue Code.
    If a nonqualified deferred compensation plan of an employer 
provides that assets will be restricted to the provision of 
benefits under the plan in connection with the at-risk status 
(or other similar financial measure determined by the Secretary 
of Treasury) of any defined benefit pension plan of the 
employer, or assets are so restricted, such assets are treated 
as property transferred in connection with the performance of 
services (whether or not such assets are available to satisfy 
the claims of general creditors) under section 83 of the 
Internal Revenue Code.
    Any subsequent increases in the value of, or any earnings 
with respect to, transferred or restricted assets are treated 
as additional transfers of property. In addition to current 
income inclusion, interest at the underpayment rate plus one 
percentage point is imposed on the underpayments that would 
have occurred had the amounts been includable in income for the 
taxable year in which first deferred or, if later, the first 
taxable year not subject to a substantial risk of forfeiture. 
The amount required to be included in income is also subject to 
an additional 20 percent tax.
    The provision is effective for transfers and other 
restrictions of assets on or after January 1, 2006. Assets set 
aside or transferred before January 1, 2006, for purposes of 
paying nonqualified deferred compensation, are not subject to 
the provision.

    TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS


 Subtitle A--Amendments to Employee Retirement Income Security Act of 
                                  1974


Sec. 201. Funding rules for multiemployer defined benefit plans

    Minimum funding standards for multiemployer plans: Section 
201 provides that any amounts attributable to unfunded past 
service liability (for plans established after 1974), plan 
amendments, investment gains and losses, actuarial changes, and 
any waived funding deficiency are to be amortized over a 
fifteen year period. These new amortization periods apply to 
any amortization bases established after the date of enactment 
of the bill. Each plan is required to establish a funding 
standard account, which will be charged or credited with the 
normal cost of the plan and any amortization shortfall amount. 
The value of a plan's assets shall be determined on the basis 
of reasonable actuarial methods of valuation which offer the 
best estimate of anticipated experience under the plan. 
Interest must be charged or credited to the funding standard 
account (as prescribed by the Secretary of the Treasury) at an 
appropriate rate consistent with the rate or rates of interest 
used to determine costs under the plan.
    Extension of amortization periods: Section 201 provides 
that the Secretary of the Treasury shall, upon application, 
automatically extend the period of years required to amortize 
any unfunded liability of a plan for a period of time not in 
excess of five years if the Secretary determines that, absent 
the extension, the plan would have an accumulated funding 
deficiency in any of the next 10 plan years, the plan sponsor 
has adopted a plan to improve the plan's funded status, and the 
plan is projected to have sufficient assets to timely pay its 
expected benefit liabilities and other anticipated expenses. 
Prior to the Secretary granting the automatic extension, each 
applicant is required to provide notice of the filing of the 
application for such extension to each contributing employer, 
employee organization, and the PBGC. The notice must also 
include a description of the extent to which the plan is funded 
for benefits which are guaranteed by the PBGC and for benefit 
liabilities.
    The Secretary may grant an additional amortization 
extension for cause, for a period of time not in excess of five 
years, if he determines that the failure to permit the 
extension would result in a substantial risk to the voluntary 
continuation of the plan or a substantial curtailment of 
pension benefit levels or employee compensation, and would be 
adverse to the interests of plan participants in the aggregate.
    Interest rate for extensions: The rate of interest 
applicable in connection with an extension granted is the 
greater of: (1) 150 percent of the federal mid-term rate, or 
(2) the rate of interest used under the plan for determining 
costs.

Sec. 202. Additional funding rules for multiemployer plans in 
        endangered or critical status

    Certification: Beginning on the first day of each plan 
year, the plan actuary must certify within 90 days to the 
Secretary of the Treasury whether a plan is in endangered or 
critical status for a plan year. If certification is not made 
before the end of the 90-day period, the plan is presumed to be 
in critical status until the actuary makes a contrary 
certification. Any certification must take into account any 
reasonable actuarial assumptions and methods of the current 
value of plan assets and the present value of all liabilities 
for the current and succeeding plan years as well as any 
reasonably anticipated employer and employee contributions for 
the current and succeeding plan years. If certification is not 
made before the end of the 90-day period, the plan is presumed 
to be in critical status for the plan year until such time as 
the plan actuary makes a contrary certification.
    Notice requirements: If a plan is determined to be an 
endangered or critical plan, notice must be given no later than 
30 days after certification is made that the plan is in 
endangered or critical status. The notice must be provided to 
the participants, contributing employers, unions, the Secretary 
of Labor, and the Secretary of the Treasury.
    Funding improvement plan: If a plan is certified to be in 
endangered status for a plan year, the plan sponsor must amend 
the plan to include a funding improvement plan upon approval by 
the bargaining parties within 240 days after the date on which 
the plan is certified to be in endangered status. The funding 
improvement plan must result in a \1/3\ projected improvement 
in the plan's funded percentage and a prevention of an 
accumulated funding deficiency during the funding improvement 
period, taking into account any extension of amortization 
periods. A summary of the funding improvement plan, as well as 
any modifications to the plan, must be included in the plan's 
annual report.
    Endangered status: A plan is considered an endangered plan 
if the plan has a funded liability percentage of less than 80 
percent, or there is a projected deficiency in the any of the 
next seven plan years (including the current plan year).
    Standard funding improvement period: Unless the special 
rules for certain seriously underfunded plans apply, the 
funding improvement period is the 10-year period beginning on 
the earlier of the second anniversary of the date of adoption 
of the funding improvement plan or the first day of the first 
plan year in which collective bargaining agreements covering at 
least 75 percent of active participants have expired.
    Special rule for seriously underfunded plans: A plan is 
also considered to be an endangered plan if the plan has a 
funded liability percentage of 70 percent or less; for such 
plans, the funding improvement plan must result in a \1/5\ 
projected improvement in the plan's funded percentage and a 
prevention of an accumulated funding deficiency during the 
funding improvement period, taking into account any extension 
of amortization periods. For purposes of this paragraph, the 
funding improvement period is the 15 year period beginning on 
the earlier of the second anniversary of the date of adoption 
of the funding improvement plan or the first day of the first 
plan year in which collective bargaining agreements covering at 
least 75 percent of active participants have expired.
    A plan is also considered to be an endangered plan if the 
plan has a funded percentage of greater than 70 percent but 
less than 80 percent and the plan actuary certifies within 30 
days after the plan is certified to be an endangered plan that 
the plan is not able to meet the standard \1/3\ projected 
improvement in the plan's funded percentage and a prevention of 
an accumulated funding deficiency during the funding 
improvement period, taking into account any extension of 
amortization periods within the 10 year period. However, such 
plan meeting this special rule must adopt a funding improvement 
plan that will improve the plan's funded percentage by \1/5\ 
during the funding improvement period. For purposes of this 
paragraph, the funding improvement period is the 15 year period 
beginning on the earlier of the second anniversary of the date 
of adoption of the funding improvement plan or the first day of 
the first plan year in which collective bargaining agreements 
covering at least 75 percent of active participants have 
expired.
    Actions taken by plan sponsor pending approval: A plan 
sponsor must take all permitted action (under the terms of the 
plan and applicable law) necessary to increase the plan's 
funded liability percentage, and postpone an accumulated 
funding deficiency by at least one additional year. Such 
actions may include requesting an amortization extension, use 
of the shortfall method, modification of the plan's benefit 
structure and/or the reduction of future benefit accruals, and 
any other reasonable action consistent with the terms of the 
plan and applicable law.
    Recommendations by a plan sponsor: Within 90 days following 
a plan's certification, the plan sponsor shall develop and 
provide to the bargaining parties alternative proposals for 
revised benefit and contribution structures which, if adopted, 
may reasonably be expected to meet the funding improvement 
benchmarks. Proposals by the plan sponsor must include: (1) at 
least one proposal for reductions in the amount of future 
benefit accruals necessary to achieve the benchmarks, assuming 
no amendments increasing contributions under the plan (other 
than amendments increasing contributions necessary to achieve 
the benchmarks after amendments have reduced future benefit 
accruals to the maximum extent permitted by law); and (2) at 
least one proposal for increases in contributions necessary to 
achieve the benchmarks, assuming no amendments reducing future 
benefit accruals under the plan.
    Upon the request of any bargaining party who employs at 
least five percent of the active plan participants or 
represents an employee organization representing at least five 
percent of active participants, the plan sponsor shall provide 
the parties with information as to other combinations of 
increases in contributions and reductions in future benefit 
accruals which would result in achieving the benchmarks. A plan 
sponsor may prepare and provide the bargaining parties with any 
additional information relating to the contribution or benefit 
structures or any other information relevant to the funding 
improvement plan.
    Maintenance of contributions pending approval: Pending 
approval of a funding improvement plan by the bargaining 
parties, a plan may not be amended to reduce the level of 
contributions for participants not in pay status, to suspend 
contributions, or to directly or indirectly exclude any younger 
or newly hired employees from plan participation.
    Benefit restrictions pending approval of funding 
improvement plan: Pending approval of a funding improvement 
plan, a plan may not be amended to distribute, as a lump sum 
distribution or as any other accelerated form, the present 
value of a participant's accrued benefit exceeding $5,000. In 
addition, the plan may not adopt any amendment that would 
result in an increase of plan liabilities 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, unless the amendment is required as a condition 
of plan qualification under the Internal Revenue Code.
    Default if no funding improvement plan adoption: If no 
funding improvement plan is adopted by the end of the 240-day 
period, the plan is considered in critical status as of the 
first day of the succeeding plan year.
    Restrictions upon approval of funding improvement plan: 
Once a funding improvement plan has been adopted by the 
bargaining parties, the plan may not be amended so as to be 
inconsistent with the funding improvement plan or to increase 
future benefit accruals, unless the plan actuary certifies, 
after taking into account the proposed increase, that the plan 
is reasonably expected to meet the funding improvement 
benchmarks.
    Critical status: A plan is considered to be in critical 
status if it is an endangered plan that does not comply with 
requirements appertaining to such plans, or if it is projected 
to meet one of several tests: (1) if, as of the first day of 
the plan year, the plan's funded liability percentage is less 
than 65 percent, and the sum of the market value of assets plus 
anticipated contributions for the current and each of the six 
succeeding plan years is less than the present value of all 
nonforfeitable benefits for all participants and beneficiaries 
projected to be payable under the plan during the current and 
each of the six succeeding plan years plus administrative 
expenses; (2) if, as of the first day of the plan year, the 
plan's market value of assets plus anticipated contributions 
for the current and each of the four succeeding plan years 
equals less than the present value of all nonforfeitable 
benefits projected to be payable during the current and each of 
the four succeeding plan years; (3) if, as of the first day of 
the plan year, the plan is less than 65 percent funded and will 
have an accumulated funding deficiency for any of the four 
succeeding plan years (taking into account any amortization 
extensions); (4) if the plan's normal cost for the year plus 
interest (determined at the rate used for determining costs 
under the plan) for the current plan year on the amount of 
unfunded benefit liabilities under the plan as of the last date 
of the preceding plan year exceeds the present value, as of the 
beginning of the current plan year, of the projected 
contributions for the current plan year, and the present value 
of the nonforfeitable benefits of inactive participants is 
greater than the present value of nonforfeitable benefits of 
active participants, and the plan is projected to have an 
accumulated funding deficiency in the current or any of the 4 
succeeding plan years; or (5) if the funded liability 
percentage of the plan is greater than 65 percent for the 
current plan year and the plan is projected to have an 
accumulated funding deficiency during either of the following 
three plan years, not taking into account any extension of 
amortization periods.
    In any case in which a plan is certified to be in critical 
status for a plan year, the plan sponsor must amend the plan to 
include a rehabilitation plan upon approval by the bargaining 
parties within 240 days after the date on which the plan is 
certified to be in endangered status.
    Rehabilitation plan: A rehabilitation plan shall consist of 
plan amendments that would take the plan out of critical status 
within 10 plan years. The rehabilitation plan may include a 
combination of contribution increases, expense reductions 
(including possible mergers), funding relief measures, and/or 
benefit reductions. These changes must be adopted by all 
bargaining parties. If the plan cannot emerge from 
reorganization within 10 years, the rehabilitation plan must 
describe alternatives, explain why emergence from 
reorganization is not feasible, and develop actions that the 
trustees must take to postpone insolvency. A summary of the 
rehabilitation plan, as well as any modifications to the plan, 
must be included in the plan's annual report.
    Rehabilitation period: The rehabilitation period is the 10-
year period beginning on the earlier of the second anniversary 
of the date of adoption of the rehabilitation plan or the first 
day of the first plan year in which collective bargaining 
agreements covering at least 75 percent of active participants 
have expired.
    Development of rehabilitation plan: Within 90 days 
following a plan's certification, the plan sponsor shall 
develop and provide to the bargaining parties proposals for 
revised benefit and contribution structures which, if adopted, 
reasonably would be expected to ensure that the plan is no 
longer a critical plan. Proposals by the plan sponsor shall 
include: (1) at least one proposal for reductions in the amount 
of future benefit accruals necessary to cause the plan to cease 
to be in critical status, assuming no amendments increasing 
contributions under the plan; and (2) at least one proposal for 
increases in contributions necessary to cause the plan to cease 
to be in critical status, assuming all future benefit accruals 
were reduced to the maximum extent permitted by law.
    Upon the joint request of all bargaining parties who employ 
at least five percent of the active plan participants or 
represent at least five percent of active participants, the 
plan sponsor shall provide the parties with information as to 
other combinations of increases in contributions and reductions 
in future benefit accruals as may be specified by the 
bargaining parties.
    Limitation on reduction in rates of future accruals: Any 
schedule must not reduce the rate of future accruals below the 
lower of: (1) a monthly benefit equal to one percent of the 
contributions required to be made with respect to a participant 
or the equivalent standard accrual rate for a participant or 
group of participants under the collective bargaining agreement 
in effect as of the first day of the plan year in which the 
plan enters critical status; or (2) if lower, the accrual rate 
under the plan on such date. The equivalent standard accrual 
rate shall be determined by the trustees based on the standard 
or average contribution base units that they determine to be 
representative for active participants and such other factors 
as they determine to be relevant.
    Default schedule: If no default schedule is adopted by the 
end of the 240 day period following certification, the plan 
sponsor shall amend the plan to implement one of the proposals 
for reductions in the amount of future benefit accruals 
necessary to cause the plan to cease to be in critical status, 
assuming no amendments increasing contributions under the plan 
are made.
    Allocation of reductions in future benefit accruals: Any 
schedule containing reductions in future benefit accruals is 
applicable to active participants in proportion to the extent 
to which increases in contributions under the schedule apply to 
such bargaining party.
    Maintenance of contributions pending approval: Pending 
approval of a rehabilitation plan by the bargaining parties, 
the plan may not be amended to reduce the level of 
contributions for participants not in pay status, to suspend 
contributions, or to directly or indirectly exclude any younger 
or newly hired employees from plan participation.
    Special rules--automatic employer surcharge: For the first 
plan year in which the plan is in critical status, each 
contributing employer in the plan is obligated to pay to the 
plan a surcharge equal to five percent of the contribution 
otherwise required under the collective bargaining agreement in 
effect (or other agreement pursuant to which the employer 
contributes). For each consecutive plan year thereafter in 
which the plan is in critical status, the surcharge is 10 
percent of the contribution otherwise required under the 
collective bargaining agreement in effect (or other agreement 
pursuant to which the employer contributes). The surcharges are 
required to be paid to the plan on the same schedule as the 
plan contributions. Any failure to pay the surcharge is treated 
as a delinquent contribution. The requirement to pay the 
surcharge ceases on the date on which the agreement is 
renegotiated to include the rehabilitation plan. The amount of 
any surcharge shall not be the basis for any benefit accruals 
under the plan.
    Special rules--benefit adjustments: The trustees of a plan 
in critical status may not reduce adjustable benefits of any 
participant or beneficiary in pay status at least one year 
before the first day of the first plan year in which the plan 
enters into critical status. The trustees shall include in the 
schedules provided to the bargaining parties an allowance for 
funding the benefits of participants with respect to whom 
contributions are not currently required to be made, and shall 
reduce their benefits to the extent permitted and considered 
appropriate based on the plan's then current overall funding 
status and its future prospects in light of the results of the 
parties negotiations.
    An adjustable benefit is defined as any benefit, right, or 
feature (other than the accrued benefit payable at normal 
retirement age, except as otherwise provided under this bill), 
such as post-retirement death benefits, 60-month guarantees, 
disability benefits not yet in pay status and similar benefits, 
retirement-type subsidies, early retirement benefits and 
benefit payment options (other than the 50 percent qualified 
joint-and-survivor benefit and single life annuity), and 
benefit increases that would not be eligible for a guarantee by 
the PBGC on the first day of the first plan year in which the 
plan enters into critical status because they were adopted, or 
if later, took effect less than 60 months before 
reorganization.
    Any benefit reductions shall be disregarded in determining 
a plan's unfunded vested benefits and any surcharges shall be 
disregarded for purposes of determining an employer's 
withdrawal liability.
    Benefit restrictions pending approval of rehabilitation 
plan: Pending approval of the funding improvement plan, the 
plan may not be amended to distribute, as a lump sum 
distribution or as any other accelerated form, the present 
value of a participant's accrued benefit exceeding $5,000. In 
addition, the plan may not adopt any amendment that would 
result in an increase of plan liabilities 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, unless the amendment is required as a condition 
of plan qualification under the Internal Revenue Code.
    Deemed withdrawal: The failure of any contributing employer 
to make the required contributions in compliance with the 
rehabilitation plan may, at the discretion of the plan sponsor, 
be treated as a partial or complete withdrawal by that 
contributing employer from the plan.

Sec. 203. Measures to forestall insolvency of multiemployer plans

    Section 203 provides that if a plan sponsor makes a 
determination that the plan will be insolvent in any of the 
next five plan years, the plan sponsor shall make an annual 
assessment of the current rehabilitation plan and take any 
steps necessary within the limitations of this bill until a 
determination is made that the plan will not be insolvent in 
any of the next five plan years.

Sec. 204. Withdrawal liability reforms

    Repeal of ERISA section 4225: The current law provision 
reduces or subordinates withdrawal liability claims involving 
employer liquidation and insolvency. The liability of insolvent 
employers is capped at 50 percent of withdrawal liability plus 
50 percent of the remaining liquidation value under current 
law. H.R. 2830 repeals this provision.
    Repeal of ERISA section 4219(c): The current law provision 
arbitrarily limits an employer's withdrawal liability payments 
to twenty years of payments. H.R. 2830 repeals this provision.
    Partial withdrawal by means of outsourcing: This provision 
clarifies that an employer who performs the same work formerly 
covered by a pension plan incurs partial (or complete) 
withdrawal liability from the plan if contractor employees are 
performing the same work as any former employees for whom 
contributions in the plan used to be made.
    Repeal of special trucking industry rule: The current law 
rules created a withdrawal liability exemption for those 
companies in the long and short haul trucking industry. H.R. 
2830 repeals this provision.
    Application of forgiveness rule to plans in building and 
construction: The bill allows certain plans covering employees 
in the building and construction industry to elect to adopt a 
rule under which an employer who withdraws from the plan in a 
complete or partial termination is not liable to the plan if 
the employer was a contributing employer for less than five 
years. This rule is applicable to plans in other industries 
under current law.
    Effective Date: The amendments made by this subsection 
apply to plan withdrawals occurring on or after January 1, 
2006.

Sec. 205. Removal of restrictions with respect to procedures applicable 
        to disputes involving withdrawal liability

    Section 205 provides that a plan sponsor may only make a 
claim against an employer alleging that the principle purpose 
of a transaction was to evade or avoid withdrawal liability for 
transactions occurring in the previous five plan years or two 
plan years in the case of a small employer. A small employer is 
any employer who (immediately before the transaction) employs 
not more than 500 employees and is required to make 
contributions to the plan for not more than 250 employees.

        Subtitle B--Amendments to Internal Revenue Code of 1986


                      TITLE III--OTHER PROVISIONS


Sec. 301. Interest rate assumption for determination of lump sum 
        distributions

    Section 301 amends the ERISA and the Internal Revenue Code 
to provide applicable mortality tables and interest rate 
assumptions for determination of lump sum distributions. The 
mortality table used for determination of lump sum 
distributions must be the same mortality table used under 
section 102 of the bill; however, plans must consider that an 
equal number of male and female participants will take a lump 
sum distribution. The three segment rates determined by the 
Secretary of Treasury's modified yield curve used to calculate 
a plan's liability under section 102 of the Pension Protection 
Act must also be used to calculate minimum lump sum 
distributions for participants. The applicable segment rate 
used for calculating a participant's lump sum distribution is 
the same rate that is used to fund for the pension liability of 
that individual. There is a five-year phase-in of this 
provision.

Sec. 302. Interest rate assumption for applying benefit limitations to 
        lump sum distributions

    Section 302 provides that in adjusting a lump sum benefit 
for purposes of applying the limits on benefits payable under a 
defined benefit plan, the interest rate used must be not less 
than the greater of 5.5 percent or the rate that provides a 
benefit of not more than 105 percent of the benefit that would 
be provided by the applicable segment rate or the rate of 
interest specified under the plan.

Sec. 303. Distributions during working retirement

    Section 303 amends the definition of an employee pension 
plan to include that a distribution from a plan, fund, or 
program shall not be treated as made in a form other than 
retirement income or as a distribution prior to termination of 
covered employment solely because such distribution is made to 
an employee who has attained age 62 and who is not separated 
from employment at the time of the distribution.

Sec. 304. Other amendments relating to prohibited transactions

    Section 304 amends ERISA to clarify certain prohibited 
transaction rules:
    Definition of ``Amount Involved.'' The ``amount involved'' 
in a transaction is clarified to mean the amount of money and/
or the fair market value of property either given or received 
as of the date on which the prohibited transaction occurs. The 
definition of ``amount involved'' is clarified to provide that 
the civil penalties imposed for any prohibited transaction may 
not exceed 5 percent of the amount involved.
    Exemption for Block Trading. This exemption includes any 
transaction involving the purchase or sale of securities 
between a plan and a party in interest (other than a fiduciary 
with respect to the plan) if the transaction involves a block 
trade, if at the time of the transaction, the interests of the 
plan (together with the interests of any other plans maintained 
by the same plan sponsor) does not exceed 10 percent of the 
aggregate size of the block trade, and if the terms of the 
transaction, including the price, are at least as favorable to 
the plan as an arm's length transaction.
    Bonding Relief. This exemption amends ERISA's bonding rules 
to reflect the regulation of broker-dealers and investment 
advisers under federal securities law;
    Conforming ERISA's Prohibited Transaction Provision to 
Federal Employee Retirement System Act (FERSA). This provision 
exempts certain transactions between a plan and a party in 
interest solely by reason of providing services, but only if in 
connection with such transaction, the plan receives no less and 
pays no more than adequate consideration. Adequate 
consideration is the price of a security prevailing on a 
national securities exchange registered under the Securities 
Exchange Act of 1934, taking into account factors such as the 
size of the transaction and marketability. If the security is 
not traded on a national securities exchange, a price not less 
favorable to the plan than the offering price for the security 
must be used as established by the current bid and asked prices 
quoted by persons independent of the issuer and party in 
interest, taking into account factors such as the size of the 
transaction and marketability. In the case of an asset other 
than a security for which there is a generally recognized 
market, the fair market value of the asset shall be determined 
in good faith by a fiduciary in accordance with regulations 
prescribed by the Secretary of the Treasury.
    Exemption for Electronic Communication Network. This 
exemption allows for any transaction involving the purchase or 
sale of securities or other property between a plan and a party 
in interest if the transaction is executed through an exchange, 
electronic communications network, alternative trading system, 
or similar execution system or trading venue subject to 
regulation and oversight by the applicable governmental 
regulating entity, provided that the identity of the parties in 
the execution of the transaction are not taken into account and 
the transaction is effected pursuant to rules designed to match 
purchases and sales at the best price available through the 
communications network.
    Definition of Plan Asset Vehicle. This provision excludes 
the underlying assets of entities which hold less than 50 
percent of plan assets from the fiduciary rules under ERISA. 
For purposes of determining the 50 percent threshold, the value 
of any equity interest owned by a person (other than the 
employee benefit plan) who has discretionary authority or 
control with respect to the assets of the entity or any person 
who provides investment advice for a fee (direct or indirect), 
is disregarded.
    Exemption for Foreign Exchange Transactions. This provision 
exempts any foreign transactions between a bank or broker-
dealer, or any affiliate, and a plan to which any bank or 
broker-dealer, or any affiliate, is a trustee, custodian, 
fiduciary, or other party in interest, provided that the 
transaction is in connection with the purchase or sale of 
securities, at the time the transaction is entered into and the 
terms of the transaction are not less favorable to the plan 
than the terms generally available or afforded in a comparable 
arm's length foreign exchange transaction between unrelated 
parties. In addition, the exchange rate used by the bank or 
broker-dealer for a foreign exchange transaction must be at a 
rate no less favorable than the rate quoted for transactions of 
similar size at the time of the transaction as displayed on an 
independent service that reports rates of exchange, and there 
is no investment discretion or advice provided by the bank or 
broker-dealer, or any affiliate with respect to the 
transaction.

Sec. 305. Correction period for certain transactions involving 
        securities and commodities

    This provision provides a 14-day correction period, 
beginning on the date on which the fiduciary or party in 
interest or other person discovers or reasonably should have 
discovered the prohibited transaction, for any transactions 
that occurs by mistake between a plan and a party-in-interest 
or fiduciary.

Sec. 306. GAO study

    This provision calls upon the Comptroller General of the 
Government Accountability Office to transmit to the Congress a 
pension funding report not later than one year after the date 
of enactment of the bill that will include an analysis of the 
feasibility, advantages, and disadvantages of requiring an 
employee pension benefit plan to insure a portion of such 
plan's total investments; requiring an employee pension benefit 
plan to adhere to uniform solvency standards set by the PBGC 
which are similar to those applied on a state level in the 
insurance industry; and amortizing a single-employer defined 
benefit pension plan's shortfall amortization base over various 
periods of not more than seven years.

          TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS


Sec 401. Increases in PBGC premiums

    This section provides for an increase in the PBGC yearly 
insurance premium paid by plans to the PBGC. Plans with a 
funding target percentage less than 80 percent will have a 
three year phase-in of premiums from the current $19 dollars to 
$30 dollars per participant per year, including an inflation 
adjustment each year to the national wage index. Plans with a 
funding target percentage of 80 percent or higher funded will 
have a five year phase-in of $19 dollars to $30, including 
inflation adjustment each year to the national wage index.

                          TITLE V--DISCLOSURE


Sec. 501. Defined benefit plan funding notices

    Section 501 amends section 101(f) of ERISA to apply such 
notices to all defined benefit (single employer and 
multiemployer) plans. The notice is now due 90 days after the 
end of the plan year. The notice must include a statement of 
the ratio of inactive participants to active participants in 
the plan. This section also requires that plan sponsors include 
in the notice a statement of a reasonable estimate of the value 
of plans assets and projected liabilities as well as the plan's 
funded ratio. The notice must also include a statement of the 
plan's funding policy and the asset allocation of investment 
under the plan (as expressed as a percentage of the total 
assets).
    For multiemployer plans, this notice shall include a 
summary of any funding improvement plan or rehabilitation plan 
as well as the statement of the ratio, as of the end of the 
plan year to which the notice relates, of the number of 
participants who are not in covered service and are in pay 
status under the plan or have a nonforfeitable right to 
benefits under the plan to the number of participants who are 
in covered service under the plan.

Sec. 502. Additional disclosure requirements

    Section 502 provides new requirements for plans filing a 
Form 5500 report with the Department of Labor. Specifically, 
this section provides that defined benefit plans (both single 
and multiemployer plans) will be required to file the ratio of 
the number of inactive participants to the number of active 
participants as of the end of the plan year. If plans have 
merged and are making one filing, the funded percentage of the 
preceding plan year and the new funded percentage after the 
plan merger must also be reported. On the Schedule B, the 
plan's enrolled actuary must provide an explanation detailing 
the basis for all plan retirement assumptions. With respect to 
multiemployer plans, the plan sponsor must include in the 
filing the number of contributing employers in a plan as well 
as the number of employees in the plan who no longer have a 
contributing employer on their behalf must also be reported. 
The deadline for filing the annual report for any plan year is 
275 days after the close of the plan year. The Secretary of 
Labor may grant an extension only in cases of hardship in 
accordance with regulations.
    Summary Annual Report: A Summary Annual Report must be 
filed within 15 days after the deadline for the filing of the 
Annual Report.
    Information to be made available: Section 502 requires that 
the trustees of a multiemployer plan make available upon 
request by any contributing employer, participant, or 
beneficiary, within 30 days of receipt by the plan sponsor, 
copies of all actuary reports and financial reports received by 
the plan for a plan year. Plans are permitted to charge 
reasonable fees for copying and mailing this information. The 
bill also provides that the Secretary of Labor shall identify 
alternative methods of disclosure within 90 days from the date 
of enactment of the bill.
    Withdrawal liability notice: This section gives 
contributing employers the right to a notice of the amount of 
their withdrawal liability. Only one notice can be provided 
within any 12-month period. The plan sponsor may make any 
reasonable charge to cover copying, mailing, and other costs 
attributable to furnishing such notice. This information must 
be provided within 180 days after a written request.

Sec. 503. Section 4010 filings with the PBGC

    Section 503 makes changes to the requirements under Section 
4010 of ERISA which require the reporting of actuarial and 
financial information by certain controlled groups with plans 
that have significant unfunded vested benefits. Additional 
requirements are established for single employer plans that 
will require the sponsoring employer to notify all participants 
and beneficiaries (including those participants and 
beneficiaries that are members of the sponsoring employer's 
controlled group), within 90 days after the 4010 filing is due, 
of the following information: (1) notification that a 4010 
filing has been made for the plan year; (2) the number of plans 
maintained by the sponsoring employer (including plans 
maintained by any controlled group member) that are less than 
60 percent funded, and (3) the assets, liabilities, and funded 
ratio for those plans that are less than 60 percent funded. The 
notice must also include, in the aggregate, the total values of 
plan assets and funding targets of such plans, taking into 
account only those benefits to which participants and 
beneficiaries have a nonforfeitable right as well as the 
aggregate funding target attainment percentage of the plan.
    The requirements for filing a 4010 are amended to require a 
filing if the aggregate funding target percentage of the plan, 
taking into account all plans maintained by the contributing 
sponsor and the members of its controlled group as of the end 
of the applicable plan year, is less than 60 percent; or the 
aggregate funding target of a plan, taking into account the 
aggregate values of plan assets and funding targets of all 
plans maintained by the contributing sponsor and the members of 
its controlled group as of the end of the applicable plan year, 
is less than 75 percent and the plan sponsor is in an industry, 
determined by the PBGC, in which there is substantial 
unemployment or underemployment and in which the sales and 
profits are depressed or declining.

                      TITLE VI--INVESTMENT ADVICE


Sec. 601. Amendments to Employee Retirement Income Security Act of 1974 
        providing prohibited transaction exemption for provision of 
        investment advice

    Section 601 provides a statutory exemption from the 
prohibited transaction rules of the Employee Retirement Income 
Security Act (ERISA) and the Internal Revenue Code (a new 
Sec. 408(b)(14) of ERISA and a new Sec. 4975(d)(14) of the IRC) 
for: (1) the provision of investment advice regarding plan 
assets subject to the direction of plan participants and 
beneficiaries plan to a plan, its participants and 
beneficiaries; (2) the sale, acquisition, or holding of 
securities or other property pursuant to such investment 
advice; and (3) the direct or indirect receipt of fees or other 
compensation in connection with providing the advice.
    In order to qualify for the exemption, an entity must be a 
``fiduciary adviser'' and must meet a series of detailed 
requirements. The bill defines the following regulated entities 
to qualify as fiduciary advisers: registered investment 
advisers, the trust department of banks or similar 
institutions, insurance companies, registered broker-dealers, 
and the affiliates, employees, agents, or registered 
representatives of those entities who satisfy the requirements 
of the applicable insurance, banking and securities laws with 
respect to the provision of such advice.
    The fiduciary adviser, at a time reasonably contemporaneous 
with the initial delivery of investment advice on a security or 
other property, must provide a clear and conspicuous written 
(including electronic) disclosure of: (1) the fees or other 
compensation that the fiduciary adviser and its affiliates 
receive relating to the provision of investment advice or a 
resulting sale or acquisition of securities or other property 
(including from third parties); (2) any interest of the 
fiduciary adviser (and its affiliates) in any security or other 
property recommended, purchased or sold; (3) any limitation 
placed on the fiduciary's ability to provide advice; (4) the 
advisory services offered; (5) the fact that the adviser is 
acting as a fiduciary of the plan in connection with the 
provision of such advice; (6) any information required to be 
disclosed under applicable securities laws; and (7) the plan 
participant's right to seek advice from an unaffiliated 
adviser. This disclosure must be written in a way that the 
average plan participant could understand the information. This 
material must be maintained in currently accurate form. The 
Secretary of Labor will issue a model disclosure form.
    Any investment advice provided to participants or 
beneficiaries may be implemented (through a purchase or sale of 
securities or other property) only at their direction. The 
terms of the transaction must be at least as favorable to the 
plan as an arm's length transaction would be, and the 
compensation received by the fiduciary adviser (and its 
affiliates) in connection with any transaction must be 
reasonable. The fiduciary adviser must also provide a written 
acknowledgement that it is acting as a fiduciary of the plan to 
the plan sponsor.
    Fiduciary advisers must comply with a six-year record-
keeping requirement (for records necessary to determine whether 
the conditions of the exemption have been met).
    A plan sponsor or other fiduciary that arranges for a 
fiduciary adviser to provide investment advice to participants 
and beneficiaries has no duty to monitor the specific 
investment advice given by the fiduciary adviser to any 
particular recipient of advice. The plan sponsor or other 
fiduciary retains the duty of prudent selection and periodic 
review of the fiduciary adviser. The fiduciary adviser must 
acknowledge in writing to the plan sponsor that it is acting as 
a fiduciary of the plan with respect to the advice provided. 
Plan assets may be used to pay for the expenses of providing 
investment advice to participants and beneficiaries.

Sec. 602. Amendments to Internal Revenue Code of 1986 providing 
        prohibited transaction exemption for provision of investment 
        advice

    Section 602 conforms the Internal Revenue Code to allow for 
the provision of certain investment advice.

                 TITILE VII--BENEFIT ACCRUAL STANDARDS


Sec. 701. Improvements in benefit accrual standards

    Section 701 clarifies the rules relating to the reduction 
in accrued benefits under ERISA. A plan is not treated as 
failing to meet plan requirements under ERISA section 
204(b)(1)(H) if a participant's entire accrued benefit, as 
determined as of any date under the formula for determining 
benefits as set forth in the text of the plan documents would 
be equal to or greater than that of any similarly situated, 
younger individual. An individual is similarly situated to 
another participant if such individual is identical in every 
respect (including period of service, compensation, position, 
date of hire, work history, and any other respect) except for 
age. In determining the entire accrued benefit, the subsidized 
portion of any early retirement benefit (including any early 
retirement subsidy that is fully or partially included or 
reflected in an employee's opening account balance or other 
transition benefits) shall be disregarded.
    A plan to which the accrued benefit payable under the plan 
upon distribution (or any portion thereof) is expressed as the 
balance of a hypothetical account does not fail to meet the 
requirements under ERISA section 204(b)(1)(H) because interest 
accruing on the account balance is taken into account.
    A plan does not fail to meet the requirements under ERISA 
section 204(b)(1)(H) because the plan provides allowable 
offsets against those benefits under the plan which are 
attributable to employer contributions, based on benefits which 
are provided under title II of the Social Security Act, the 
Railroad Retirement Act of 1974, or another plan described in 
IRC section 401(a), and are maintained by the same employer, or 
under any retirement program or officers or employees of the 
Federal or State government or one of its political 
subdivisions. Allowable offsets consist of offsets equal to all 
or part of the actual benefit payment amounts, or reasonable 
projections or estimations of such benefit payment amounts.
    A plan does not fail to meet the requirements under ERISA 
section 204(b)(1)(H) because the plan provides a disparity in 
contributions or benefits with respect to which the 
requirements of IRC section 401(l) are met.
    A plan does not fail to meet the requirements under ERISA 
section 204(b)(1)(H) because the plan provides for pre-
retirement indexing of accrued benefits under the plan. Pre-
retirement indexing is the periodic adjustment of the accrued 
benefit by means of the application of a recognized index or 
methodology so as to protect the economic value of the benefit 
against inflation prior to distribution.
    Determinations of accrued benefit as balance of benefit 
account: A defined benefit plan under which the accrued benefit 
payable under the plan upon distribution (or any portion 
thereof) is expressed as the balance of the hypothetical 
account for each participant may make available for such 
distribution under the terms of the plan the balance of the 
account, calculated by using the applicable interest rate that 
would be used under the terms of the plan to project the amount 
of the participant's account balance to normal retirement age, 
so long as the interest rate used does not provide for a return 
that is greater than a market rate of return, as determined by 
the Secretary of the Treasury.
    The effective date of this provision applies to periods 
beginning on or after June 29, 2005.

                   TITLE VIII--DEDUCTION LIMITATIONS


Sec. 801. Increase in deduction limit for single-employer plans

    Section 801 provides for an increase in the deduction limit 
for single-employer plans up to a new higher maximum deductible 
amount equal to the greater of: (1) the excess of the sum of 
150 percent of the plan's funding target plus the target normal 
cost over the value of plan assets, or (2) the excess of the 
sum of the plan's at-risk normal cost and at-risk funding 
target for the plan year over the value of plan assets to 150 
percent of the plan's funding target plus the target normal 
cost.
    The increase in the deduction limit for multiemployer plans 
is the excess of 140 percent of the plan's current liability 
over the value of plan assets.
    The provision also modifies the rules relating to the 
limitation on deductions for plan sponsors maintaining both 
defined benefit and defined contribution plans. The bill 
provides that in the case of employer contributions to one or 
more defined contribution plans, the limit shall only apply to 
the extent that such contributions exceed six percent of the 
compensation otherwise paid or accrued during the year to 
beneficiaries under the plan.

                       Explanation of Amendments

    The provisions of the Amendment in the Nature of a 
Substitute are explained in this report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This Bill allows amends the Employee Retirement Income 
Security Act (ERISA) to provide for pension security. Since 
ERISA excludes governmental plans, the bill does not apply to 
legislative branch employees. As public employees, legislative 
branch employees are eligible to participate in the Federal 
Employee Retirement System.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill amends the voluntary pension system 
provided under the Employee Retirement Income Security Act 
(ERISA). As such, the bill does not contain any unfunded 
mandates. In compliance with this requirement, the Committee 
has received a letter from the Congressional Budget Office 
included herein.


                             Correspondence

                     Congress of the United States,
                                  House of Representatives,
                                     Washington, DC, July 12, 2005.
Hon. John Boehner,
Chairman, Committee on Education and the Workforce,
Rayburn House Office Building, Washington, DC.
    Dear Mr. Chairman: Due to a Base Realignment and Closure 
(BRAC) Regional Hearing in Atlanta regarding a possible closure 
in my district, I was unable to attend the Committee's mark-up 
of H.R. 2830, ``Pension Protection Act of 2005''. Consequently, 
I was unable to vote on the following amendments: 
Representative Tierney's amendment regarding defined benefit 
terminations; Representatives Wu and Van Hollen's amendment 
regarding shutdown benefits; Representatives Woolsey and Van 
Hollen's amendment regarding executive parity in benefit 
restrictions; and Representative Miller's amendment regarding 
cash balance plans. Had I been present, I would have voted in 
favor of each of these amendments.
    I would appreciate your including this letter in the 
Committee Report to accompany H.R. 2830. Thank you for your 
attention in this matter.
            Sincerely,
                                                       John Barrow.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 2830 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 9, 2005.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: As you requested, the Congressional 
Budget Office has prepared the enclosed cost estimate for H.R. 
2830, the Pension Protection Act of 2005.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Geoffrey 
Gerhardt.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 2830--Pension Protection Act of 2005

    Summary: H.R. 2830 would make changes to the Employee 
Retirement Income Security Act of 1974 (ERISA) and the Internal 
Revenue Code (IRC) that would affect the operations of private 
pension plans. It would do so mostly by changing the funding 
requirements for tax-qualified, defined-benefit pension plans 
and the premiums paid to the Pension Benefit Guaranty 
Corporation (PBGC).
    The budgetary effects of the bill would result from:
     Increased income to the PBGC from premiums paid by 
the sponsors of pension plans--totaling an estimated $5.1 
billion over the next 10 years.
     A loss of federal income tax revenue, primarily 
because more rigorous funding rules would be imposed on plans' 
sponsors; the Joint Committee on Taxation (JCT) estimates that 
enacting H.R. 2830 would reduce federal revenues by $5.5 
billion over the 2006-2015 period.
     Additional benefit payments--totaling an estimated 
$0.5 billion over 10 years--that the PBGC would have to make as 
a result of a number of changes made by the bill.
    In combination, those effects would add $0.8 billion to 
federal budget deficits over the 2006-2015 period, CBO 
estimates. The additional premium income would have another 
effect: it would increase the balances in the PBGC's on-budget 
revolving fund and therefore forestall the need for significant 
transfers to that revolving fund from the PBGC's nonbudgetary 
trust fund in order pay insured benefits. Because those 
transfers are treated in the budget as offsetting collections 
(that is, offsets to outlays), smaller transfers would result 
in higher net outlays for PBGC's on-budget revolving fund. The 
improvement in the financial condition of that fund would 
eliminate the need for $7.4 billion in transfers to the fund 
from 2013 through 2015, CBO estimates, thereby increasing on-
budget outlays by that amount. Adding that effect to the other 
impacts of the bill, CBO projects that enacting H.R. 2830 would 
increase federal budget deficits by $8.2 billion over the 2006-
2015 period.
    The bill would improve the budget outlook in the near term 
but would increase budget deficits in later years because of 
the way some of the provisions would phase in and because the 
reduction in transfers to the on-budget revolving fund would 
occur towards the end of the 10-year period. CBO estimates that 
enacting the bill would reduce federal deficits by $5.7 billion 
over the 2006-2008 period, but would add $13.9 billion to 
budget shortfalls from 2009 through 2015.
    Major provisions of H.R. 2830 would:
     Require sponsors of single-employer pension plans 
to meet a funding target that is at least 100 percent of 
current liabilities;
     Specify that the discount rate used to calculate 
the present value of current pension liabilities be based on a 
segmented yield curve of corporate bonds rather than the 
interest rate on 30-year Treasury bonds;
     Restrict the use of credit balances to offset 
required pension contributions;
     Place limits on benefit accruals for participants 
in certain underfunded plans;
     Increase the limits on the tax-deductible 
contributions sponsors may make to plans;
     Increase the per-participant premium paid to the 
PBGC for single-employer plans;
     Change the funding rules for multiemployer pension 
plans;
     Enhance disclosure requirements for both single-
employer and multiemployer pension plans; and
     Address the legal status of so-called hybrid 
defined-benefit pension plans.
    Not all of these policies would directly affect federal 
spending or revenues.
    Pursuant to section 407 of H. Con. Res. 95 (the Concurrent 
Resolution on the Budget, Fiscal Year 2006), CBO estimates that 
enacting H.R. 2830 would not cause an increase in direct 
spending greater than $5 billion in any of the 10-year periods 
between 2016 and 2055.
    CBO has reviewed the nontax portions of H.R. 2830 and 
determined that they contain no intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) and would 
impose no costs on state, local, or tribal governments. Those 
provisions would impose a number of mandates on sponsors and 
administrators of single-employer and multiemployer private 
pension plans. CBO estimates that the direct cost of those 
private-sector mandates, less the direct savings from those 
mandates, would exceed the annual threshold specified in UMRA 
($123 million in 2005, adjusted annually for inflation) in 2009 
and subsequent years.
    JCT has determined that the tax provisions of H.R. 2830 
contain no intergovernmental or private-sector mandates as 
defined in UMRA.
    Estimated cost the Federal Government: The estimated 
budgetary impact of H.R 2830 is shown in the following table. 
The costs of this legislation would fall within budget function 
600 (income security).
    Basis of estimate: H.R. 2830 contains changes to both ERISA 
and the Internal Revenue Code that would affect sponsors of 
defined-benefit pension plans. Under current law, the funding 
rules are exactly the same in both ERISA and IRC. In certain 
instances, however, changes made by the bill to the pension 
funding requirements of ERISA are inconsistent with changes 
made to the funding rules in the IRC. CBO's and JCT's budget 
estimates assume that, if H.R. 2830 is enacted, additional 
changes would be made to the IRC to make it consistent with 
those changes made to ERISA by H.R. 2830. Those estimates also 
assume that H.R. 2830 and the corresponding changes to the IRC 
will be enacted by December 2005.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     By fiscal year, in millions of dollars--
                                                        ------------------------------------------------------------------------------------------------
                                                           2006     2007      2008      2009      2010      2011      2012      2013      2014     2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING


Changes in Flat-Rate Premiums Paid to PBGC:
    Estimated Budget Authority.........................      -79      -158      -240      -314      -552      -586      -655      -690     -759     -828
    Estimated Outlays..................................      -79      -158      -240      -314      -552      -586      -655      -690     -759     -828
Changes in Variable Premiums Paid to PBGC:
    Estimated Budget Authority.........................        0       -25      -170      -246      -255      -191       -68        66      237      360
    Estimated Outlays..................................        0       -25      -170      -246      -255      -191       -68        66      237      360
Changes in Net Benefit Payments:
    Estimated Budget Authority.........................       -1         *         6        19        35        54        72        88      101      112
    Estimated Outlays..................................       -1         *         6        19        35        54        72        88      101      112
    Subtotal:
        Estimated Budget Authority.....................      -80      -184      -404      -541      -771      -722      -651      -536     -421     -356
        Estimated Outlays..............................      -80      -184      -404      -541      -771      -722      -651      -536     -421     -356
Changes in Transfers from PBGC's Nonbudgetary Trust
 Fund:
    Estimated Budget Authority.........................        0         0         0         0         0         0         0     1,068    3,092    3,222
    Estimated Outlays..................................        0         0         0         0         0         0         0     1,068    3,092    3,222
    Total Changes in Direct Spending:
        Estimated Budget Authority.....................      -80      -184      -404      -541      -771      -722      -651       532    2,671    2,866
        Estimated Outlays..............................      -80      -184      -404      -541      -771      -772      -651       532    2,671    2,866


                                                                   CHANGES IN REVENUES


Changes to Funding Rules for Single-Employer Plans.....      778     2,584     1,761    -1,420    -2,502    -2,185    -1,757    -1,070     -758     -659
Changes to Funding Rules for Multiemployer Plans.......        *        -2        -8       -18       -28       -34       -40       -46      -52      -58
Changes to Benefit Accrual Standards...................      -24        -9         1         6        -3        -8         6        25       29       13
                                                        ------------------------------------------------------------------------------------------------
    Total Changes in Revenue...........................      754     2,573     1,754    -1,432    -2,533    -2,227    -1,791    -1,091     -781     -704


                                                     NET INCREASE OR DECREASE (-) IN BUDGET DEFICITS


Net of Transfers from PBGC's Nonbudgetary Trust Fund...     -834    -2,757    -2,158       891     1,762     1,505     1,140     1,623    3,452    3,570
Excluding Transfers from PBGC's Nonbudgetary Trust Fund     -834    -2,757    -2,158       891     1,762     1,505     1,140       555      360      348
--------------------------------------------------------------------------------------------------------------------------------------------------------
SOURCES: Congressional Budget Office and Joint Committee on Taxation.
NOTES: PBGC = Pension Benefit Guaranty Corporation.
* = less than $500,000.

Direct spending

    Increase in Flat-Rate Premium. Under current law, sponsors 
of single-employer pension plans insured by the PBGC are 
required to pay the agency a premium of $19 per participant. 
H.R. 2830 would increase the flat-rate premium to $30 per 
participant in 2006 and index it to wage growth starting in 
2007. However, no plans would pay the full increase 
immediately. The bill would phase in the rate increase 
differently depending on whether the ratio of a plan's assets 
to its liabilities (known as its funding ratio) is above or 
below 80 percent. For plans that have a funding ratio of 80 
percent or higher, the increased rate would be phased in over a 
five-year period; for plans with a funding ratio of less than 
80 percent, the rate increase would be phased in over a three-
year period. Both phase-in periods would begin in 2006 and the 
premium rate for all single-employer plans would be the same--
approximately $35 per participant--by 2010.
    About 35 million people currently participate in tax-
qualified, single-employer pension plans. This figure includes 
active workers, former workers who are vested but have not 
started collecting retirement benefits, and annuitants. The 
number of participants in single-employer plans insured by the 
PBGC has remained nearly constant for the past decade, and CBO 
assumes it would remain steady for the next 10 years.
    The current premium of $19 per participant generates about 
$650 million in premium income annually for the PBGC. CBO 
estimates changes to the flat-rate premiums made by H.R. 2830 
would increase receipts by $1.3 billion over the 2006-2010 
period and $4.9 billion over the 2006-2015 period. The varying 
amounts of additional premiums from year to year reflect both 
the phase-in of the rate increase and the rounding of the new 
rates to the nearest dollar, as specified by the bill. Because 
the PBGC's premiums are recorded as offsetting collections to a 
mandatory spending account, increases in premium collections 
are reflected in the budget as decreases in direct spending.
    Variable Premiums. Under current law, sponsors of single-
employer plans with assets less than liabilities are generally 
required to pay a variable premium, which is based on the 
amount of underfunding in the plan. The variable premium rate 
is $9 per $1,000 of underfunding. The amount of income from 
this type of premium varies from year to year; in 2004 it 
generated approximately $800 million in receipts.
    H.R. 2830 would affect how much the PBGC collects from 
variable premiums because it would change the way plans' 
sponsors calculate the amount of underfunding. Starting in 
2006, current law will require plans to discount their current 
liabilities, in order to determine the amount of underfunding, 
using an interest rate that is the four-year moving average of 
the rate on 30-year Treasury bonds; \1\ H.R. 2830 would allow 
plans to discount their pension obligations using a yield curve 
based on a three-year weighted average of yields on investment-
grade corporate bonds. The yield curve, which would be 
determined by the Secretary of the Treasury, would be divided 
into three segments: yields for bonds maturing in the five-year 
period following the first day of each new plan-year; yields 
for bonds maturing during the next 15-year period; and yields 
for bonds maturing after the initial 20-year period. These 
segments would be used to discount benefit payments expected to 
be made by plans during each of the three periods.
---------------------------------------------------------------------------
    \1\ Public Law 108-218, the Pension Funding Equity Act, changed how 
current liabilities of covered plans are discounted during plan-years 
2004 and 2005. During those two years, current liabilities are 
discounted using an interest rate on high-grade corporate bonds, as 
determined by the Department of the Treasury. Prior to those years, the 
discount rate was based on the interest rates on 30-year Treasury 
bonds.
---------------------------------------------------------------------------
    When compared to interest rates on 30-year Treasury bonds, 
the segmented yield curve would generally result in lower 
discount rates for participants whose benefits will be paid in 
the near term, and higher discount rates for participants whose 
benefits will be paid in later years. Discount rates and the 
present value of pension liabilities have an inverse 
relationship: increasing the discount rate results in a lower 
valuation of liability, while lowering the discount rate 
produces a higher valuation of liability. Based on information 
provided by the PBGC, CBO estimates that the segmented yield 
curve would reduce the total present value of current 
liabilities among all underfunded plans by about 5 percent.
    Reducing the present value of current liabilities would 
generally reduce future contributions that plans' sponsors 
would be required to make. Other changes to the funding rules 
(which are discussed in more detail later) would increase 
contributions. CBO estimates that, under H.R. 2830, firms 
initially would have to contribute less to their plans, but 
later would have to contribute more than under current law. The 
change in contributions would have significant effects on 
federal revenues, as discussed later in this estimate. The 
change in contribution patterns would also affect how many 
plans are underfunded and how much underfunding exists in those 
plans. This, in turn, would affect the PBGC's income from 
variable premiums.
    H.R. 2830 would also have an effect on which plans are 
required to make a variable premium payment. Current law 
provides underfunded plans with ways to reduce or avoid 
variable premium payments. Plans that have reached a statutory 
``full funding limit'' are exempt from paying a variable 
premium, even though they may be substantially underfunded. 
H.R. 2830 would eliminate the full funding limit exemption and 
would require all plans that are underfunded to pay the 
variable premium on any underfunding.
    CBO estimates that enacting H.R. 2830 would increase 
receipts from variable premiums by $696 million over the 2007-
2010 period and by $292 million over the 2007-2015 period.\2\ 
As with flat-rate premiums, increases in receipts from variable 
premiums are reflected as decreases in direct spending.
---------------------------------------------------------------------------
    \2\ Because plans are estimated to be better funded on a current 
liability basis in the long run, collections of variable premiums under 
H.R. 2830 would fall starting in 2013.
---------------------------------------------------------------------------
    PBGC's Disbursements. H.R. 2830 would affect both how much 
sponsors are required to contribute to their plans and how much 
benefits may increase under certain plans insured by the PBGC. 
Such changes would affect the amount of unfunded liabilities 
that the PBGC assumes in the event that a pension plan is 
terminated (i.e., claims) and thus the payments the agency 
makes to beneficiaries in terminated plans. CBO estimates that 
the policies contained in H.R. 2830 would increase benefit 
outlays by $59 million over the 2006-2010 period and by $486 
million over the 2006-2015 period.
    Several of the changes to the pension funding rules would 
have countervailing effects on the contributions plans' 
sponsors would be required to make over the next 10 years. 
Basing the discount rate for calculating the present value of 
liabilities on corporate bonds instead of Treasuries would 
cause the present value of current liabilities among 
underfunded plans to shrink by more than $50 billion in 2006, 
CBO estimates. This policy would have the effect of reducing 
required contributions by plans' sponsors.
    Other changes made by the bill would also have an effect on 
required contributions. Current funding rules require that 
sponsors of insured plans make contributions to cover the costs 
of benefits accrued in a given year and that contributions 
above that amount are required only if the actuarial value of a 
plan's assets is less than 90 percent of current liabilities. 
These additional payments (referred to as ``deficit reduction 
contributions'') can be amortized over periods ranging from 
three to 30 years, depending on how the underfunding 
occurred.\3\ H.R. 2830 would require that, in addition to 
covering its normal costs, a sponsor must make additional 
contributions if assets are less than 100 percent of current 
liabilities (referred to as its ``funding target''). The bill 
generally would require the shortfall to be amortized over a 
period of seven years. These changes would have the effect of 
reducing required contributions for some plans (due to the 
seven-year amortization period) and increasing required 
contributions for others (because of the higher funding 
target).
---------------------------------------------------------------------------
    \3\ Under certain circumstances, plans can be between 80 percent 
and 90 percent funded before being required to make deficit reduction 
contributions.
---------------------------------------------------------------------------
    The bill also would limit the use of previously accumulated 
funding balances, which can be used to offset required 
contributions. Funding balances usually occur when a sponsor 
contributes more than the minimum required in a given year. 
Under current law, no matter how underfunded a plan is, its 
sponsor may use funding balances to reduce or eliminate 
required contributions. In addition, the value of funding 
balances is not adjusted for actual gains or losses on the 
assets in which they are invested. Instead, these balances are 
increased each year by the same rate of return assumed for 
other assets held by the plan. H.R. 2830 would allow only plans 
that have a funding ratio of 80 percent or higher to use 
funding balances to offset required pension contributions. In 
addition, the bill would require plans to adjust the value of 
any balances for net gains or losses on the plan's assets. 
These changes to the use of funding balances would generally 
have the effect of increasing required contributions.
    H.R. 2830 would also affect required contributions by: 
reducing the ``smoothing'' period used to calculate the 
actuarial value of assets and liabilities; updating the 
mortality table used to project future benefits; and adding a 
``loading factor'' to the funding target of plans that are less 
than 60 percent funded.
    In addition to changes in the funding rules, H.R. 2830 
would also restrict some benefit payments for certain 
underfunded plans. Specifically, the bill would limit the 
ability of plans with a funding ratio of less than 80 percent 
to make lump-sum payments or amend the plan to increase 
benefits. It also would effectively freeze normal benefit 
increases in plans with funding ratios of less than 60 percent. 
In addition, the bill would prohibit plans from paying benefits 
for unpredictable contingent events, such as shutdown benefits 
to workers in facilities that are closed. If enacted, these 
policies would reduce liabilities, and therefore reduce benefit 
payments that the PBGC would be required to make for plans that 
are terminated in the future.
    Accounting for all the policy changes contained in H.R. 
2830, CBO estimates that the annual shortfall between assets 
and liabilities (on a present-value basis) among plans that the 
PBGC takes over during the 2006-2015 period would increase by 
several hundred million dollars. The larger shortfall would 
manifest itself in higher outlays for benefit payments by the 
PBGC, as those liabilities eventually come due, with a 
significant portion of those claims being paid well after 2015. 
The biggest reason for the increase in claims is the projected 
decrease in required contributions, at least during the first 
several year of the period, due to use of the corporate bond 
yield curve to discount current liabilities.\4\ This effect 
would be offset to some degree, especially during the second 
half of the budget window, by the higher funding target and 
limits on benefit accruals. Overall, however, CBO estimates 
that the bill would lead to an increase in underfunding among 
plans that would be terminated over the next decade, thus 
increasing outlays by the PBGC for pension benefits.
---------------------------------------------------------------------------
    \4\ The higher discount rate would be used to calculate plans' 
``current liability,'' which is used to determine funding requirements 
and any premium payments on underfunding. The bill would not, however, 
affect the discount rate used to calculate plans' ``termination 
liability,'' which represents the present value of all future benefit 
payments owed by the PBGC upon termination of a plan.
---------------------------------------------------------------------------
    Transfers from PBGC's Trust Fund. The PBGC's assets are 
held in two separate funds: an on-budget revolving fund and a 
nonbudgetary trust fund.\5\ ``The on-budget fund receives 
premium payments and makes outlays for benefit payments and 
administrative costs. The nonbudgetary trust fund holds assets 
from terminated plans until they are needed to help pay for 
benefits and other expenses. The PBGC makes periodic transfers 
from the nonbudgetary fund to the on-budget fund, where they 
are used to cover about half of all benefit payments and most 
of the PBGC's administrative costs. As with premiums, these 
transfers are offsetting collections to a mandatory account, 
and so are reflected in the budget as offsets to outlays.
---------------------------------------------------------------------------
    \5\ The PBGC has several different on-budget revolving funds and 
two nonbudgetary trust funds. For simplicity in the budgetary 
presentation, CBO combines the various on-budget and nonbudgetary funds 
into just two funds.
---------------------------------------------------------------------------
    In CBO's current-law projections, the combination of rising 
benefit payments and level premium income will cause the 
agency's on-budget fund to be completely exhausted in about 
2013. No precedent exists for how the PBGC would proceed if its 
on-budget fund is depleted. However, CBO assumes that the 
agency would cover its expenses by increasing the percentage of 
benefits and other expenses being paid through transfers from 
its nonbudgetary trust fund, thus increasing offsetting 
collections above what they would have been if the fund had 
remained solvent.
    CBO estimates the increases in Premium receipts resulting 
from H.R. 2830 would cause the on-budget fund to remain solvent 
through at least 2015. Because the bill would improve the 
finances of the on-budget fund, the PBGC would not need to 
increase the amounts transferred from the nonbudgetary fund in 
order to help cover benefit payments and other expenses during 
the 10-year projection period. By allowing the on-budget fund 
to remain solvent through the next decade, the bill would 
reduce those transfers by $7.4 billion over the 2013-2015 
period. Because this change would reduce an offset to mandatory 
spending, it would result in a net increase in such spending.

Revenues

    H.R. 2830 would alter existing tax law related to the 
treatment of pension plans. CBO and JCT estimate that, if 
enacted, those changes would increase receipts to the federal 
government during the 2006-2008 period, but decrease receipts 
after that. As a result, JCT estimates, enacting H.R. 2830 
would increase revenues by about $1.1 billion over the 2006-
2010 period and would reduce revenues by about $5.5 billion 
over the 2006-2015 period.
    Most of the revenue effects would come from the altered 
funding rules for single-employer, defined-benefit pension 
plans. By affecting the amount of tax-deductible contributions 
firms make to their pension plans, these changes would increase 
revenues by $5.1 billion over the 2006-2008 period and then 
decrease revenues by $10.4 billion over the 2009-2015 period. 
The change from increases to decreases in revenues is due to 
the differing phase-in rates of the stricter funding rules and 
the new discount rates. In the short run, the higher discount 
rates would reduce contributions and increase revenues before 
the stricter funding rules come fully into effect. Over the 
longer term, however, the stricter funding rules would more 
than offset the effect of the higher discount rates, leading to 
overall revenue losses.
    H.R. 2830 also would affect federal revenues by:
     Changing funding rules for multiemployer defined-
benefit plans. Currently, payments to cover many costs of plans 
(for example, their unfunded past service liability) are spread 
over a period of years. The amortization periods range from 15 
years to 40 years. H.R. 2830 would require plans' sponsors to 
amortize most costs over a 15-year period, thereby accelerating 
contributions and reducing corporate tax payments. JCT 
estimates this change would decrease revenues by less than 
$500,000 in 2006, by $56 million over the 2006-2010 period, and 
by $287 million over the 2006-2015 period.
     Changing benefit accrual standards. Under current 
law, an employee's accrual of benefits may not be stopped 
because of age. Under H.R. 2830, a plan would not violate this 
requirement if a participant's accrued benefit is as much or 
more than that of a similarly situated, but younger individual. 
In other words, age discrimination would not be present in such 
a case. As a result, firms might change the type of pension 
plans they offer and the amount of tax-deductible contributions 
to those plans. JCT estimates that this change would decrease 
revenues by $29 million over the 2006-2010 period and would 
increase revenues by $36 million over the 2006-2015 period.
    Long-term effects on direct spending: Pursuant to section 
407 of H. Con. Res. 95 (the Concurrent Resolution on the 
Budget, Fiscal Year 2006), CBO estimates that enacting H.R. 
2830 would not cause an increase in direct spending greater 
than $5 billion in any of the 10-year periods between 2016 and 
2055. During the four decades following 2015, reductions in 
outlays due to higher premium 10 receipts would be larger than 
increases in outlays resulting from changes to transfers from 
the nonbudgetary fund and additional benefit payments.
    Estimated impact on state, local, and tribal governments: 
CBO and JCT have reviewed the provisions of H.R. 2830 and 
determined they contain no intergovernmental mandates as 
defined in UMRA. State, local, and tribal governments are 
exempt from the provisions of ERISA that the bill would amend, 
and the remaining provisions of the bill contain no 
intergovernmental mandates and would not affect the budgets of 
state, local, or tribal governments.
    Estimated impact on the private sector: Some of the bill's 
changes to ERISA would impose mandates on sponsors and 
administrators of single-employer and multiemployer private-
pension plans. CBO estimates that the direct cost to affected 
entities of the mandates in the bill, less the direct savings 
resulting from those mandates, would exceed the annual 
threshold specified in UMRA ($123 million in 2005, adjusted 
annually for inflation) in 2009 and thereafter. Most of that 
cost would result from the increase in premiums paid to the 
PBGC. JCT has determined that the tax provisions in the bill 
contain no private-sector mandates.

Premiums

    The bill would increase the premiums that sponsors of 
single-employer plans are required to pay to the PBGC. CBO 
estimates that the additional premiums would total $2.0 billion 
over the 2006-2010 period.

Disclosures

    Title II would require multiemployer plans to provide 
certain information to participants and beneficiaries when a 
plan enters into ``endangered'' or ``critical'' status. Title V 
would require single-employer plans to provide certain 
information to participants and beneficiaries when one or more 
plans sponsored by the employer are in ``at risk'' status. Both 
single-employer and multiemployer plans would be required to 
provide annual funding notices to all participants and 
beneficiaries within 90 days of the end of the plan-year. CBO 
estimates that the direct cost of those new requirements would 
be less than $30 million annually.

Funding rules

    Title I would make several changes to the funding rules in 
ERISA for single-employer, defined-benefit pension plans. 
Changes in the discount rate plans are required to use to value 
future liabilities would decrease the contributions sponsors 
would be required to make to their pension plans. Several other 
changes in funding rules would increase the amount of annual 
contributions that they would be required to make. Title II 
would change the funding rules in ERISA for multiemployer 
defined-benefit pension plans such that some sponsors would be 
required to increase the amount of annual contributions that 
they make to their plans.
    The net effect of those changes would be to decrease the 
total amount of required pension contributions for sponsors of 
single-employer plans in the early years, and increase total 
required contributions in later years. CBO estimates that the 
changes in funding rules would increase required contributions 
for sponsors of

multiemployer plans throughout the five-year period. The 
changes in funding rules in the bill would not change the 
liabilities that plans' sponsors have to current and future 
pension recipients, however. They would only affect the timing 
of the sponsors' contributions. Because we have little basis 
for estimating the costs or benefits to sponsors of changes in 
the amounts contributed to their pension plans (for example, 
the cost of borrowing additional funds or of using funds that 
would otherwise be available for other purposes), CBO cannot 
estimate the direct cost or savings from those provisions.

Lump-sum distributions

    Title III would change the rules in ERISA used for 
determining the amounts of lump-sum distributions to plans' 
participants. A segmented interest rate based on corporate bond 
yields and an updated mortality table would be phased in for 
use in such calculations. Although the updated mortality table 
would cause a short-term increase in the amount of 
distributions, the substitution of the segmented interest rate 
for the 30-year Treasury rate would decrease that cost in most 
cases. Taken together, CBO estimates that these changes would 
likely have the net effect of reducing plans' costs.
    Estimate prepared by: Federal Spending: Geoffrey Gerhardt. 
Federal Revenues: Emily Schlect. Impact on State, Local, and 
Tribal Governments: Leo Lex. Impact on the Private Sector: 
Peter Richmond.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis. G. Thomas Woodward, Assistant 
Director for Tax Analysis.

         Statement of General Performance Goals and Objectives

    In accordance with clause (3)(c) of House Rule XIII, the 
goal of the bill is to strengthen the private pension system by 
amending the Employee Retirement Income Security Act (ERISA). 
The Committee expects the Department of Labor and the Pension 
Benefit Guaranty Corporation to implement the changes to the 
law in accordance with this stated goal.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 2830. The 
Employee Retirement Income Security Act (ERISA) has been 
determined by the federal courts to be within Congress' 
Constitutional authority. In Commercial Mortgage Insurance, 
Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D. 
Tex. 1981), the court held that Congress legitimately concluded 
that employee benefit plans so affected interstate commerce as 
to be within the scope of Congressional powers under Article 1, 
Section 8, Clause 3 of the Constitution of the United States. 
In Murphy v. Wal-Mart Associates' Group Health Plan, 928 F. 
Supp. 700 (E.D. Tex 1996), the court upheld the preemption 
provisions of ERISA. Because H.R. 2830 modifies the regulation 
of pensions, the Committee believes that the Act falls within 
the same scope of Congressional authority as ERISA.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 2830. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  Pursuant to the terms of the referral of the bill to the 
Committee, the Committee adopted an amendment striking those 
provisions which were referred to the Committee and inserting 
new text.
  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the provisions of the bill referred to the Committee, as 
reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italics, existing law in which no change is proposed is shown 
in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


                   SHORT TITLE AND TABLE OF CONTENTS

  Section 1. This Act may be cited as the ``Employee Retirement 
Income Security Act of 1974''.

                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

     * * * * * * *

                    Subtitle B--Regulatory Provisions

     * * * * * * *

                    Part 2--Participation and Vesting

     * * * * * * *
[Sec. 207. Temporary variances from certain vesting requirements.]
     * * * * * * *

                             Part 3--Funding

Sec. 301. Coverage.
[Sec. 302. Minimum funding standards.
[Sec. 303. Variance from minimum funding standard.
[Sec. 304. Extension of amortization periods.
[Sec. 305. Alternative minimum funding standard.
[Sec. 306. Security for waivers of minimum funding standard and 
          extensions of amortization period.
[Sec. 307. Security required upon adoption of plan amendment resulting 
          in significant underfunding.
[Sec. 308. Effective dates.]
Sec. 302. Minimum funding standards.
Sec. 303. Minimum funding standards for single-employer defined benefit 
          pension plans.
Sec. 304. Minimum funding standards for multiemployer plans.
Sec. 305. Additional funding rules for multiemployer plans in endangered 
          status or critical status.
     * * * * * * *

                          Subtitle D--Liability

     * * * * * * *

                      Part 1--Employer Withdrawals

     * * * * * * *
[Sec. 4225. Limitation on withdrawal liability.]
     * * * * * * *

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

Subtitle A--General Provisions

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 3. For purposes of this title:
  (1) * * *
  (2)(A) Except as provided in subparagraph (B), the terms 
``employee pension benefit plan'' and ``pension plan'' mean any 
plan, fund, or program which was heretofore or is hereafter 
established or maintained by an employer or by an employee 
organization, or by both, to the extent that by its express 
terms or as a result of surrounding circumstances such plan, 
fund, or program--
          (i) * * *

           *       *       *       *       *       *       *

  (42) the term ``plan assets'' means plan assets as defined by 
such regulations as the Secretary may prescribe, except that 
under such regulations the assets of any entity shall not be 
treated as plan assets if, immediately after the most recent 
acquisition of any equity interest in the entity, less than 50 
percent of the total value of all equity interests in the 
entity are held by employee benefit plan investors. For 
purposes of determinations pursuant to this paragraph, the 
value of any equity interest owned by a person (other than such 
an employee benefit plan) who has discretionary authority or 
control with respect to the assets of the entity or any person 
who provides investment advice for a fee (direct or indirect) 
with respect to such assets, or any affiliate of such a person, 
shall be disregarded for purposes of calculating the 50 percent 
threshold. An entity shall be considered to hold plan assets 
only to the extent of the percentage of the equity interest 
owned by benefit plan investors. For purposes of this 
paragraph, the term ``benefit plan investor'' means an employee 
benefit plan subject to this part and any plan to which section 
4975 of the Internal Revenue Code of 1986 applies.

                   Subtitle B--Regulatory Provisions

                    Part 1--Reporting and Disclosure

                    DUTY OF DISCLOSURE AND REPORTING

  Sec. 101. (a) * * *

           *       *       *       *       *       *       *

  (d) Notice of Failure to Meet Minimum Funding Standards.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Definitions.--For purposes of this subsection, 
        the terms ``required installment'' and ``due date'' 
        have the same meanings given such terms by [section 
        302(e)] section 303(j).
  (e) Notice of Transfer of Excess Pension Assets to Health 
Benefits Accounts.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Definitions.--For purposes of paragraph (1), any 
        term used in such paragraph which is also used in 
        section 420 of the Internal Revenue Code of 1986 (as in 
        effect on the date of the enactment of the [American 
        Jobs Creation Act of 2004] Pension Protection Act of 
        2005) shall have the same meaning as when used in such 
        section.
  (f) [Multiemployer] Defined Benefit Plan Funding Notices.--
          (1) In general.--The administrator of a defined 
        benefit plan [which is a multiemployer plan] shall for 
        each plan year provide a plan funding notice to each 
        plan participant and beneficiary, to each labor 
        organization representing such participants or 
        beneficiaries, to each employer that has an obligation 
        to contribute under the plan, and to the Pension 
        Benefit Guaranty Corporation.
          (2) Information contained in notices.--
                  (A) * * *
                  (B) Specific information.--A plan funding 
                notice under paragraph (1) shall include--
                          [(i) a statement as to whether the 
                        plan's funded current liability 
                        percentage (as defined in section 
                        302(d)(8)(B)) for the plan year to 
                        which the notice relates is at least 
                        100 percent (and, if not, the actual 
                        percentage);
                          [(ii) a statement of the value of the 
                        plan's assets, the amount of benefit 
                        payments, and the ratio of the assets 
                        to the payments for the plan year to 
                        which the notice relates;
                          [(iii) a summary of the rules 
                        governing insolvent multiemployer 
                        plans, including the limitations on 
                        benefit payments and any potential 
                        benefit reductions and suspensions (and 
                        the potential effects of such 
                        limitations, reductions, and 
                        suspensions on the plan); and]
                          (i) a statement as to whether--
                                  (I) in the case of a single-
                                employer plan, the plan's 
                                funding target attainment 
                                percentage (as defined in 
                                section 303(d)(2)), or
                                  (II) in the case of a 
                                multiemployer plan, the plan's 
                                funded percentage (as defined 
                                in section 305(d)(2)),
                        is at least 100 percent (and, if not, 
                        the actual percentage);
                          (ii) a statement of a reasonable 
                        estimate of--
                                  (I) the value of the plan's 
                                assets for the plan year to 
                                which the notice relates,
                                  (II) projected liabilities of 
                                the plan for the plan year to 
                                which the notice relates, and
                                  (III) the ratio of the 
                                estimated amount determined 
                                under subclause (I) to the 
                                estimated amount determined 
                                under subclause (II);
                          (iii)(I) in the case of a single-
                        employer plan, a summary of the rules 
                        governing termination of single-
                        employer plans under subtitle C of 
                        title IV, or
                          (II) in the case of a multiemployer 
                        plan, a summary of the rules governing 
                        insolvent multiemployer plans, 
                        including the limitations on benefit 
                        payments and any potential benefit 
                        reductions and suspensions (and the 
                        potential effects of such limitations, 
                        reductions, and suspensions on the 
                        plan);
                          (iv) a general description of the 
                        benefits under the plan which are 
                        eligible to be guaranteed by the 
                        Pension Benefit Guaranty Corporation, 
                        along with an explanation of the 
                        limitations on the guarantee and the 
                        circumstances under which such 
                        limitations apply[.];
                          (v) a statement of the ratio, as of 
                        the end of the plan year to which the 
                        notice relates, of--
                                  (I) the number of 
                                participants who are not in 
                                covered service under the plan 
                                and are in pay status under the 
                                plan or have a nonforfeitable 
                                right to benefits under the 
                                plan, to
                                  (II) the number of 
                                participants who are in covered 
                                service under the plan;
                          (vi) a statement setting forth the 
                        funding policy of the plan and the 
                        asset allocation of investments under 
                        the plan (expressed as percentages of 
                        total assets) as of the end of the plan 
                        year to which the notice relates; and
                          (vii) a summary of any funding 
                        improvement plan, rehabilitation plan, 
                        or modification thereof adopted under 
                        section 305 during the plan year to 
                        which the notice relates.
                For purposes of determining a plan's projected 
                liabilities for a plan year under clause 
                (ii)(II), such projected liabilities shall be 
                determined by projecting forward in a 
                reasonable manner to the end of the plan year 
                the liabilities of the plan to participants and 
                beneficiaries as of the first day of the plan 
                year, taking into account any significant 
                events that occur during the plan year and that 
                have a material effect on such liabilities, 
                including any plan amendments in effect for the 
                plan year.

           *       *       *       *       *       *       *

          (3) Time for providing notice.--Any notice under 
        paragraph (1) shall be provided no later than [two 
        months after the deadline (including extensions) for 
        filing the annual report for the plan year] 90 days 
        after the end of the plan year to which the notice 
        relates.

           *       *       *       *       *       *       *

  (j) Notice of Funding-Based Limitation on Certain Forms of 
Distribution.--The plan administrator of a single-employer plan 
shall provide a written notice to plan participants and 
beneficiaries within 30 days after the plan has become subject 
to the restriction described in section 206(h)(2) or at such 
other time as may be determined by the Secretary.
  (k) Multiemployer Plan Information Made Available on 
Request.--
          (1) In general.--Each administrator of a 
        multiemployer plan shall furnish to any plan 
        participant or beneficiary or any employer having an 
        obligation to contribute to the plan, who so requests 
        in writing--
                  (A) a copy of any actuarial report received 
                by the plan for any plan year which has been in 
                receipt by the plan for at least 30 days, and
                  (B) a copy of any financial report prepared 
                for the plan by any plan investment manager or 
                advisor or other person who is a plan fiduciary 
                which has been in receipt by the plan for at 
                least 30 days.
          (2) Compliance.--Information required to be provided 
        under paragraph (1) --
                  (A) shall be provided to the requesting 
                participant, beneficiary, or employer within 30 
                days after the request in a form and manner 
                prescribed in regulations of the Secretary, and
                  (B) may be provided in written, electronic, 
                or other appropriate form to the extent such 
                form is reasonably accessible to persons to 
                whom the information is required to be 
                provided.
          (3) Limitations.--In no case shall a participant, 
        beneficiary, or employer be entitled under this 
        subsection to receive more than one copy of any report 
        described in paragraph (1) during any one 12-month 
        period. The administrator may make a reasonable charge 
        to cover copying, mailing, and other costs of 
        furnishing copies of information pursuant to paragraph 
        (1). The Secretary may by regulations prescribe the 
        maximum amount which will constitute a reasonable 
        charge under the preceding sentence.
  (l) Notice of Potential Withdrawal Liability.--
          (1) In general.--The plan sponsor or administrator of 
        a multiemployer plan shall furnish to any employer who 
        has an obligation to contribute under the plan and who 
        so requests in writing notice of--
                  (A) the amount which would be the amount of 
                such employer's withdrawal liability under part 
                1 of subtitle E of title IV if such employer 
                withdrew on the last day of the plan year 
                preceding the date of the request, and
                  (B) the average increase, per participant 
                under the plan, in accrued liabilities under 
                the plan as of the end of such plan year to 
                participants under such plan on whose behalf no 
                employer contributions are payable (or their 
                beneficiaries), which would be attributable to 
                such a withdrawal by such employer.
        For purposes of subparagraph (B), the term ``employer 
        contribution'' means, in connection with a participant, 
        a contribution made by an employer as an employer of 
        such participant.
          (2) Compliance.--Any notice required to be provided 
        under paragraph (1)--
                  (A) shall be provided to the requesting 
                employer within 180 days after the request in a 
                form and manner prescribed in regulations of 
                the Secretary, and
                  (B) may be provided in written, electronic, 
                or other appropriate form to the extent such 
                form is reasonably accessible to employers to 
                whom the information is required to be 
                provided.
          (3) Limitations.--In no case shall an employer be 
        entitled under this subsection to receive more than one 
        notice described in paragraph (1) during any one 12-
        month period. The person required to provide such 
        notice may make a reasonable charge to cover copying, 
        mailing, and other costs of furnishing such notice 
        pursuant to paragraph (1). The Secretary may by 
        regulations prescribe the maximum amount which will 
        constitute a reasonable charge under the preceding 
        sentence.
  [(j)] (m) Cross Reference.--For regulations relating to 
coordination of reports to the Secretaries of Labor and the 
Treasury, see section 3004.

           *       *       *       *       *       *       *


                             ANNUAL REPORTS

  Sec. 103. (a)(1)(A) * * *
  (B) The annual report shall include the information described 
in subsections (b) and (c) and where applicable [subsections 
(d) and (e)] subsections (d), (e), and (f) and shall also 
include--
          (i) * * *

           *       *       *       *       *       *       *

  (d) With respect to an employee pension benefit plan (other 
than (A) a profit sharing, savings, or other plan, which is an 
individual account plan, (B) a plan described in section 
301(b), or (C) a plan described both in section 4021(b) and in 
paragraph (1), (2), (3), (4), (5), (6), or (7) of section 
301(a)) an annual report under this section for a plan year 
shall include a complete actuarial statement applicable to the 
plan year which shall include the following:
          (1) * * *

           *       *       *       *       *       *       *

          (8) A statement by the enrolled actuary--
                  (A) * * *
                  (B) [the requirements of section 302(c)(3)] 
                the applicable requirements of sections 303(h) 
                and 304(c)(3) (relating to reasonable actuarial 
                assumptions and methods) have been complied 
                with.

           *       *       *       *       *       *       *

          [(11) If the current value of the assets of the plan 
        is less than 70 percent of the current liability under 
        the plan (within the meaning of section 302(d)(7)), the 
        percentage which such value is of such liability.]
          (11) If the current value of the assets of the plan 
        is less than 70 percent of--
                  (A) in the case of a single-employer plan, 
                the funding target (as defined in section 
                303(d)(1)) of the plan, or
                  (B) in the case of a multiemployer plan, the 
                current liability (as defined in section 
                304(c)(6)(D)) under the plan,
        the percentage which such value is of the amount 
        described in subparagraph (A) or (B).
          (12) A statement explaining the actuarial assumptions 
        and methods used in projecting future retirements and 
        forms of benefit distributions under the plan.
          [(12)] (13) Such other information regarding the plan 
        as the Secretary may by regulation require.
          [(13)] (14) Such other information as may be 
        necessary to fully and fairly disclose the actuarial 
        position of the plan.
Such actuary shall make an actuarial valuation of the plan for 
every third plan year, unless he determines that a more 
frequent valuation is necessary to support his opinion under 
subsection (a)(4) of this section.

           *       *       *       *       *       *       *

  (f)(1) With respect to any defined benefit plan, an annual 
report under this section for a plan year shall include the 
following:
          (A) The ratio, as of the end of such plan year, of--
                  (i) the number of participants who, as of the 
                end of such plan year, are not in covered 
                service under the plan and are in pay status 
                under the plan or have a nonforfeitable right 
                to benefits under the plan, to
                  (ii) the number of participants who are in 
                covered service under the plan as of the end of 
                such plan year.
          (B) In any case in which any liabilities to 
        participants or their beneficiaries under such plan as 
        of the end of such plan year consist (in whole or in 
        part) of liabilities to such participants and 
        beneficiaries borne by 2 or more pension plans as of 
        immediately before such plan year, the funded ratio of 
        each of such 2 or more pension plans as of immediately 
        before such plan year and the funded ratio of the plan 
        with respect to which the annual report is filed as of 
        the end of such plan year.
          (C) For purposes of this paragraph, the term ``funded 
        ratio'' means, in connection with a plan, the 
        percentage which--
                  (i) the value of the plan's assets is of
                  (ii) the liabilities to participants and 
                beneficiaries under the plan.
  (2) With respect to any defined benefit plan which is a 
multiemployer plan, an annual report under this section for a 
plan year shall include the following:
          (A) The number of employers obligated to contribute 
        to the plan as of the end of such plan year.
          (B) The number of participants under the plan on 
        whose behalf no employer contributions have been made 
        to the plan for such plan year. For purposes of this 
        subparagraph, the term ``employer contribution'' means, 
        in connection with a participant, a contribution made 
        by an employer as an employer of such participant.

    FILING WITH SECRETARY AND FURNISHING INFORMATION TO PARTICIPANTS

  Sec. 104. (a)(1) The administrator of any employee benefit 
plan subject to this part shall file with the Secretary the 
annual report for a plan year within 210 days after the close 
of such year (or within such time as may be required by 
regulations promulgated by the Secretary in order to reduce 
duplicative filing). In the case of a pension plan, the 
Secretary may extend the deadline for filing the annual report 
for any plan year past 275 days after the close of the plan 
year only on a case by case basis and only in cases of 
hardship, in accordance with regulations which shall be 
prescribed by the Secretary. The Secretary shall make copies of 
such annual reports available for inspection in the public 
document room of the Department of Labor.
  (b) Publication of the summary plan descriptions and annual 
reports shall be made to participants and beneficiaries of the 
particular plan as follows:
  (1) * * *
  (2) The administrator shall make copies of the latest updated 
summary plan description and the latest annual report and the 
bargaining agreement, trust agreement, contract, or other 
instruments under which the plan was established or is operated 
available for examination by any plan participant or 
beneficiary in the principal office of the administrator and in 
such other places as may be necessary to make available all 
pertinent information to all participants (including such 
places as the Secretary may prescribe by regulations).
  (3) [Within 210 days after the close of the fiscal year of 
the plan,] (A) Within 15 business days after the due date under 
subsection (a)(1) for the filing of the annual report for the 
fiscal year of the plan, the administrators shall furnish to 
each participant, and to each beneficiary receiving benefits 
under the plan, a copy of the statements and schedules, for 
such fiscal year, described in subparagraphs (A) and (B) of 
section 103(b)(3) and such other material (including the 
percentage determined under section 103(d)(11)) as is necessary 
to fairly summarize [the latest] such annual report.
  (B) The material provided pursuant to subparagraph (A) to 
summarize the latest annual report shall be written in a manner 
calculated to be understood by the average plan participant and 
shall set forth the total assets and liabilities of the plan 
for the plan year for which the latest annual report was filed 
and for each of the 2 preceding plan years, as reported in the 
annual report for each such plan year under this section.

           *       *       *       *       *       *       *

  (5) Identification and basic plan information and actuarial 
information included in the annual report for any plan year 
shall be filed with the Secretary in an electronic format which 
accommodates display on the Internet, in accordance with 
regulations which shall be prescribed by the Secretary. The 
Secretary shall provide for display of such information 
included in the annual report, within 90 days after the date of 
the filing of the annual report, on a website maintained by the 
Secretary on the Internet and other appropriate media. Such 
information shall also be displayed on any website maintained 
by the plan sponsor (or by the plan administrator on behalf of 
the plan sponsor) on the Internet, in accordance with 
regulations which shall be prescribed by the Secretary.

           *       *       *       *       *       *       *


Part 2--Participation and Vesting

           *       *       *       *       *       *       *


                       MINIMUM VESTING STANDARDS

  Sec. 203. (a) Each pension plan shall provide that an 
employee's right to his normal retirement benefit is 
nonforfeitable upon the attainment of normal retirement age and 
in addition shall satisfy the requirements of paragraphs (1) 
and (2) of this subsection.
          (1) * * *

           *       *       *       *       *       *       *

          (3)(A) * * *

           *       *       *       *       *       *       *

          (C) A right to an accrued benefit derived from 
        employer contributions shall not be treated as 
        forfeitable solely because plan amendments may be given 
        retroactive application as provided in [section 
        302(c)(8)] section 302(d)(2).

           *       *       *       *       *       *       *

  (f)(1) A defined benefit plan under which the accrued benefit 
payable under the plan upon distribution (or any portion 
thereof) is expressed as the balance of a hypothetical account 
maintained for the participant shall not be treated as failing 
to meet the requirements of subsection (a)(2) and section 
205(g) solely because of the amount actually made available for 
such distribution under the terms of the plan, in any case in 
which the applicable interest rate that would be used under the 
terms of the plan to project the amount of the participant's 
account balance to normal retirement age is not greater than a 
market rate of return.
  (2) The Secretary of the Treasury may provide by regulation 
for rules governing the calculation of a market rate of return 
for purposes of paragraph (1) and for permissible methods of 
crediting interest to the account (including variable interest 
rates) resulting in effective rates of return meeting the 
requirements of paragraph (1).

                      BENEFIT ACCRUAL REQUIREMENTS

  Sec. 204. (a) * * *
  (b)(1)(A) * * *

           *       *       *       *       *       *       *

  (H)(i) * * *

           *       *       *       *       *       *       *

  (vii)(I) A plan shall not be treated as failing to meet the 
requirements of clause (i) if a participant's entire accrued 
benefit, as determined as of any date under the formula for 
determining benefits as set forth in the text of the plan 
documents, would be equal to or greater than that of any 
similarly situated, younger individual.
  (II) For purposes of this clause, an individual is similarly 
situated to a participant if such individual is identical to 
such participant in every respect (including period of service, 
compensation, position, date of hire, work history, and any 
other respect) except for age.
  (III) In determining the entire accrued benefit for purposes 
of this clause, the subsidized portion of any early retirement 
benefit (including any early retirement subsidy that is fully 
or partially included or reflected in an employee's opening 
balance or other transition benefits) shall be disregarded.
  (viii) A plan under which the accrued benefit payable under 
the plan upon distribution (or any portion thereof) is 
expressed as the balance of a hypothetical account maintained 
for the participant shall not be treated as failing to meet the 
requirements of clause (i) solely because interest accruing on 
such balance is taken into account.
  (ix) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides allowable offsets against those benefits under the 
plan which are attributable to employer contributions, based on 
benefits which are provided under title II of the Social 
Security Act, the Railroad Retirement Act of 1974, another plan 
described in section 401(a) of the Internal Revenue Code of 
1986 maintained by the same employer, or under any retirement 
program for officers or employees of the Federal Government or 
of the government of any State or political subdivision 
thereof. For purposes of this clause, allowable offsets based 
on such benefits consist of offsets equal to all or part of the 
actual benefit payment amounts, reasonable projections or 
estimations of such benefit payment amounts, or actuarial 
equivalents of such actual benefit payment amounts, 
projections, or estimations (determined on the basis of 
reasonable actuarial assumptions).
  (x) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides a disparity in contributions or benefits with respect 
to which the requirements of section 401(l) of the Internal 
Revenue Code of 1986 are met.
  (xi)(I) A plan shall not be treated as failing to meet the 
requirements of this subparagraph solely because the plan 
provides for pre-retirement indexing of accrued benefits under 
the plan.
  (II) For purposes of this clause, the term ``pre-retirement 
indexing'' means, in connection with an accrued benefit, the 
periodic adjustment of the accrued benefit by means of the 
application of a recognized index or methodology so as to 
protect the economic value of the benefit against inflation 
prior to distribution.

           *       *       *       *       *       *       *

  (g)(1) The accrued benefit of a participant under a plan may 
not be decreased by an amendment of the plan, other than an 
amendment described in [section 302(c)(8)] section 302(d)(2) or 
4281.

           *       *       *       *       *       *       *

  (i)(1) * * *
  (2) Paragraph (1) shall not apply to any plan amendment 
that--
          (A) * * *
          (B) only repeals an amendment described in [section 
        302(c)(8)] section 302(d)(2),

           *       *       *       *       *       *       *

  (3) This subsection shall apply only to plans (other than 
multiemployer plans) covered under section 4021 of this Act for 
which the [funded current liability percentage (within the 
meaning of section 302(d)(8) of this Act)] funding target 
attainment percentage (as defined in section 303(d)(2)) is less 
than 100 percent after taking into account the effect of the 
amendment.
  (4) For purposes of this subsection, the term ``employer'' 
has the meaning set forth in [section 302(c)(11)(A), without 
regard to section 302(c)(11)(B)] section 302(b)(1), without 
regard to section 302(b)(2).

           *       *       *       *       *       *       *


 REQUIREMENT OF JOINT AND SURVIVOR ANNUITY AND PRERETIREMENT SURVIVOR 
                                ANNUITY

  Sec. 205. (a) * * *

           *       *       *       *       *       *       *

  (g)(1) * * *

           *       *       *       *       *       *       *

          [(3) Determination of present value.--
                  [(A) In general.--
                          [(i) Present value.--Except as 
                        provided in subparagraph (B), for 
                        purposes of paragraphs (1) and (2), the 
                        present value shall not be less than 
                        the present value calculated by using 
                        the applicable mortality table and the 
                        applicable interest rate.
                          [(ii) Definitions.--For purposes of 
                        clause (i)--
                                  [(I) Applicable mortality 
                                table.--The term ``applicable 
                                mortality table'' means the 
                                table prescribed by the 
                                Secretary of the Treasury. Such 
                                table shall be based on the 
                                prevailing commissioners' 
                                standard table (described in 
                                section 807(d)(5)(A) of the 
                                Internal Revenue Code of 1986) 
                                used to determine reserves for 
                                group annuity contracts issued 
                                on the date as of which present 
                                value is being determined 
                                (without regard to any other 
                                subparagraph of section 
                                807(d)(5) of such Code).
                                  [(II) Applicable interest 
                                rate.--The term ``applicable 
                                interest rate'' means the 
                                annual rate of interest on 30-
                                year Treasury securities for 
                                the month before the date of 
                                distribution or such other time 
                                as the Secretary of the 
                                Treasury may by regulations 
                                prescribe.
                  [(B) Exception.--In the case of a 
                distribution from a plan that was adopted and 
                in effect prior to the date of the enactment of 
                the Retirement Protection Act of 1994, the 
                present value of any distribution made before 
                the earlier of--
                          [(i) the later of when a plan 
                        amendment applying subparagraph (A) is 
                        adopted or made effective, or
                          [(ii) the first day of the first plan 
                        year beginning after December 31, 1999,
                shall be calculated, for purposes of paragraphs 
                (1) and (2), using the interest rate determined 
                under the regulations of the Pension Benefit 
                Guaranty Corporation for determining the 
                present value of a lump sum distribution on 
                plan termination that were in effect on 
                September 1, 1993, and using the provisions of 
                the plan as in effect on the day before such 
                date of enactment; but only if such provisions 
                of the plan met the requirements of section 
                205(g)(3) as in effect on the day before such 
                date of enactment.]
  (3)(A) For purposes of paragraphs (1) and (2), the present 
value shall not be less than the present value calculated by 
using the applicable mortality table and the applicable 
interest rate.
  (B) For purposes of subparagraph (B)--
          (i) The term ``applicable mortality table'' means a 
        mortality table, modified as appropriate by the 
        Secretary of the Treasury, based on the mortality table 
        specified for the plan year under section 303(h)(3).
          (ii) The term ``applicable interest rate'' means the 
        adjusted first, second, and third segment rates applied 
        under rules similar to the rules of section 
        303(h)(2)(C) for the month before the date of the 
        distribution or such other time as the Secretary of the 
        Treasury may by regulations prescribe.
          (iii) For purposes of clause (ii), the adjusted 
        first, second, and third segment rates are the first, 
        second, and third segment rates which would be 
        determined under section 303(h)(2)(C) if--
                  (I) section 303(h)(2)(D)(i) were applied by 
                substituting ``the yields'' for ``a 3-year 
                weighted average of yields'',
                  (II) section 303(h)(2)(G)(i)(II) were applied 
                by substituting ``section 205(g)(3)(B)(ii)'' 
                for ``section 302(b)(5)(B)(ii)(II)'', and
                  (III) the applicable percentage under section 
                303(h)(2)(G) were determined in accordance with 
                the following table:





In the case of plan years           The applicable percentage is:
 beginning in:
  2006............................  20 percent
  2007............................  40 percent
  2008............................  60 percent
  2009............................  80 percent.

                                    

           *       *       *       *       *       *       *
       OTHER PROVISIONS RELATING TO FORM AND PAYMENT OF BENEFITS

  Sec. 206. (a) * * *

           *       *       *       *       *       *       *

  (e) Limitation on Distributions Other Than Life Annuities 
Paid By The Plan.--
          (1) In general.--Notwithstanding any other provision 
        of this part, the fiduciary of a pension plan that is 
        subject to the additional funding requirements of 
        [section 302(d)] section 303(j)(4) shall not permit a 
        prohibited payment to be made from a plan during a 
        period in which such plan has a liquidity shortfall (as 
        defined in [section 302(e)(5)] section 
        303(j)(4)(E)(i)).

           *       *       *       *       *       *       *

          (3) Period of shortfall.--For purposes of this 
        subsection, a plan has a liquidity shortfall during the 
        period that there is an underpayment of an installment 
        under [section 302(e) by reason of paragraph (5)(A) 
        thereof] section 303(j)(3) by reason of section 
        303(j)(4)(A).

           *       *       *       *       *       *       *

  (g) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--
          (1) In general.--No pension plan which is a single-
        employer plan may provide benefits to which 
        participants are entitled solely by reason of the 
        occurrence of--
                  (A) a plant shutdown, or
                  (B) any other unpredictable contingent event.
          (2) Unpredictable contingent event.--For purposes of 
        this subsection, the term ``unpredictable contingent 
        event'' means an event other than--
                  (A) attainment of any age, performance of any 
                service, receipt or derivation of any 
                compensation, or the occurrence of death or 
                disability, or
                  (B) an event which is reasonably and reliably 
                predictable (as determined by the Secretary of 
                the Treasury).
  (h) Funding-Based Limits on Benefits and Benefit Accruals 
Under Single-Employer Plans.--
          (1) Limitations on plan amendments increasing 
        liability for benefits.--
                  (A) In general.--No amendment to a single-
                employer plan which has the effect of 
                increasing liabilities of the plan by reason of 
                increases in benefits, establishment of new 
                benefits, changing the rate of benefit accrual, 
                or changing the rate at which benefits become 
                nonforfeitable to the plan may take effect 
                during any plan year if the funding target 
                attainment percentage as of the valuation date 
                of the plan for such plan year is--
                          (i) less than 80 percent, or
                          (ii) would be less than 80 percent 
                        taking into account such amendment.
                For purposes of this subparagraph, any increase 
                in benefits under the plan by reason of an 
                increase in the benefit rate provided under the 
                plan or on the basis of an increase in 
                compensation shall be treated as affected by 
                plan amendment.
                  (B) Exemption.--Subparagraph (A) shall cease 
                to apply with respect to any plan year, 
                effective as of the first date of the plan year 
                (or if later, the effective date of the 
                amendment), upon payment by the plan sponsor of 
                a contribution (in addition to any minimum 
                required contribution under section 303) equal 
                to--
                          (i) in the case of subparagraph 
                        (A)(i), the amount of the increase in 
                        the funding target of the plan (under 
                        section 303) for the plan year 
                        attributable to the amendment, and
                          (ii) in the case of subparagraph 
                        (A)(ii), the amount sufficient to 
                        result in a funding target attainment 
                        percentage of 80 percent.
          (2) Funding-based limitation on certain forms of 
        distribution.--
                  (A) In general.--A single-employer plan shall 
                provide that, in any case in which the plan's 
                funding target attainment percentage as of the 
                valuation date of the plan for a plan year is 
                less than 80 percent, the plan may not after 
                such date pay any prohibited payment (as 
                defined in section 206(e)).
                  (B) Exception.--Subparagraph (A) shall not 
                apply to any plan for any plan year if the 
                terms of such plan (as in effect for the period 
                beginning on June 29, 2005, and ending with 
                such plan year) provide for no benefit accruals 
                with respect to any participant during such 
                period.
          (3) Limitations on benefit accruals for plans with 
        severe funding shortfalls.--A single-employer plan 
        shall provide that, in any case in which the plan's 
        funding target attainment percentage as of the 
        valuation date of the plan for a plan year is less than 
        60 percent, all future benefit accruals under the plan 
        shall cease as of such date.
          (4) New plans.--Paragraphs (1) and (3) shall not 
        apply to a plan for the first 5 plan years of the plan. 
        For purposes of this paragraph, the reference in this 
        paragraph to a plan shall include a reference to any 
        predecessor plan.
          (5) Presumed underfunding for purposes of benefit 
        limitations based on prior year's funding status.--
                  (A) Presumption of continued underfunding.--
                In any case in which a benefit limitation under 
                paragraph (1), (2), or (3) has been applied to 
                a plan with respect to the plan year preceding 
                the current plan year, the funding target 
                attainment percentage of the plan as of the 
                valuation date of the plan for the current plan 
                year shall be presumed to be equal to the 
                funding target attainment percentage of the 
                plan as of the valuation date of the plan for 
                the preceding plan year until the enrolled 
                actuary of the plan certifies the actual 
                funding target attainment percentage of the 
                plan as of the valuation date of the plan for 
                the current plan year.
                  (B) Presumption of underfunding after 10th 
                month.--In any case in which no such 
                certification is made with respect to the plan 
                before the first day of the 10th month of the 
                current plan year, for purposes of paragraphs 
                (1), (2), and (3), the plan's funding target 
                attainment percentage shall be conclusively 
                presumed to be less than 60 percent as of the 
                first day of such 10th month, and such day 
                shall be deemed, for purposes of such 
                paragraphs, to be the valuation date of the 
                plan for the current plan year.
                  (C) Presumption of underfunding after 4th 
                month for nearly underfunded plans.--In any 
                case in which--
                          (i) a benefit limitation under 
                        paragraph (1), (2), or (3) did not 
                        apply to a plan with respect to the 
                        plan year preceding the current plan 
                        year, but the funding target attainment 
                        percentage of the plan for such 
                        preceding plan year was not more than 
                        10 percentage points greater than the 
                        percentage which would have caused such 
                        paragraph to apply to the plan with 
                        respect to such preceding plan year, 
                        and
                          (ii) as of the first day of the 4th 
                        month of the current plan year, the 
                        enrolled actuary of the plan has not 
                        certified the actual funding target 
                        attainment percentage of the plan as of 
                        the valuation date of the plan for the 
                        current plan year,
                until the enrolled actuary so certifies, such 
                first day shall be deemed, for purposes of such 
                paragraph, to be the valuation date of the plan 
                for the current plan year and the funding 
                target attainment percentage of the plan as of 
                such first day shall, for purposes of such 
                paragraph, be presumed to be equal to 10 
                percentage points less than the funding target 
                attainment percentage of the plan as of the 
                valuation date of the plan for such preceding 
                plan year.
          (6) Restoration by plan amendment of benefits or 
        benefit accrual.--In any case in which a prohibition 
        under paragraph (2) of the payment of lump sum 
        distributions or benefits in any other accelerated form 
        or a cessation of benefit accruals under paragraph (3) 
        is applied to a plan with respect to any plan year and 
        such prohibition or cessation, as the case may be, 
        ceases to apply to any subsequent plan year, the plan 
        may provide for the resumption of such benefit payment 
        or such benefit accrual only by means of the adoption 
        of a plan amendment after the valuation date of the 
        plan for such subsequent plan year. The preceding 
        sentence shall not apply to a prohibition or cessation 
        required by reason of paragraph (5).
          (7) Funding target attainment percentage.--
                  (A) In general.--For purposes of this 
                subsection, the term ``funding target 
                attainment percentage'' means, with respect to 
                any plan for any plan year, the ratio 
                (expressed as a percentage) which--
                          (i) the value of plan assets for the 
                        plan year (as determined under section 
                        303(g)) reduced by the pre-funding 
                        balance and the funding standard 
                        carryover balance (within the meaning 
                        of section 303(f)), bears to
                          (ii) the funding target of the plan 
                        for the plan year (as determined under 
                        section 303(d)(1), but without regard 
                        to section 303(i)(1)).
                  (B) Application to plans which are fully 
                funded without regard to reductions for funding 
                balances.--In the case of a plan for any plan 
                year, if the funding target attainment 
                percentage is 100 percent or more (determined 
                without regard to this subparagraph and without 
                regard to the reduction under subparagraph 
                (A)(i) for the pre-funding balance and the 
                funding standard carryover balance), 
                subparagraph (A) shall be applied without 
                regard to such reduction.

           *       *       *       *       *       *       *


         [TEMPORARY VARIANCES FROM CERTAIN VESTING REQUIREMENTS

  [Sec. 207. In the case of any plan maintained on January 1, 
1974, if not later than 2 years after the date of enactment of 
this Act, the administrator petitions the Secretary, the 
Secretary may prescribe an alternate method which shall be 
treated as satisfying the requirements of section 203(a)(2) or 
204(b)(1) (other than subparagraph (D) thereof) of this title 
or both for a period of not more than 4 years. The Secretary 
may prescribe such alternate method only when he finds that--
          [(1) the application of such requirements would 
        increase the costs of the plan to such an extent that 
        there would result a substantial risk to the voluntary 
        continuation of the plan or a substantial curtailment 
        of benefit levels or the levels of employees' 
        compensation,
          [(2) the application of such requirements or 
        discontinuance of the plan would be adverse to the 
        interests of plan participants in the aggregate, and
          [(3) a waiver or extension of time granted under 
        section 303 or 304 of this Act would be inadequate.
In the case of any plan with respect to which an alternate 
method has been prescribed under the preceding provisions of 
this subsection for a period of not more than 4 years, if, not 
later than 1 year before the expiration of such period, the 
administrator petitions the Secretary for an extension of such 
alternate method, and the Secretary makes the findings required 
by the preceding sentence, such alternate method may be 
extended for not more than 3 years.]

           *       *       *       *       *       *       *


                            Part 3--Funding

                                COVERAGE

  Sec. 301. (a) * * *

           *       *       *       *       *       *       *

  [(d) Any amount of any financial assistance from the Pension 
Benefit Guaranty Corporation to any plan, and any repayment of 
such amount, shall be taken into account under this section in 
such manner as determined by the Secretary of the Treasury.]

                       [MINIMUM FUNDING STANDARDS

  [Sec. 302. (a)(1) Every employee pension benefit plan subject 
to this part shall satisfy the minimum funding standard (or the 
alternative minimum funding standard under section 305) for any 
plan year to which this part applies. A plan to which this part 
applies shall have satisfied the minimum funding standard for 
such plan for a plan year if as of the end of such plan year 
the plan does not have an accumulated funding deficiency.
  [(2) For the purposes of this part, the term ``accumulated 
funding deficiency'' means for any plan the excess of the total 
charges to the funding standard account for all plan years 
(beginning with the first plan year to which this part applies) 
over the total credits to such account for such years or, if 
less, the excess of the total charges to the alternative 
minimum funding standard account for such plan years over the 
total credits to such account for such years.
  [(3) In any plan year in which a multiemployer plan is in 
reorganization, the accumulated funding deficiency of the plan 
shall be determined under section 4243.
  [(b)(1) Each plan to which this part applies shall establish 
and maintain a funding standard account. Such account shall be 
credited and charged solely as provided in this section.
  [(2) For a plan year, the funding standard account shall be 
charged with the sum of--
          [(A) the normal cost of the plan for the plan year,
          [(B) the amounts necessary to amortize in equal 
        annual installments (until fully amortized)--
                  [(i) in the case of a plan in existence on 
                January 1, 1974, the unfunded past service 
                liability under the plan on the first day of 
                the first plan year to which this part applies, 
                over a period of 40 plan years,
                  [(ii) in the case of a plan which comes into 
                existence after January 1, 1974, the unfunded 
                past service liability under the plan on the 
                first day of the first plan year to which this 
                part applies, over a period of 30 plan years 
                (20 plan years in the case of a multiemployer 
                plan),
                  [(iii) separately, with respect to each plan 
                year, the net increase (if any) in unfunded 
                past service liability under the plan arising 
                from plan amendments adopted in such year, over 
                a period of 30 plan years (20 plan years in the 
                case of a multiemployer plan),
                  [(iv) separately, with respect to each plan 
                year, the net experience loss (if any) under 
                the plan, over a period of 5 plan years (15 
                plan years in the case of a multiemployer 
                plan), and
                  [(v) separately, with respect to each plan 
                year, the net loss (if any) resulting from 
                changes in actuarial assumptions used under the 
                plan, over a period of 10 plan years (30 plan 
                years in the case of a multiemployer plan),
          [(C) the amount necessary to amortize each waived 
        funding deficiency (within the meaning of section 
        303(c), for each prior plan year in equal annual 
        installments (until fully amortized) over a period of 5 
        plan years (15 plan years in the case of a 
        multiemployer plan),
          [(D) the amount necessary to amortize in equal annual 
        installments (until fully amortized) over a period of 5 
        plan years any amount credited to the funding standard 
        account under paragraph (3)(D), and
          [(E) the amount necessary to amortize in equal annual 
        installments (until fully amortized) over a period of 
        20 years the contributions which would be required to 
        be made under the plan but for the provisions of 
        subsection (c)(7)(A)(i)(I).
  [(3) For a plan year, the funding standard account shall be 
credited with the sum of--
          [(A) the amount considered contributed by the 
        employer to or under the plan for the plan year,
          [(B) the amount necessary to amortize in equal annual 
        installments (until fully amortized)--
                  [(i) separately, with respect to each plan 
                year, the net decrease (if any) in unfunded 
                past service liability under the plan arising 
                from plan amendments adopted in such year, over 
                a period of 30 plan years (20 plan years in the 
                case of a multiemployer plan),
                  [(ii) separately, with respect to each plan 
                year, the net experience gain (if any) under 
                the plan, over a period of 5 plan years (15 
                plan years in the case of a multiemployer 
                plan), and
                  [(iii) separately, with respect to each plan 
                year, the net gain (if any) resulting from 
                changes in actuarial assumptions used under the 
                plan, over a period of 10 plan years (30 plan 
                years in the case of a multiemployer plan),
          [(C) the amount of the waived funding deficiency 
        (within the meaning of section 303(c)) for the plan 
        year, and
          [(D) in the case of a plan year for which the 
        accumulated funding deficiency is determined under the 
        funding standard account if such plan year follows a 
        plan year for which such deficiency was determined 
        under the alternative minimum funding standard, the 
        excess (if any) of any debit balance in the funding 
        standard account (determined without regard to this 
        subparagraph) over any debit balance in the alternative 
        minimum funding standard account.
  [(4) Under regulations prescribed by the Secretary of the 
Treasury, amounts required to be amortized under paragraph (2) 
or paragraph (3), as the case may be--
          [(A) may be combined into one amount under such 
        paragraph to be amortized over a period determined on 
        the basis of the remaining amortization period for all 
        items entering into such combined amount, and
          [(B) may be offset against amounts required to be 
        amortized under the other such paragraph, with the 
        resulting amount to be amortized over a period 
        determined on the basis of the remaining amortization 
        periods for all items entering into whichever of the 
        two amounts being offset is the greater.
  [(5) Interest.--
          [(A) In general.--The funding standard account (and 
        items therein) shall be charged or credited (as 
        determined under regulations prescribed by the 
        Secretary of the Treasury) with interest at the 
        appropriate rate consistent with the rate or rates of 
        interest used under the plan to determine costs.
          [(B) Required change of interest rate.--For purposes 
        of determining a plan's current liability and for 
        purposes of determining a plan's required contribution 
        under section 302(d) for any plan year--
                  [(i) In general.--If any rate of interest 
                used under the plan to determine cost is not 
                within the permissible range, the plan shall 
                establish a new rate of interest within the 
                permissible range.
                  [(ii) Permissible range.--For purposes of 
                this subparagraph--
                          [(I) In general.--Except as provided 
                        in subclause (II) or (III), the term 
                        ``permissible range'' means a rate of 
                        interest which is not more than 10 
                        percent above, and not more than 10 
                        percent below, the the weighted average 
                        of the rates of interest on 30-year 
                        Treasury securities during the 4-year 
                        period ending on the last day before 
                        the beginning of the plan year.
                          [(II) Special rule for years 2004 and 
                        2005.--In the case of plan years 
                        beginning after December 31, 2003, and 
                        before January 1, 2006, the term 
                        ``permissible range'' means a rate of 
                        interest which is not above, and not 
                        more than 10 percent below, the 
                        weighted average of the rates of 
                        interest on amounts invested 
                        conservatively in long-term investment 
                        grade corporate bonds during the 4-year 
                        period ending on the last day before 
                        the beginning of the plan year. Such 
                        rates shall be determined by the 
                        Secretary of the Treasury on the basis 
                        of 2 or more indices that are selected 
                        periodically by the Secretary of the 
                        Treasury and that are in the top 3 
                        quality levels available. The Secretary 
                        of the Treasury shall make the 
                        permissible range, and the indices and 
                        methodology used to determine the 
                        average rate, publicly available.
                          [(III) Secretarial authority.--If the 
                        Secretary finds that the lowest rate of 
                        interest permissible under subclause 
                        (I) or (II) is unreasonably high, the 
                        Secretary may prescribe a lower rate of 
                        interest, except that such rate may not 
                        be less than 80 percent of the average 
                        rate determined under such subclause.
                  [(iii) Assumptions.--Notwithstanding 
                subsection (c)(3)(A)(i), the interest rate used 
                under the plan shall be--
                          [(I) determined without taking into 
                        account the experience of the plan and 
                        reasonable expectations, but
                          [(II) consistent with the assumptions 
                        which reflect the purchase rates which 
                        would be used by insurance companies to 
                        satisfy the liabilities under the plan.
  [(6) In the case of a plan which, immediately before the date 
of the enactment of the Multiemployer Pension Plan Amendments 
Act of 1980, was a multiemployer plan (within the meaning of 
section 3(37) as in effect immediately before such date)--
          [(A) any amount described in paragraph (2)(B)(ii), 
        (2)(B)(iii), or (3)(B)(i) of this subsection which 
        arose in a plan year beginning before such date shall 
        be amortized in equal annual installments (until fully 
        amortized) over 40 plan years, beginning with the plan 
        year in which the amount arose;
          [(B) any amount described in paragraph (2)(B)(iv) or 
        (3)(B)(ii) of this subsection which arose in a plan 
        year beginning before such date shall be amortized in 
        equal annual installments (until fully amortized) over 
        20 plan years, beginning with the plan year in which 
        the amount arose;
          [(C) any change in past service liability which 
        arises during the period of 3 plan years beginning on 
        or after such date, and results from a plan amendment 
        adopted before such date, shall be amortized in equal 
        annual installments (until fully amortized) over 40 
        plan years, beginning with the plan year in which the 
        change arises; and
          [(D) any change in past service liability which 
        arises during the period of 2 plan years beginning on 
        or after such date, and results from the changing of a 
        group of participants from one benefit level to another 
        benefit level under a schedule of plan benefits which--
                  [(i) was adopted before such date, and
                  [(ii) was effective for any plan participant 
                before the beginning of the first plan year 
                beginning on or after such date,
        shall be amortized in equal annual installments (until 
        fully amortized) over 40 plan years, beginning with the 
        plan year in which the increase arises.
  [(7) For purposes of this part--
          [(A) Any amount received by a multiemployer plan in 
        payment of all or part of an employer's withdrawal 
        liability under part 1 of subtitle E of title IV shall 
        be considered an amount contributed by the employer to 
        or under the plan. The Secretary of the Treasury may 
        prescribe by regulation additional charges and credits 
        to a multiemployer plan's funding standard account to 
        the extent necessary to prevent withdrawal liability 
        payments from being unduly reflected as advance funding 
        for plan liabilities.
          [(B) If a plan is not in reorganization in the plan 
        year but was in reorganization in the immediately 
        preceding plan year, any balance in the funding 
        standard account at the close of such immediately 
        preceding plan year--
                  [(i) shall be eliminated by an offsetting 
                credit or charge (as the case may be), but
                  [(ii) shall be taken into account in 
                subsequent plan years by being amortized in 
                equal annual installments (until fully 
                amortized) over 30 plan years.
        The preceding sentence shall not apply to the extent of 
        any accumulated funding deficiency under section 
        418B(a) of the Internal Revenue Code of 1986 as of the 
        end of the last plan year that the plan was in 
        reorganization.
          [(C) Any amount paid by a plan during a plan year to 
        the Pension Benefit Guaranty Corporation pursuant to 
        section 4222 or to a fund exempt under section 
        501(c)(22) of such Code pursuant to section 4223 shall 
        reduce the amount of contributions considered received 
        by the plan for the plan year.
          [(D) Any amount paid by an employer pending a final 
        determination of the employer's withdrawal liability 
        under part 1 of subtitle E of title IV and subsequently 
        refunded to the employer by the plan shall be charged 
        to the funding standard account in accordance with 
        regulations prescribed by the Secretary.
          [(E) For purposes of the full funding limitation 
        under subsection (c)(7), unless otherwise provided by 
        the plan, the accrued liability under a multiemployer 
        plan shall not include benefits which are not 
        nonforfeitable under the plan after the termination of 
        the plan (taking into consideration section 411(d)(3) 
        of the Internal Revenue Code of 1986).
                  [(F) Election for deferral of charge for 
                portion of net experience loss.--
                          [(i) In general.--With respect to the 
                        net experience loss of an eligible 
                        multiemployer plan for the first plan 
                        year beginning after December 31, 2001, 
                        the plan sponsor may elect to defer up 
                        to 80 percent of the amount otherwise 
                        required to be charged under paragraph 
                        (2)(B)(iv) for any plan year beginning 
                        after June 30, 2003, and before July 1, 
                        2005, to any plan year selected by the 
                        plan from either of the 2 immediately 
                        succeeding plan years.
                          [(ii) Interest.--For the plan year to 
                        which a charge is deferred pursuant to 
                        an election under clause (i), the 
                        funding standard account shall be 
                        charged with interest on the deferred 
                        charge for the period of deferral at 
                        the rate determined under section 
                        304(a) for multiemployer plans.
                          [(iii) Restrictions on benefit 
                        increases.--No amendment 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 during any 
                        period for which a charge is deferred 
                        pursuant to an election under clause 
                        (i), unless--
                                  [(I) the plan's enrolled 
                                actuary certifies (in such form 
                                and manner prescribed by the 
                                Secretary of the Treasury) that 
                                the amendment provides for an 
                                increase in annual 
                                contributions which will exceed 
                                the increase in annual charges 
                                to the funding standard account 
                                attributable to such amendment, 
                                or
                                  [(II) the amendment is 
                                required by a collective 
                                bargaining agreement which is 
                                in effect on the date of 
                                enactment of this subparagraph.
                        If a plan is amended during any such 
                        plan year in violation of the preceding 
                        sentence, any election under this 
                        paragraph shall not apply to any such 
                        plan year ending on or after the date 
                        on which such amendment is adopted.
                          [(iv) Eligible multiemployer plan.--
                        For purposes of this subparagraph, the 
                        term ``eligible multiemployer plan'' 
                        means a multiemployer plan--
                                  [(I) which had a net 
                                investment loss for the first 
                                plan year beginning after 
                                December 31, 2001, of at least 
                                10 percent of the average fair 
                                market value of the plan assets 
                                during the plan year, and
                                  [(II) with respect to which 
                                the plan's enrolled actuary 
                                certifies (not taking into 
                                account the application of this 
                                subparagraph), on the basis of 
                                the acutuarial assumptions used 
                                for the last plan year ending 
                                before the date of the 
                                enactment of this subparagraph, 
                                that the plan is projected to 
                                have an accumulated funding 
                                deficiency (within the meaning 
                                of subsection (a)(2)) for any 
                                plan year beginning after June 
                                30, 2003, and before July 1, 
                                2006.
                        For purposes of subclause (I), a plan's 
                        net investment loss shall be determined 
                        on the basis of the actual loss and not 
                        under any actuarial method used under 
                        subsection (c)(2).
                          [(v) Exception to treatment of 
                        eligible multiemployer plan.--In no 
                        event shall a plan be treated as an 
                        eligible multiemployer plan under 
                        clause (iv) if--
                                  [(I) for any taxable year 
                                beginning during the 10-year 
                                period preceding the first plan 
                                year for which an election is 
                                made under clause (i), any 
                                employer required to contribute 
                                to the plan failed to timely 
                                pay any excise tax imposed 
                                under section 4971 of the 
                                Internal Revenue Code of 1986 
                                with respect to the plan,
                                  [(II) for any plan year 
                                beginning after June 30, 1993, 
                                and before the first plan year 
                                for which an election is made 
                                under clause (i), the average 
                                contribution required to be 
                                made by all employers to the 
                                plan does not exceed 10 cents 
                                per hour or no employer is 
                                required to make contributions 
                                to the plan, or
                                  [(III) with respect to any of 
                                the plan years beginning after 
                                June 30, 1993, and before the 
                                first plan year for which an 
                                election is made under clause 
                                (i), a waiver was granted under 
                                section 303 of this Act or 
                                section 412(d) of the Internal 
                                Revenue Code of 1986 with 
                                respect to the plan or an 
                                extension of an amortization 
                                period was granted under 
                                section 304 of this Act or 
                                section 412(e) of such Code 
                                with respect to the plan.
                          [(vi) Notice.--If a plan sponsor 
                        makes an election under this 
                        subparagraph or section 412(b)(7)(F) of 
                        the Internal Revenue Code of 1986 for 
                        any plan year, the plan administrator 
                        shall provide, within 30 days of filing 
                        the election for such year, written 
                        notice of the election to participants 
                        and beneficiaries, to each labor 
                        organization representing such 
                        participants or beneficiaries, to each 
                        employer that has an obligation to 
                        contribute under the plan, and to the 
                        Pension Benefit Guaranty Corporation. 
                        Such notice shall include with respect 
                        to any election the amount of any 
                        charge to be deferred and the period of 
                        the deferral. Such notice shall also 
                        include the maximum guaranteed monthly 
                        benefits which the Pension Benefit 
                        Guaranty Corporation would pay if the 
                        plan terminated while underfunded.
                          [(vii) Election.--An election under 
                        this subparagraph shall be made at such 
                        time and in such manner as the 
                        Secretary of the Treasury may 
                        prescribe.
  [(c)(1) For purposes of this part, normal costs, accrued 
liability, past service liabilities, and experience gains and 
losses shall be determined under the funding method used to 
determine costs under the plan.
  [(2)(A) For purposes of this part, the value of the plan's 
assets shall be determined on the basis of any reasonable 
actuarial method of valuation which takes into account fair 
market value and which is permitted under regulations 
prescribed by the Secretary of the Treasury.
  [(B) For purposes of this part, the value of a bond or other 
evidence of indebtedness which is not in default as to 
principal or interest may, at the election of the plan 
administrator, be determined on an amortized basis running from 
initial cost at purchase to par value at maturity or earliest 
call date. Any election under this subparagraph shall be made 
at such time and in such manner as the Secretary of the 
Treasury shall by regulations provide, shall apply to all such 
evidences of indebtedness, and may be revoked only with the 
consent of the Secretary of the Treasury. In the case of a plan 
other than a multiemployer plan, this subparagraph shall not 
apply, but the Secretary of the Treasury may by regulations 
provide that the value of any dedicated bond portfolio of such 
plan shall be determined by using the interest rate under 
subsection (b)(5).
  [(3) For purposes of this section, all costs, liabilities, 
rates of interest, and other factors under the plan shall be 
determined on the basis of actuarial assumptions and methods--
          [(A) in the case of--
                  [(i) a plan other than a multiemployer plan, 
                each of which is reasonable (taking into 
                account the experience of the plan and 
                reasonable expectations) or which, in the 
                aggregate, result in a total contribution 
                equivalent to that which would be determined if 
                each such assumption and method were 
                reasonable, or
                  [(ii) a multiemployer plan, which, in the 
                aggregate, are reasonable (taking into account 
                the experiences of the plan and reasonable 
                expectations), and
          [(B) which, in combination, offer the actuary's best 
        estimate of anticipated experience under the plan.
  [(4) For purposes of this section, if--
          [(A) a change in benefits under the Social Security 
        Act or in other retirement benefits created under 
        Federal or State law, or
          [(B) a change in the definition of the term ``wages'' 
        under section 3121 of the Internal Revenue Code of 
        1986, or a change in the amount of such wages taken 
        into account under regulations prescribed for purposes 
        of section 401(a)(5) of the Internal Revenue Code of 
        1986,
results in an increase or decrease in accrued liability under a 
plan, such increase or decrease shall be treated as an 
experience loss or gain.
  [(5)
                  [(A) In general.--If the funding method for a 
                plan is changed, the new funding method shall 
                become the funding method used to determine 
                costs and liabilities under the plan only if 
                the change is approved by the Secretary of the 
                Treasury. If the plan year for a plan is 
                changed, the new plan year shall become the 
                plan year for the plan only if the change is 
                approved by the Secretary of the Treasury.
                  [(B) Approval required for certain changes in 
                assumptions by certain single-employer plans 
                subject to additional funding requirement.--
                          [(i) In general.--No actuarial 
                        assumption (other than the assumptions 
                        described in subsection (d)(7)(C)) used 
                        to determine the current liability for 
                        a plan to which this subparagraph 
                        applies may be changed without the 
                        approval of the Secretary of the 
                        Treasury.
                          [(ii) Plans to which subparagraph 
                        applies.--This subparagraph shall apply 
                        to a plan only if--
                                  [(I) the plan is a defined 
                                benefit plan (other than a 
                                multiemployer 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 unfunded current liability 
                                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 current 
                                liability of the plan before 
                                such change.
  [(6) If, as of the close of a plan year, a plan would 
(without regard to this paragraph) have an accumulated funding 
deficiency (determined without regard to the alternative 
minimum funding standard account permitted under section 305) 
in excess of the full funding limitation--
          [(A) the funding standard account shall be credited 
        with the amount of such excess, and
          [(B) all amounts described in paragraphs (2), (B), 
        (C), and (D) and (3)(B) of subsection (b) which are 
        required to be amortized shall be considered fully 
        amortized for purposes of such paragraphs.
  [(7) Full-funding limitation.--
          [(A) In general.--For purposes of paragraph (6), the 
        term ``full-funding limitation'' means the excess (if 
        any) of--
                  [(i) the lesser of (I) in the case of plan 
                years beginning before January 1, 2004, the 
                applicable percentage of current liability 
                (including the expected increase in current 
                liability due to benefits accruing during the 
                plan year), or (II) the accrued liability 
                (including normal cost) under the plan 
                (determined under the entry age normal funding 
                method if such accrued liability cannot be 
                directly calculated under the funding method 
                used for the plan), over
                  [(ii) the lesser of--
                          [(I) the fair market value of the 
                        plan's assets, or
                          [(II) the value of such assets 
                        determined under paragraph (2).
                  [(B) Current liability.--For purposes of 
                subparagraph (D) and subclause (I) of 
                subparagraph (A)(i), the term ``current 
                liability'' has the meaning given such term by 
                subsection (d)(7) (without regard to 
                subparagraphs (C) and (D) thereof) and using 
                the rate of interest used under subsection 
                (b)(5)(B).
          [(C) Special rule for paragraph (6)(b).--For purposes 
        of paragraph (6)(B), subparagraph (A)(i) shall be 
        applied without regard to subclause (I) thereof.
          [(D) Regulatory authority.--The Secretary of the 
        Treasury may by regulations provide--
                  [(i) for adjustments to the percentage 
                contained in subparagraph (A)(i) to take into 
                account the respective ages or lengths of 
                service of the participants, and
                  [(ii) alternative methods based on factors 
                other than current liability for the 
                determination of the amount taken into account 
                under subparagraph (A)(i).
                  [(E) Minimum amount.--
                          [(i) In general.--In no event shall 
                        the full-funding limitation determined 
                        under subparagraph (A) be less than the 
                        excess (if any) of--
                                  [(I) 90 percent of the 
                                current liability of the plan 
                                (including the expected 
                                increase in current liability 
                                due to benefits accruing during 
                                the plan year), over
                                  [(II) the value of the plan's 
                                assets determined under 
                                paragraph (2).
                          [(ii) Current liability; assets.--For 
                        purposes of clause (i)--
                                  [(I) the term ``current 
                                liability'' has the meaning 
                                given such term by subsection 
                                (d)(7) (without regard to 
                                subparagraph (D) thereof), and
                                  [(II) assets shall not be 
                                reduced by any credit balance 
                                in the funding standard 
                                account.
                  [(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable 
                percentage shall be determined in accordance 
                with the following table:

        [In the case of any plan year                     The applicable
          beginning in calendar year--                   percentage is--
          2002................................................      165 
          2003................................................      170.

  [(8) For purposes of this part, any amendment applying to a 
plan year which--
          [(A) is adopted after the close of such plan year but 
        no later than 2\1/2\ months after the close of the plan 
        year (or, in the case of a multiemployer plan, no later 
        than 2 years after the close of such plan year),
          [(B) does not reduce the accrued benefit of any 
        participant determined as of the beginning of the first 
        plan year to which the amendment applies, and
          [(C) does not reduce the accrued benefit of any 
        participant determined as of the time of adoption 
        except to the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed to 
have been made on the first day of such plan year. No amendment 
described in this paragraph which reduces the accrued benefits 
of any participant shall take effect unless the plan 
administrator files a notice with the Secretary notifying him 
of such amendment and the Secretary has approved such amendment 
or, within 90 days after the date on which such notice was 
filed, failed to disapprove such amendment. No amendment 
described in this subsection shall be approved by the Secretary 
unless he determines that such amendment is necessary because 
of a substantial business hardship (as determined under section 
303(b) and that waiver under section 303(a) is unavailable or 
inadequate.
  [(9)(A) For purposes of this part, a determination of 
experience gains and losses and a valuation of the plan's 
liability shall be made not less frequently than once every 
year, except that such determination shall be made more 
frequently to the extent required in particular cases under 
regulations prescribed by the Secretary of the Treasury.
  [(B)(i) Except as provided in clause (ii), the valuation 
referred to in subparagraph (A) shall be made as of a date 
within the plan year to which the valuation refers or within 
one month prior to the beginning of such year.
  [(ii) The valuation referred to in subparagraph (A) may be 
made as of a date within the plan year prior to the year to 
which the valuation refers if, as of such date, the value of 
the assets of the plan are not less than 100 percent of the 
plan's current liability (as defined in paragraph (7)(B)).
  [(iii) Information under clause (ii) shall, in accordance 
with regulations, be actuarially adjusted to reflect 
significant differences in participants.
  [(iv) A change in funding method to use a prior year 
valuation, as provided in clause (ii), may not be made unless 
as of the valuation date within the prior plan year, the value 
of the assets of the plan are not less than 125 percent of the 
plan's current liability (as defined in paragraph (7)(B)).
  [(10) For purposes of this section--
          [(A) In the case of a defined benefit plan other than 
        a multiemployer plan, any contributions for a plan year 
        made by an employer during the period--
                  [(i) beginning on the day after the last day 
                of such plan year, and
                  [(ii) ending on the date which is 8\1/2\ 
                months after the close of the plan year,
        shall be deemed to have been made on such last day.
          [(B) In the case of a plan not described in 
        subparagraph (A), any contributions for a plan year 
        made by an employer after the last day of such plan 
        year, but not later than two and one-half months after 
        such day, shall be deemed to have been made on such 
        last day. For purposes of this subparagraph, such two 
        and one-half month period may be extended for not more 
        than six months under regulations prescribed by the 
        Secretary of the Treasury.
          [(11) Liability for contributions.--
                  [(A) In general.--Except as provided in 
                subparagraph (B), the amount of any 
                contribution required by this section and any 
                required installments under subsection (e) 
                shall be paid by the employer responsible for 
                contributing to or under the plan the amount 
                described in subsection (b)(3)(A).
                  [(B) Joint and several liability where 
                employer member of controlled group.--
                          [(i) In general.--In the case of a 
                        plan other than a multiemployer plan, 
                        if the employer referred to in 
                        subparagraph (A) is a member of a 
                        controlled group, each member of such 
                        group shall be jointly and severally 
                        liable for payment of such contribution 
                        or required installment.
                          [(ii) Controlled group.--For purposes 
                        of clause (i), 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.
          [(12) Anticipation of benefit increases effective in 
        the future.--In determining projected benefits, the 
        funding method of a collectively bargained plan 
        described in section 413(a) of the Internal Revenue 
        Code of 1986 (other than a multiemployer plan) shall 
        anticipate benefit increases scheduled to take effect 
        during the term of the collective bargaining agreement 
        applicable to the plan.
  [(d) Additional Funding Requirements for Plans Which Are Not 
Multiemployer Plans.--
          [(1) In general.--In the case of a defined benefit 
        plan (other than a multiemployer plan) to which this 
        subsection applies under paragraph (9) for any plan 
        year, the amount charged to the funding standard 
        account for such plan year shall be increased by the 
        sum of--
                  [(A) the excess (if any) of--
                          [(i) the deficit reduction 
                        contribution determined under paragraph 
                        (2) for such plan year, over
                          [(ii) the sum of the charges for such 
                        plan year under subsection (b)(2), 
                        reduced by the sum of the credits for 
                        such plan year under subparagraph (B) 
                        of subsection (b)(3), plus
                  [(B) the unpredictable contingent event 
                amount (if any) for such plan year.
        Such increase shall not exceed the amount which, after 
        taking into account charges (other than the additional 
        charge under this subsection) and credits under 
        subsection (b), is necessary to increase the funded 
        current liability percentage (taking into account the 
        expected increase in current liability due to benefits 
        accruing during the plan year) to 100 percent.
          [(2) Deficit reduction contribution.--For purposes of 
        paragraph (1), the deficit reduction contribution 
        determined under this paragraph for any plan year is 
        the sum of--
                  [(A) the unfunded old liability amount,
                  [(B) the unfunded new liability amount,
                  [(C) the expected increase in current 
                liability due to benefits accruing during the 
                plan year, and
                  [(D) the aggregate of the unfunded mortality 
                increase amounts.
          [(3) Unfunded old liability amount.--For purposes of 
        this subsection--
                  [(A) In general.--The unfunded old liability 
                amount with respect to any plan for any plan 
                year is the amount necessary to amortize the 
                unfunded old liability under the plan in equal 
                annual installments over a period of 18 plan 
                years (beginning with the 1st plan year 
                beginning after December 31, 1988).
                  [(B) Unfunded old liability.--The term 
                ``unfunded old liability'' means the unfunded 
                current liability of the plan as of the 
                beginning of the 1st plan year beginning after 
                December 31, 1987 (determined without regard to 
                any plan amendment increasing liabilities 
                adopted after October 28, 1987).
                  [(C) Special rules for benefit increases 
                under existing collective bargaining 
                agreements.--
                          [(i) In general.--In the case of a 
                        plan maintained pursuant to 1 or more 
                        collective bargaining agreements 
                        between employee representatives and 
                        the employer ratified before October 
                        29, 1987, the unfunded old liability 
                        amount with respect to such plan for 
                        any plan year shall be increased by the 
                        amount necessary to amortize the 
                        unfunded existing benefit increase 
                        liability in equal annual installments 
                        over a period of 18 plan years 
                        beginning with--
                                  [(I) the plan year in which 
                                the benefit increase with 
                                respect to such liability 
                                occurs, or
                                  [(II) if the taxpayer elects, 
                                the 1st plan year beginning 
                                after December 31, 1988.
                          [(ii) Unfunded existing benefit 
                        increase liabilities.--For purposes of 
                        clause (i), the unfunded existing 
                        benefit increase liability means, with 
                        respect to any benefit increase under 
                        the agreements described in clause (i) 
                        which takes effect during or after the 
                        1st plan year beginning after December 
                        31, 1987, the unfunded current 
                        liability determined--
                                  [(I) by taking into account 
                                only liabilities attributable 
                                to such benefit increase, and
                                  [(II) by reducing (but not 
                                below zero) the amount 
                                determined under paragraph 
                                (8)(A)(ii) by the current 
                                liability determined without 
                                regard to such benefit 
                                increase.
                          [(iii) Extensions, modifications, 
                        etc. not taken into account.--For 
                        purposes of this subparagraph, any 
                        extension, amendment, or other 
                        modification of an agreement after 
                        October 28, 1987, shall not be taken 
                        into account.
                  [(D) Special rule for required changes in 
                actuarial assumptions.--
                          [(i) In general.--The unfunded old 
                        liability amount with respect to any 
                        plan for any plan year shall be 
                        increased by the amount necessary to 
                        amortize the amount of additional 
                        unfunded old liability under the plan 
                        in equal annual installments over a 
                        period of 12 plan years (beginning with 
                        the first plan year beginning after 
                        December 31, 1994).
                          [(ii) Additional unfunded old 
                        liability.--For purposes of clause (i), 
                        the term ``additional unfunded old 
                        liability'' means the amount (if any) 
                        by which--
                                  [(I) the current liability of 
                                the plan as of the beginning of 
                                the first plan year beginning 
                                after December 31, 1994, valued 
                                using the assumptions required 
                                by paragraph (7)(C) as in 
                                effect for plan years beginning 
                                after December 31, 1994, 
                                exceeds
                                  [(II) the current liability 
                                of the plan as of the beginning 
                                of such first plan year, valued 
                                using the same assumptions used 
                                under subclause (I) (other than 
                                the assumptions required by 
                                paragraph (7)(C)), using the 
                                prior interest rate, and using 
                                such mortality assumptions as 
                                were used to determine current 
                                liability for the first plan 
                                year beginning after December 
                                31, 1992.
                          [(iii) Prior interest rate.--For 
                        purposes of clause (ii), the term 
                        ``prior interest rate'' means the rate 
                        of interest that is the same percentage 
                        of the weighted average under 
                        subsection (b)(5)(B)(ii)(I) for the 
                        first plan year beginning after 
                        December 31, 1994, as the rate of 
                        interest used by the plan to determine 
                        current liability for the first plan 
                        year beginning after December 31, 1992, 
                        is of the weighted average under 
                        subsection (b)(5)(B)(ii)(I) for such 
                        first plan year beginning after 
                        December 31, 1992.
                  [(E) Optional rule for additional unfunded 
                old liability.--
                          [(i) In general.--If an employer 
                        makes an election under clause (ii), 
                        the additional unfunded old liability 
                        for purposes of subparagraph (D) shall 
                        be the amount (if any) by which--
                                  [(I) the unfunded current 
                                liability of the plan as of the 
                                beginning of the first plan 
                                year beginning after December 
                                31, 1994, valued using the 
                                assumptions required by 
                                paragraph (7)(C) as in effect 
                                for plan years beginning after 
                                December 31, 1994, exceeds
                                  [(II) the unamortized portion 
                                of the unfunded old liability 
                                under the plan as of the 
                                beginning of the first plan 
                                year beginning after December 
                                31, 1994.
                          [(ii) Election.--
                                  [(I) An employer may 
                                irrevocably elect to apply the 
                                provisions of this subparagraph 
                                as of the beginning of the 
                                first plan year beginning after 
                                December 31, 1994.
                                  [(II) If an election is made 
                                under this clause, the increase 
                                under paragraph (1) for any 
                                plan year beginning after 
                                December 31, 1994, and before 
                                January 1, 2002, to which this 
                                subsection applies (without 
                                regard to this subclause) shall 
                                not be less than the increase 
                                that would be required under 
                                paragraph (1) if the provisions 
                                of this title as in effect for 
                                the last plan year beginning 
                                before January 1, 1995, had 
                                remained in effect.
          [(4) Unfunded new liability amount.--For purposes of 
        this subsection--
                  [(A) In general.--The unfunded new liability 
                amount with respect to any plan for any plan 
                year is the applicable percentage of the 
                unfunded new liability.
                  [(B) Unfunded new liability.--The term 
                ``unfunded new liability'' means the unfunded 
                current liability of the plan for the plan year 
                determined without regard to--
                          [(i) the unamortized portion of the 
                        unfunded old liability, the unamortized 
                        portion of the additional unfunded old 
                        liability, the unamortized portion of 
                        each unfunded mortality increase, and 
                        the unamortized portion of the unfunded 
                        existing benefit increase liability, 
                        and
                          [(ii) the liability with respect to 
                        any unpredictable contingent event 
                        benefits (without regard to whether the 
                        event has occurred).
                  [(C) Applicable percentage.--The term 
                ``applicable percentage'' means, with respect 
                to any plan year, 30 percent, reduced by the 
                product of--
                          [(i) .40 multiplied by
                          [(ii) the number of percentage points 
                        (if any) by which the funded current 
                        liability percentage exceeds 60 
                        percent.
          [(5) Unpredictable contingent event amount.--
                  [(A) In general.--The unpredictable 
                contingent event amount with respect to a plan 
                for any plan year is an amount equal to the 
                greatest of--
                          [(i) the applicable percentage of the 
                        product of--
                                  [(I) 100 percent, reduced 
                                (but not below zero) by the 
                                funded current liability 
                                percentage for the plan year, 
                                multiplied by
                                  [(II) the amount of 
                                unpredictable contingent event 
                                benefits paid during the plan 
                                year, including (except as 
                                provided by the Secretary of 
                                the Treasury) any payment for 
                                the purchase of an annuity 
                                contract for a participant or 
                                beneficiary with respect to 
                                such benefits,
                          [(ii) the amount which would be 
                        determined for the plan year if the 
                        unpredictable contingent event benefit 
                        liabilities were amortized in equal 
                        annual installments over 7 plan years 
                        (beginning with the plan year in which 
                        such event occurs), or
                          [(iii) the additional amount that 
                        would be determined under paragraph 
                        (4)(A) if the unpredictable contingent 
                        event benefit liabilities were included 
                        in unfunded new liability 
                        notwithstanding paragraph (4)(B)(ii).
                  [(B) Applicable percentage.--

             [In the case of plan years                   The applicable
             beginning in:                                percentage is:

                 1989 and 1990..........................             5  
                 1991...................................            10  
                 1992...................................            15  
                 1993...................................            20  
                 1994...................................            30  
                 1995...................................            40  
                 1996...................................            50  
                 1997...................................            60  
                 1998...................................            70  
                 1999...................................            80  
                 2000...................................            90  
                 2001 and thereafter....................          100.  

                  [(C) Paragraph not to apply to existing 
                benefits.--This paragraph shall not apply to 
                unpredictable contingent event benefits (and 
                liabilities attributable thereto) for which the 
                event occurred before the first plan year 
                beginning after December 31, 1988.
                  [(D) Special rule for first year of 
                amortization.--Unless the employer elects 
                otherwise, the amount determined under 
                subparagraph (A) for the plan year in which the 
                event occurs shall be equal to 150 percent of 
                the amount determined under subparagraph 
                (A)(i). The amount under subparagraph (A)(ii) 
                for subsequent plan years in the amortization 
                period shall be adjusted in the manner provided 
                by the Secretary of the Treasury to reflect the 
                application of this subparagraph.
                  [(E) Limitation.--The present value of the 
                amounts described in subparagraph (A) with 
                respect to any one event shall not exceed the 
                unpredictable contingent event benefit 
                liabilities attributable to that event.
          [(6) Special rules for small plans.--
                  [(A) Plans with 100 or fewer participants.--
                This subsection shall not apply to any plan for 
                any plan year if on each day during the 
                preceding plan year such plan had no more than 
                100 participants.
                  [(B) Plans with more than 100 but not more 
                than 150 participants.--In the case of a plan 
                to which subparagraph (A) does not apply and 
                which on each day during the preceding plan 
                year had no more than 150 participants, the 
                amount of the increase under paragraph (1) for 
                such plan year shall be equal to the product 
                of--
                          [(i) such increase determined without 
                        regard to this subparagraph, multiplied 
                        by
                          [(ii) 2 percent for the highest 
                        number of participants in excess of 100 
                        on any such day.
                  [(C) Aggregation of plans.--For purposes of 
                this paragraph, all defined benefit plans 
                maintained by the same employer (or any member 
                of such employer's controlled group) shall be 
                treated as 1 plan, but only employees of such 
                employer or member shall be taken into account.
          [(7) Current liability.--For purposes of this 
        subsection--
                  [(A) In general.--The term ``current 
                liability'' means all liabilities to 
                participants and their beneficiaries under the 
                plan.
                  [(B) Treatment of unpredictable contingent 
                event benefits.--
                          [(i) In general.--For purposes of 
                        subparagraph (A), any unpredictable 
                        contingent event benefit shall not be 
                        taken into account until the event on 
                        which the benefit is contingent occurs.
                          [(ii) Unpredictable contingent event 
                        benefit.--The term ``unpredictable 
                        contingent event benefit'' means any 
                        benefit contingent on an event other 
                        than--
                                  [(I) age, service, 
                                compensation, death, or 
                                disability, or
                                  [(II) an event which is 
                                reasonably and reliably 
                                predictable (as determined by 
                                the Secretary of the Treasury).
                  [(C) Interest rate and mortality assumptions 
                used.--Effective for plan years beginning after 
                December 31, 1994--
                          [(i) Interest rate.--
                                  [(I) In general.--The rate of 
                                interest used to determine 
                                current liability under this 
                                subsection shall be the rate of 
                                interest used under subsection 
                                (b)(5), except that the highest 
                                rate in the permissible range 
                                under subparagraph (B)(ii) 
                                thereof shall not exceed the 
                                specified percentage under 
                                subclause (II) of the weighted 
                                average referred to in such 
                                subparagraph.
                                  [(II) Specified percentage.--
                                For purposes of subclause (I), 
                                the specified percentage shall 
                                be determined as follows:

             [In the case of
               plan years beginning                        The specified
               in calendar year:                          percentage is:
                 1995...................................            109 
                 1996...................................            108 
                 1997...................................            107 
                 1998...................................            106 
                 1999 and thereafter....................            105.

                                  [(III) Special rule for 2002 
                                and 2003.--For a plan year 
                                beginning in 2002 or 2003, 
                                notwithstanding subclause (I), 
                                in the case that the rate of 
                                interest used under subsection 
                                (b)(5) exceeds the highest rate 
                                permitted under subclause (I), 
                                the rate of interest used to 
                                determine current liability 
                                under this subsection may 
                                exceed the rate of interest 
                                otherwise permitted under 
                                subclause (I); except that such 
                                rate of interest shall not 
                                exceed 120 percent of the 
                                weighted average referred to in 
                                subsection (b)(5)(B)(ii).
                                  [(IV) Special rule for 2004 
                                and 2005.--For plan years 
                                beginning in 2004 or 2005, 
                                notwithstanding subclause (I), 
                                the rate of interest used to 
                                determine current liability 
                                under this subsection shall be 
                                the rate of interest under 
                                subsection (b)(5).
                          [(ii) Mortality tables.--
                                  [(I) Commissioners' standard 
                                table.--In the case of plan 
                                years beginning before the 
                                first plan year to which the 
                                first tables prescribed under 
                                subclause (II) apply, the 
                                mortality table used in 
                                determining current liability 
                                under this subsection shall be 
                                the table prescribed by the 
                                Secretary of the Treasury which 
                                is based on the prevailing 
                                commissioners' standard table 
                                (described in section 
                                807(d)(5)(A) of the Internal 
                                Revenue Code of 1986) used to 
                                determine reserves for group 
                                annuity contracts issued on 
                                January 1, 1993.
                                  [(II) Secretarial 
                                authority.--The Secretary of 
                                the Treasury may by regulation 
                                prescribe for plan years 
                                beginning after December 31, 
                                1999, mortality tables to be 
                                used in determining current 
                                liability under this 
                                subsection. Such tables shall 
                                be based upon the actual 
                                experience of pension plans and 
                                projected trends in such 
                                experience. In prescribing such 
                                tables, the Secretary of the 
                                Treasury shall take into 
                                account results of available 
                                independent studies of 
                                mortality of individuals 
                                covered by pension plans.
                                  [(III) Periodic review.--The 
                                Secretary of the Treasury shall 
                                periodically (at least every 5 
                                years) review any tables in 
                                effect under this subsection 
                                and shall, to the extent the 
                                Secretary determines necessary, 
                                by regulation update the tables 
                                to reflect the actual 
                                experience of pension plans and 
                                projected trends in such 
                                experience.
                          [(iii) Separate mortality tables for 
                        the disabled.--Notwithstanding clause 
                        (ii)--
                                  [(I) In general.--In the case 
                                of plan years beginning after 
                                December 31, 1995, the 
                                Secretary of the Treasury shall 
                                establish mortality tables 
                                which may be used (in lieu of 
                                the tables under clause (ii)) 
                                to determine current liability 
                                under this subsection for 
                                individuals who are entitled to 
                                benefits under the plan on 
                                account of disability. Such 
                                Secretary shall establish 
                                separate tables for individuals 
                                whose disabilities occur in 
                                plan years beginning before 
                                January 1, 1995, and for 
                                individuals whose disabilities 
                                occur in plan years beginning 
                                on or after such date.
                                  [(II) Special rule for 
                                disabilities occurring after 
                                1994.--In the case of 
                                disabilities occurring in plan 
                                years beginning after December 
                                31, 1994, the tables under 
                                subclause (I) shall apply only 
                                with respect to individuals 
                                described in such subclause who 
                                are disabled within the meaning 
                                of title II of the Social 
                                Security Act and the 
                                regulations thereunder.
                                  [(III) Plan years beginning 
                                in 1995.--In the case of any 
                                plan year beginning in 1995, a 
                                plan may use its own mortality 
                                assumptions for individuals who 
                                are entitled to benefits under 
                                the plan on account of 
                                disability.
                  [(D) Certain service disregarded.--
                          [(i) In general.--In the case of a 
                        participant to whom this subparagraph 
                        applies, only the applicable percentage 
                        of the years of service before such 
                        individual became a participant shall 
                        be taken into account in computing the 
                        current liability of the plan.
                          [(ii) Applicable percentage.--For 
                        purposes of this subparagraph, the 
                        applicable percentage shall be 
                        determined as follows:

             [If the years of                             The applicable
             participation are:                           percentage is:

                 1......................................            20  
                 2......................................            40  
                 3......................................            60  
                 4......................................            80  
                 5 or more..............................          100.  

                          [(iii) Participants to whom 
                        subparagraph applies.--This 
                        subparagraph shall apply to any 
                        participant who, at the time of 
                        becoming a participant--
                                  [(I) has not accrued any 
                                other benefit under any defined 
                                benefit plan (whether or not 
                                terminated) maintained by the 
                                employer or a member of the 
                                same controlled group of which 
                                the employer is a member,
                                  [(II) who first becomes a 
                                participant under the plan in a 
                                plan year beginning after 
                                December 31, 1987, and
                                  [(III) has years of service 
                                greater than the minimum years 
                                of service necessary for 
                                eligibility to participate in 
                                the plan.
                          [(iv) Election.--An employer may 
                        elect not to have this subparagraph 
                        apply. Such an election, once made, may 
                        be revoked only with the consent of the 
                        Secretary of the Treasury.
          [(8) Other definitions.--For purposes of this 
        subsection--
                  [(A) Unfunded current liability.--The term 
                ``unfunded current liability'' means, with 
                respect to any plan year, the excess (if any) 
                of--
                          [(i) the current liability under the 
                        plan, over
                          [(ii) value of the plan's assets 
                        determined under subsection (c)(2).
                  [(B) Funded current liability percentage.--
                The term ``funded current liability 
                percentage'' means, with respect to any plan 
                year, the percentage which--
                          [(i) the amount determined under 
                        subparagraph (A)(ii), is of
                          [(ii) the current liability under the 
                        plan.
                  [(C) Controlled group.--The term ``controlled 
                group'' means any group treated as a single 
                employer under subsections (b), (c), (m), and 
                (o) of section 414 of the Internal Revenue Code 
                of 1986.
                  [(D) Adjustments to prevent omissions and 
                duplications.--The Secretary of the Treasury 
                shall provide such adjustments in the unfunded 
                old liability amount, the unfunded new 
                liability amount, the unpredictable contingent 
                event amount, the current payment amount, and 
                any other charges or credits under this section 
                as are necessary to avoid duplication or 
                omission of any factors in the determination of 
                such amounts, charges, or credits.
                  [(E) Deduction for credit balances.--For 
                purposes of this subsection, the amount 
                determined under subparagraph (A)(ii) shall be 
                reduced by any credit balance in the funding 
                standard account. The Secretary of the Treasury 
                may provide for such reduction for purposes of 
                any other provision which references this 
                subsection.
          [(9) Applicability of subsection.--
                  [(A) In general.--Except as provided in 
                paragraph (6)(A), this subsection shall apply 
                to a plan for any plan year if its funded 
                current liability percentage for such year is 
                less than 90 percent.
                  [(B) Exception for certain plans at least 80 
                percent funded.--Subparagraph (A) shall not 
                apply to a plan for a plan year if--
                          [(i) the funded current liability 
                        percentage for the plan year is at 
                        least 80 percent, and
                          [(ii) such percentage for each of the 
                        2 immediately preceding plan years (or 
                        each of the 2d and 3d immediately 
                        preceding plan years) is at least 90 
                        percent.
                  [(C) Funded current liability percentage.--
                For purposes of subparagraphs (A) and (B), the 
                term ``funded current liability percentage'' 
                has the meaning given such term by paragraph 
                (8)(B), except that such percentage shall be 
                determined for any plan year--
                          [(i) without regard to paragraph 
                        (8)(E), and
                          [(ii) by using the rate of interest 
                        which is the highest rate allowable for 
                        the plan year under paragraph (7)(C).
                  [(D) Transition rules.--For purposes of this 
                paragraph:
                          [(i) Funded percentage for years 
                        before 1995.--The funded current 
                        liability percentage for any plan year 
                        beginning before January 1, 1995, shall 
                        be treated as not less than 90 percent 
                        only if for such plan year the plan met 
                        one of the following requirements (as 
                        in effect for such year):
                                  [(I) The full-funding 
                                limitation under subsection 
                                (c)(7) for the plan was zero.
                                  [(II) The plan had no 
                                additional funding requirement 
                                under this subsection (or would 
                                have had no such requirement if 
                                its funded current liability 
                                percentage had been determined 
                                under subparagraph (C)).
                                  [(III) The plan's additional 
                                funding requirement under this 
                                subsection did not exceed the 
                                lesser of 0.5 percent of 
                                current liability or 
                                $5,000,000.
                          [(ii) Special rule for 1995 and 
                        1996.--For purposes of determining 
                        whether subparagraph (B) applies to any 
                        plan year beginning in 1995 or 1996, a 
                        plan shall be treated as meeting the 
                        requirements of subparagraph (B)(ii) if 
                        the plan met the requirements of clause 
                        (i) of this subparagraph for any two of 
                        the plan years beginning in 1992, 1993, 
                        and 1994 (whether or not consecutive).
          [(10) Unfunded mortality increase amount.--
                  [(A) In general.--The unfunded mortality 
                increase amount with respect to each unfunded 
                mortality increase is the amount necessary to 
                amortize such increase in equal annual 
                installments over a period of 10 plan years 
                (beginning with the first plan year for which a 
                plan uses any new mortality table issued under 
                paragraph (7)(C)(ii)(II) or (III)).
                  [(B) Unfunded mortality increase.--For 
                purposes of subparagraph (A), the term 
                ``unfunded mortality increase'' means an amount 
                equal to the excess of--
                          [(i) the current liability of the 
                        plan for the first plan year for which 
                        a plan uses any new mortality table 
                        issued under paragraph (7)(C)(ii)(II) 
                        or (III), over
                          [(ii) the current liability of the 
                        plan for such plan year which would 
                        have been determined if the mortality 
                        table in effect for the preceding plan 
                        year had been used.
          [(11) Phase-in of increases in funding required by 
        retirement protection act of 1994.--
                  [(A) In general.--For any applicable plan 
                year, at the election of the employer, the 
                increase under paragraph (1) shall not exceed 
                the greater of--
                          [(i) the increase that would be 
                        required under paragraph (1) if the 
                        provisions of this title as in effect 
                        for plan years beginning before January 
                        1, 1995, had remained in effect, or
                          [(ii) the amount which, after taking 
                        into account charges (other than the 
                        additional charge under this 
                        subsection) and credits under 
                        subsection (b), is necessary to 
                        increase the funded current liability 
                        percentage (taking into account the 
                        expected increase 
                        in current liability due to benefits 
                        accruing during the plan year) for the 
                        applicable plan year to a percentage 
                        equal to the sum of the initial funded 
                        current liability percentage of the 
                        plan plus the applicable number of 
                        percentage points for such applicable 
                        plan year.
                  [(B) Applicable number of percentage 
                points.--
                          [(i) Initial funded current liability 
                        percentage of 75 percent or less.--
                        Except as provided in clause (ii), for 
                        plans with an initial funded current 
                        liability percentage of 75 percent or 
                        less, the applicable number of 
                        percentage points for the applicable 
                        plan year is:

             [In the case                                 The applicable
               of applicable                                   number of
               plan years                                     percentage
               beginning in:                                  points is:
                 1995...................................              3 
                 1996...................................              6 
                 1997...................................              9 
                 1998...................................             12 
                 1999...................................             15 
                 2000...................................             19 
                 2001...................................             24.

                          [(ii) Other cases.--In the case of a 
                        plan to which this clause applies, the 
                        applicable number of percentage points 
                        for any such applicable plan year is 
                        the sum of--
                                  [(I) 2 percentage points;
                                  [(II) the applicable number 
                                of percentage points (if any) 
                                under this clause for the 
                                preceding applicable plan year;
                                  [(III) the product of .10 
                                multiplied by the excess (if 
                                any) of (a) 85 percentage 
                                points over (b) the sum of the 
                                initial funded current 
                                liability percentage and the 
                                number determined under 
                                subclause (II);
                                  [(IV) for applicable plan 
                                years beginning in 2000, 1 
                                percentage point; and
                                  [(V) for applicable plan 
                                years beginning in 2001, 2 
                                percentage points.
                          [(iii) Plans to which clause (ii) 
                        applies.--
                                  [(I) In general.--Clause (ii) 
                                shall apply to a plan for an 
                                applicable plan year if the 
                                initial funded current 
                                liability percentage of such 
                                plan is more than 75 percent.
                                  [(II) Plans initially under 
                                clause (i).--In the case of a 
                                plan which (but for this 
                                subclause) has an initial 
                                funded current liability 
                                percentage of 75 percent or 
                                less, clause (ii) (and not 
                                clause (i)) shall apply to such 
                                plan with respect to applicable 
                                plan years beginning after the 
                                first applicable plan year for 
                                which the sum of the initial 
                                funded current liability 
                                percentage and the applicable 
                                number of percentage points 
                                (determined under clause (i)) 
                                exceeds 75 percent. For 
                                purposes of applying clause 
                                (ii) to such a plan, the 
                                initial funded current 
                                liability percentage of such 
                                plan shall be treated as being 
                                the sum referred to in the 
                                preceding sentence.
                  [(C) Definitions.--For purposes of this 
                paragraph--
                          [(i) The term ``applicable plan 
                        year'' means a plan year beginning 
                        after December 31, 1994, and before 
                        January 1, 2002.
                          [(ii) The term ``initial funded 
                        current liability percentage'' means 
                        the funded current liability percentage 
                        as of the first day of the first plan 
                        year beginning after December 31, 1994.
          [(12) Election for certain plans.--
                  [(A) In general.--In the case of a defined 
                benefit plan established and maintained by an 
                applicable employer, if this subsection did not 
                apply to the plan for the plan year beginning 
                in 2000 (determined without regard to paragraph 
                (6)), then, at the election of the employer, 
                the increased amount under paragraph (1) for 
                any applicable plan year shall be the greater 
                of--
                          [(i) 20 percent of the increased 
                        amount under paragraph (1) determined 
                        without regard to this paragraph, or
                          [(ii) the increased amount which 
                        would be determined under paragraph (1) 
                        if the deficit reduction contribution 
                        under paragraph (2) for the applicable 
                        plan year were determined without 
                        regard to subparagraphs (A), (B), and 
                        (D) of paragraph (2).
                  [(B) Restrictions on benefit increases.--No 
                amendment 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 
                during any applicable plan year, unless--
                          [(i) the plan's enrolled actuary 
                        certifies (in such form and manner 
                        prescribed by the Secretary of the 
                        Treasury) that the amendment provides 
                        for an increase in annual contributions 
                        which will exceed the increase in 
                        annual charges to the funding standard 
                        account attributable to such amendment, 
                        or
                          [(ii) the amendment is required by a 
                        collective bargaining agreement which 
                        is in effect on the date of enactment 
                        of this subparagraph.
                If a plan is amended during any applicable plan 
                year in violation of the preceding sentence, 
                any election under this paragraph shall not 
                apply to any applicable plan year ending on or 
                after the date on which such amendment is 
                adopted.
                  [(C) Applicable employer.--For purposes of 
                this paragraph, the term ``applicable 
                employer'' means an employer which is--
                          [(i) a commercial passenger airline,
                          [(ii) primarily engaged in the 
                        production or manufacture of a steel 
                        mill product or the processing of iron 
                        ore pellets, or
                          [(iii) an organization described in 
                        section 501(c)(5) of the Internal 
                        Revenue Code of 1986 and which 
                        established the plan to which this 
                        paragraph applies on June 30, 1955.
                  [(D) Applicable plan year.--For purposes of 
                this paragraph--
                          [(i) In general.--The term 
                        ``applicable plan year'' means any plan 
                        year beginning after December 27, 2003, 
                        and before December 28, 2005, for which 
                        the employer elects the application of 
                        this paragraph.
                          [(ii) Limitation on number of years 
                        which may be elected.--An election may 
                        not be made under this paragraph with 
                        respect to more than 2 plan years.
                  [(E) Notice requirements for plans electing 
                alternative deficit reduction contributions.--
                          [(i) In general.--If an employer 
                        elects an alternative deficit reduction 
                        contribution under this paragraph and 
                        section 412(l)(12) of the Internal 
                        Revenue Code of 1986 for any year, the 
                        employer shall provide, within 30 days 
                        of filing the election for such year, 
                        written notice of the election to 
                        participants and beneficiaries and to 
                        the Pension Benefit Guaranty 
                        Corporation.
                          [(ii) Notice to participants and 
                        beneficiaries.--The notice under clause 
                        (i) to participants and beneficiaries 
                        shall include with respect to any 
                        election--
                                  [(I) the due date of the 
                                alternative deficit reduction 
                                contribution and the amount by 
                                which such contribution was 
                                reduced from the amount which 
                                would have been owed if the 
                                election were not made, and
                                  [(II) a description of the 
                                benefits under the plan which 
                                are eligible to be guaranteed 
                                by the Pension Benefit Guaranty 
                                Corporation and an explanation 
                                of the limitations on the 
                                guarantee and the circumstances 
                                under which such limitations 
                                apply, including the maximum 
                                guaranteed monthly benefits 
                                which the Pension Benefit 
                                Guaranty Corporation would pay 
                                if the plan terminated while 
                                underfunded.
                          [(iii) Notice to pbgc.--The notice 
                        under clause (i) to the Pension Benefit 
                        Guaranty Corporation shall include--
                                  [(I) the information 
                                described in clause (ii)(I),
                                  [(II) the number of years it 
                                will take to restore the plan 
                                to full funding if the employer 
                                only makes the required 
                                contributions, and
                                  [(III) information as to how 
                                the amount by which the plan is 
                                underfunded compares with the 
                                capitalization of the employer 
                                making the election.
                  [(F) Election.--An election under this 
                paragraph shall be made at such time and in 
                such manner as the Secretary of the Treasury 
                may prescribe.
  [(e) Quarterly Contributions Required.--
          [(1) In general.--If a defined benefit plan (other 
        than a multiemployer plan) which has a funded current 
        liability percentage (as defined in subsection (d)(8)) 
        for the preceding plan year of less than 100 percent 
        fails to pay the full amount of a required installment 
        for the plan year, then the rate of interest charged to 
        the funding standard account under subsection (b)(5) 
        with respect to the amount of the underpayment for the 
        period of the underpayment shall be equal to the 
        greater of--
                  [(A) 175 percent of the Federal mid-term rate 
                (as in effect under section 1274 of the 
                Internal Revenue Code of 1986 for the 1st month 
                of such plan year), or
                  [(B) the rate of interest used under the plan 
                in determining costs (including adjustments 
                under subsection (b)(5)(B)).
          [(2) Amount of underpayment, period of 
        underpayment.--For purposes of paragraph (1)--
                  [(A) 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.
                  [(B) Period of underpayment.--The period for 
                which any interest is charged under this 
                subsection 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 
                (determined without regard to subsection 
                (c)(10)).
                  [(C) Order of crediting contributions.--For 
                purposes of subparagraph (A)(ii), contributions 
                shall be credited against unpaid required 
                installments in the order in which such 
                installments are required to be paid.
          [(3) Number of required installments; due dates.--For 
        purposes of this subsection--
                  [(A) Payable in 4 installments.--There shall 
                be 4 required installments for each plan year.
                  [(B) Time for payment of installments.--

          [In the case of the following                                 
          required installments:                        The due date is:

              1st.......................................        April 15
              2nd.......................................         July 15
              3rd.......................................      October 15
              4th......................................January 15 of the
                                                         following year.

          [(4) Amount of required installment.--For purposes of 
        this subsection--
                  [(A) In general.--The amount of any required 
                installment shall be the applicable percentage 
                of the required annual payment.
                  [(B) Required annual payment.--For purposes 
                of subparagraph (A), the term ``required annual 
                payment'' means the lesser of--
                          [(i) 90 percent of the amount 
                        required to be contributed to or under 
                        the plan by the employer for the plan 
                        year under section 412 of the Internal 
                        Revenue Code of 1986 (without regard to 
                        any waiver under subsection (c) 
                        thereof), or
                          [(ii) 100 percent of the amount so 
                        required for the preceding plan year.
                Clause (ii) shall not apply if the preceding 
                plan year was not a year of 12 months.
                  [(C) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage 
                shall be determined in accordance with the 
                following table:

          [For plan years                                 The applicable
          beginning in:                                   percentage is:

             1989.......................................          6.25  
             1990.......................................         12.5   
             1991.......................................         18.75  
             1992 and thereafter........................         25.    

                  [(D) Special rules for unpredictable 
                contingent event benefits.--In the case of a 
                plan to which subsection (d) applies for any 
                calendar year and which has any unpredictable 
                contingent event benefit liabilities--
                          [(i) Liabilities not taken into 
                        account.--Such liabilities shall not be 
                        taken into account in computing the 
                        required annual payment under 
                        subparagraph (B).
                          [(ii) Increase in installments.--Each 
                        required installment shall be increased 
                        by the greatest of--
                                  [(I) the unfunded percentage 
                                of the amount of benefits 
                                described in subsection 
                                (d)(5)(A)(i) paid during the 3-
                                month period preceding the 
                                month in which the due date for 
                                such installment occurs,
                                  [(II) 25 percent of the 
                                amount determined under 
                                subsection (d)(5)(A)(ii) for 
                                the plan year, or
                                  [(III) 25 percent of the 
                                amount determined under 
                                subsection (d)(5)(A)(iii) for 
                                the plan year.
                          [(iii) Unfunded percentage.--For 
                        purposes of clause (ii)(I), the term 
                        ``unfunded percentage'' means the 
                        percentage determined under subsection 
                        (d)(5)(A)(i)(I) for the plan year.
                          [(iv) Limitation on increase.--In no 
                        event shall the increases under clause 
                        (ii) exceed the amount necessary to 
                        increase the funded current liability 
                        percentage (within the meaning of 
                        subsection (d)(8)(B)) for the plan year 
                        to 100 percent.
          [(5) Liquidity requirement.--
                  [(A) In general.--A plan to which this 
                paragraph applies shall be treated as failing 
                to pay the full amount of any required 
                installment to the extent that the value of the 
                liquid assets paid in such installment is less 
                than the liquidity shortfall (whether or not 
                such liquidity shortfall exceeds the amount of 
                such installment required to be paid but for 
                this paragraph).
                  [(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a defined benefit plan 
                (other than a multiemployer plan or a plan 
                described in subsection (d)(6)(A)) which--
                          [(i) is required to pay installments 
                        under this subsection for a plan year, 
                        and
                          [(ii) has a liquidity shortfall for 
                        any quarter during such plan year.
                  [(C) Period of underpayment.--For purposes of 
                paragraph (1), any portion of an installment 
                that is treated as not paid under subparagraph 
                (A) shall continue to be treated as unpaid 
                until the close of the quarter in which the due 
                date for such installment occurs.
                  [(D) Limitation on increase.--If the amount 
                of any required installment is increased by 
                reason of subparagraph (A), in no event shall 
                such increase exceed the amount which, when 
                added to prior installments for the plan year, 
                is necessary to increase the funded current 
                liability percentage (taking into account the 
                expected increase in current liability due to 
                benefits accruing during the plan year) to 100 
                percent.
                  [(E) Definitions.--For purposes of this 
                paragraph--
                          [(i) Liquidity shortfall.--The term 
                        ``liquidity shortfall'' means, with 
                        respect to any required installment, an 
                        amount equal to the excess (as of the 
                        last day of the quarter for which such 
                        installment is made) of the base amount 
                        with respect to such quarter over the 
                        value (as of such last day) of the 
                        plan's liquid assets.
                          [(ii) Base amount.--
                                  [(I) In general.--The term 
                                ``base amount'' means, with 
                                respect to any quarter, an 
                                amount equal to 3 times the sum 
                                of the adjusted disbursements 
                                from the plan for the 12 months 
                                ending on the last day of such 
                                quarter.
                                  [(II) Special rule.--If the 
                                amount determined under 
                                subclause (I) exceeds an amount 
                                equal to 2 times the sum of the 
                                adjusted disbursements from the 
                                plan for the 36 months ending 
                                on the last day of the quarter 
                                and an enrolled actuary 
                                certifies to the satisfaction 
                                of the Secretary of the 
                                Treasury that such excess is 
                                the result of nonrecurring 
                                circumstances, the base amount 
                                with respect to such quarter 
                                shall be determined without 
                                regard to amounts related to 
                                those nonrecurring 
                                circumstances.
                          [(iii) Disbursements from the plan.--
                        The term ``disbursements from the 
                        plan'' means all disbursements from the 
                        trust, including purchases of 
                        annuities, payments of single sums and 
                        other benefits, and administrative 
                        expenses.
                          [(iv) Adjusted disbursements.--The 
                        term ``adjusted disbursements'' means 
                        disbursements from the plan reduced by 
                        the product of--
                                  [(I) the plan's funded 
                                current liability percentage 
                                (as defined in subsection 
                                (d)(8)) for the plan year, and
                                  [(II) the sum of the 
                                purchases of annuities, 
                                payments of single sums, and 
                                such other disbursements as the 
                                Secretary of the Treasury shall 
                                provide in regulations.
                          [(v) Liquid assets.--The term 
                        ``liquid assets'' means cash, 
                        marketable securities and such other 
                        assets as specified by the Secretary of 
                        the Treasury in regulations.
                          [(vi) Quarter.--The term ``quarter'' 
                        means, with respect to any required 
                        installment, the 3-month period 
                        preceding the month in which the due 
                        date for such installment occurs.
                  [(F) Regulations.--The Secretary of the 
                Treasury may prescribe such regulations as are 
                necessary to carry out this paragraph.
          [(6) Fiscal years and short years.--
                  [(A) Fiscal years.--In applying this 
                subsection to a plan year beginning on any date 
                other than January 1, there shall be 
                substituted for the months specified in this 
                subsection, the months which correspond 
                thereto.
                  [(B) Short plan year.--This section shall be 
                applied to plan years of less than 12 months in 
                accordance with regulations prescribed by the 
                Secretary of the Treasury.
          [(7) Special rule for 2002.--In any case in which the 
        interest rate used to determine current liability is 
        determined under subsection (d)(7)(C)(i)(III), for 
        purposes of applying paragraphs (1) and (4)(B)(ii) for 
        plan years beginning in 2002, the current liability for 
        the preceding plan year shall be redetermined using 120 
        percent as the specified percentage determined under 
        subsection (d)(7)(C)(i)(II).
  [(f) Imposition of Lien Where Failure to Make Required 
Contributions.--
          [(1) In general.--In the case of a plan covered under 
        section 4021 of this Act, if--
                  [(A) any person fails to make a required 
                installment under subsection (e) or any other 
                payment required under this section before the 
                due date for such installment or other payment, 
                and
                  [(B) the unpaid balance of such installment 
                or other payment (including interest), when 
                added to the aggregate unpaid balance of all 
                preceding such installments or other payments 
                for which payment was not made before the due 
                date (including interest), exceeds $1,000,000,
        then there shall be a lien in favor of the plan in the 
        amount determined under paragraph (3) upon all property 
        and rights to property, whether real or personal, 
        belonging to such person and any other person who is a 
        member of the same controlled group of which such 
        person is a member.
          [(2) Plans to which subsection applies.--This 
        subsection shall apply to a defined benefit plan (other 
        than a multiemployer plan) for any plan year for which 
        the funded current liability percentage (within the 
        meaning of subsection (d)(8)(B)) of such plan is less 
        than 100 percent.
          [(3) Amount of lien.--For purposes of paragraph (1), 
        the amount of the lien shall be equal to the aggregate 
        unpaid balance of required installments and other 
        payments required under this section (including 
        interest)--
                  [(A) for plan years beginning after 1987, and
                  [(B) for which payment has not been made 
                before the due date.
          [(4) Notice of failure; lien.--
                  [(A) Notice of failure.--A person committing 
                a failure described in paragraph (1) shall 
                notify the Pension Benefit Guaranty Corporation 
                of such failure within 10 days of the due date 
                for the required installment or other payment.
                  [(B) Period of lien.--The lien imposed by 
                paragraph (1) shall arise on the due date for 
                the required installment or other payment and 
                shall continue until the last day of the first 
                plan year in which the plan ceases to be 
                described in paragraph (1)(B). Such lien shall 
                continue to run without regard to whether such 
                plan continues to be described in paragraph (2) 
                during the period referred to in the preceding 
                sentence.
                  [(C) Certain rules to apply.--Any amount with 
                respect to which a lien is imposed under 
                paragraph (1) shall be treated as taxes due and 
                owing the United States and rules similar to 
                the rules of subsections (c), (d), and (e) of 
                section 4068 shall apply with respect to a lien 
                imposed by subsection (a) and the amount with 
                respect to such lien.
          [(5) Enforcement.--Any lien created under paragraph 
        (1) may be perfected and enforced only by the Pension 
        Benefit Guaranty Corporation, or at the direction of 
        the Pension Benefit Guaranty Corporation, by the 
        contributing sponsor (or any member of the controlled 
        group of the contributing sponsor).
          [(6) Definitions.--For purposes of this subsection--
                  [(A) Due date; required installment.--The 
                terms ``due date'' and ``required installment'' 
                have the meanings given such terms by 
                subsection (e), except that in the case of a 
                payment other than a required installment, the 
                due date shall be the date such payment is 
                required to be made under this section.
                  [(B) Controlled group.--The term ``controlled 
                group'' means any group treated as a single 
                employer under subsections (b), (c), (m), and 
                (o) of section 414 of the Internal Revenue Code 
                of 1986.
  [(g) Qualified Transfers to Health Benefit Accounts.--For 
purposes of this section, in the case of a qualified transfer 
(as defined in section 420 of the Internal Revenue Code of 
1986)--
          [(1) any assets transferred in a plan year on or 
        before the valuation date for such year (and any income 
        allocable thereto) shall, for purposes of subsection 
        (c)(7), be treated as assets in the plan as of the 
        valuation date for such year, and
          [(2) the plan shall be treated as having a net 
        experience loss under subsection (b)(2)(B)(iv) in an 
        amount equal to the amount of such transfer (reduced by 
        any amounts transferred back to the plan under section 
        420(c)(1)(B) of such Code) and for which amortization 
        charges begin for the first plan year after the plan 
        year in which such transfer occurs, except that such 
        subsection shall be applied to such amount by 
        substituting ``10 plan years'' for ``5 plan years''.
  [(h) Cross Reference.--For alternative amortization method 
for certain multiemployer plans see section 1013(d) of this 
Act.
                [variance from minimum funding standard
  [Sec. 303. (a) If an employer, or in the case of a 
multiemployer plan, 10 percent or more of the number of 
employers contributing to or under the plan are unable to 
satisfy the minimum funding standard for a plan year without 
temporary substantial business hardship (substantial business 
hardship in the case of a multiemployer plan) and if 
application of the standard would be adverse to the interests 
of plan participants in the aggregate, the Secretary of the 
Treasury may waive the requirements of section 302(a) for such 
year with respect to all or any portion of the minimum funding 
standard other than the portion thereof determined under 
section 302(b)(2)(C). 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. The interest rate 
used for purposes of computing the amortization charge 
described in subsection (b)(2)(C) for any plan year shall be--
          [(1) in the case of a plan other than a multiemployer 
        plan, the greater of (A) 150 percent of the Federal 
        mid-term rate (as in effect under section 1274 of the 
        Internal Revenue Code of 1986 for the 1st month of such 
        plan year), or (B) the rate of interest used under the 
        plan in determining costs (including adjustments under 
        section 302(b)(5)(B)), and
          [(2) in the case of a multiemployer plan, the rate 
        determined under section 6621(b) of such Code.
  [(b) For purposes of this part, 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--
          [(1) the employer is operating at an economic loss,
          [(2) there is substantial unemployment or 
        underemployment in the trade or business and in the 
        industry concerned,
          [(3) the sales and profits of the industry concerned 
        are depressed or declining, and
          [(4) it is reasonable to expect that the plan will be 
        continued only if the waiver is granted.
  [(c) For purposes of this part, the term ``waived funding 
deficiency'' means the portion of the minimum funding standard 
(determined without regard to subsection (b)(3)(C) of section 
302) for a plan year waived by the Secretary of the Treasury 
and not satisfied by employer contributions.
  [(d) Special Rules.--
          [(1) Application must be submitted before date 2\1/2\ 
        months after close of year.--In the case of a plan 
        other than a multiemployer plan, no waiver may be 
        granted under this section 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.
          [(2) Special rule if employer is member of controlled 
        group.--
                  [(A) In general.--In the case of a plan other 
                than a multiemployer plan, if an employer is a 
                member of a controlled group, the temporary 
                substantial business hardship requirements of 
                subsection (a) shall be treated as met only if 
                such requirements are met--
                          [(i) with respect to such employer, 
                        and
                          [(ii) with respect to the controlled 
                        group of which such employer is a 
                        member (determined by treating all 
                        members of such group as a single 
                        employer).
                The Secretary of the Treasury may provide that 
                an analysis of a trade or business or industry 
                of a member need not be conducted if the 
                Secretary of the Treasury determines such 
                analysis is not necessary because the taking 
                into account of such member would not 
                significantly affect the determination under 
                this subsection.
                  [(B) Controlled group.--For purposes of 
                subparagraph (A), 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.
  [(e)(1) The Secretary of the Treasury shall, before granting 
a waiver under this section, 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 employee organization representing employees 
covered by the affected plan, and each affected party (as 
defined in section 4001(a)(21)) other than the Pension Benefit 
Guaranty Corporation. 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.
  [(2) The Secretary of the Treasury shall consider any 
relevant information provided by a person to whom notice was 
given under paragraph (1).
  [(f) Cross Reference.--For corresponding duties of the 
Secretary of the Treasury with regard to implementation of the 
Internal Revenue Code of 1986, see section 412(d) of such Code.
                   [extension of amortization periods
  [Sec. 304. (a) The period of years required to amortize any 
unfunded liability (described in any clause of subsection 
(b)(2)(B) of section 302) of any plan may be extended by the 
Secretary for a period of time (not in excess of 10 years) if 
he determines that such extension would carry out the purposes 
of this Act and would provide adequate protection for 
participants under the plan and their beneficiaries and if he 
determines that the failure to permit such extension would--
          [(1) result in--
                  [(A) a substantial risk to the voluntary 
                continuation of the plan, or
                  [(B) a substantial curtailment of pension 
                benefit levels or employee compensation, and
          [(2) be adverse to the interests of plan participants 
        in the aggregate.
In the case of a plan other than a multiemployer plan, the 
interest rate applicable for any plan year under any 
arrangement entered into by the Secretary in connection with an 
extension granted under this subsection shall be the greater of 
(A) 150 percent of the Federal mid-term rate (as in effect 
under section 1274 of the Internal Revenue Code of 1986 for the 
1st month of such plan year), or (B) the rate of interest used 
under the plan in determining costs. In the case of a 
multiemployer plan, such rate shall be the rate determined 
under section 6621(b) of such Code.
  [(b)(1) No amendment of the plan which increases the 
liabilities of the plan by reason of any increase in benefits, 
any change in the accrual of benefits, or any change in the 
rate at which benefits become nonforfeitable under the plan 
shall be adopted if a waiver under section 303(a) or an 
extension of time under subsection (a) of this section is in 
effect with respect to the plan, or if a plan amendment 
described in section 302(c)(8) 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.
  [(2) Paragraph (1) shall not apply to any plan amendment 
which--
          [(A) the Secretary determines to be reasonable and 
        which provides for only de minimis increases in the 
        liabilities of the plan,
          [(B) only repeals an amendment described in section 
        302(c)(8), or
          [(C) is required as a condition of qualification 
        under part I of subchapter D, of chapter 1, of the 
        Internal Revenue Code of 1986.
  [(c)(1) The Secretary of the Treasury shall, before granting 
an extension under this section, require each applicant to 
provide evidence satisfactory to such Secretary that the 
applicant has provided notice of the filing of the application 
for such extension to each employee organization representing 
employees covered by the affected plan.
  [(2) The Secretary of the Treasury shall consider any 
relevant information provided by a person to whom notice was 
given under paragraph (1).

                 [alternative minimum funding standard
  [Sec. 305. (a) A plan which uses a funding method that 
requires contributions in all years not less than those 
required under the entry age normal funding method may maintain 
an alternative minimum funding standard account for any plan 
year. Such account shall be credited and charged solely as 
provided in this section.
  [(b) For a plan year the alternative minimum funding standard 
accounts shall be--
          [(1) charged with the sum of--
                  [(A) the lesser of normal cost under the 
                funding method used under the plan or normal 
                cost determined under the unit credit method,
                  [(B) the excess, if any, of the present value 
                of accrued benefits under the plan over the 
                fair market value of the assets, and
                  [(C) an amount equal to the excess, if any, 
                of credits to the alternative minimum funding 
                standard account for all prior plan years over 
                charges to such account for all such years, and
          [(2) credited with the amount considered contributed 
        by the employer to or under the plan (within the 
        meaning of section 302(c)(10)) for the plan year.
  [(c) The alternative minimum funding standard account (and 
items therein) shall be charged or credited with interest in 
the manner provided under section 302(b)(5) with respect to the 
funding standard account.
  [security for waivers of minimum funding standard and extensions of 
                          amortization period
  [Sec. 306. (a) Security May Be Required.--
          [(1) In general.--Except as provided in subsection 
        (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 
        section 303 or an extension under section 304.
          [(2) Special rules.--Any security provided under 
        paragraph (1) 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 subsection (c), the 
Secretary of the Treasury shall, before granting or modifying a 
waiver under section 303 or an extension under section 304 with 
respect to a plan described in subsection (a)(1)--
          [(1) provide the Pension Benefit Guaranty Corporation 
        with--
                  [(A) notice of the completed application for 
                any waiver, extension, or modification, and
                  [(B) an opportunity to comment on such 
                application within 30 days after receipt of 
                such notice, and
          [(2) consider--
                  [(A) any comments of the Corporation under 
                paragraph (1)(B), and
                  [(B) any views of any employee organization 
                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 subsection 
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 and Extensions.--
          [(1) In general.--The preceding provisions of this 
        section shall not apply to any plan with respect to 
        which the sum of--
                  [(A) the outstanding balance of the 
                accumulated funding deficiencies (within the 
                meaning of section 302(a)(2) of this Act and 
                section 412(a) of the Internal Revenue Code of 
                1986) of the plan,
                  [(B) the outstanding balance of the amount of 
                waived funding deficiencies of the plan waived 
                under section 303 of this Act or section 412(d) 
                of such Code, and
                  [(C) the outstanding balance of the amount of 
                decreases in the minimum funding standard 
                allowed under section 304 of this Act or 
                section 412(e) of such Code,
        is less than $1,000,000.
          [(2) Accumulated funding deficiencies.--For purposes 
        of paragraph (1)(A), accumulated funding deficiencies 
        shall include any increase in such amount which would 
        result if all applications for waivers of the minimum 
        funding standard under section 303 of this Act or 
        section 412(d) of the Internal Revenue Code of 1986 and 
        for extensions of the amortization period under section 
        304 of this Act or section 412(e) of such Code which 
        are pending with respect to such plan were denied.
    [security required upon adoption of plan amendment resulting in 
                        significant underfunding
  [Sec. 307. (a) In General.--If--
          [(1) a defined benefit plan (other than a 
        multiemployer plan) to which the requirements of 
        section 302 apply adopts an amendment an effect of 
        which is to increase current liability under the plan 
        for a plan year, and
          [(2) the funded current liability percentage of the 
        plan for the plan year in which the amendment takes 
        effect is less than 60 percent, including the amount of 
        the unfunded current liability under the plan 
        attributable to the plan amendment,
the contributing sponsor (or any member of the controlled group 
of the contributing sponsor) shall provide security to the 
plan.
  [(b) Form of Security.--The security required under 
subsection (a) shall consist of--
          [(1) a bond issued by a corporate surety company that 
        is an acceptable surety for purposes of section 412,
          [(2) cash, or United States obligations which mature 
        in 3 years or less, held in escrow by a bank or similar 
        financial institution, or
          [(3) such other form of security as is satisfactory 
        to the Secretary of the Treasury and the parties 
        involved.
  [(c) Amount of Security.--The security shall be in an amount 
equal to the excess of--
          [(1) the lesser of--
                  [(A) the amount of additional plan assets 
                which would be necessary to increase the funded 
                current liability percentage under the plan to 
                60 percent, including the amount of the 
                unfunded current liability under the plan 
                attributable to the plan amendment, or
                  [(B) the amount of the increase in current 
                liability under the plan attributable to the 
                plan amendment and any other plan amendments 
                adopted after December 22, 1987, and before 
                such plan amendment, over
          [(2) $10,000,000.
  [(d) Release of Security.--The security shall be released 
(and any amounts thereunder shall be refunded together with any 
interest accrued thereon) at the end of the first plan year 
which ends after the provision of the security and for which 
the funded current liability percentage under the plan is not 
less than 60 percent. The Secretary of the Treasury may 
prescribe regulations for partial releases of the security by 
reason of increases in the funded current liability percentage.
  [(e) Notice.--A contributing sponsor which is required to 
provide security under subsection (a) shall notify the Pension 
Benefit Guaranty Corporation within 30 days after the amendment 
requiring such security takes effect. Such notice shall contain 
such information as the Corporation may require.
  [(f) Definitions.--For purposes of this section, the terms 
``current liability'', ``funded current liability percentage'', 
and ``unfunded current liability'' shall have the meanings 
given such terms by section 302(d), except that in computing 
unfunded current liability there shall not be taken into 
account any unamortized portion of the unfunded old liability 
amount as of the close of the plan year.
                            [effective dates
  [Sec. 308. (a) Except as otherwise provided in this section, 
this part shall apply in the case of plan years beginning after 
the date of the enactment of this Act.
  [(b) Except as otherwise provided in subsections (c) and (d), 
in the case of a plan in existence on January 1, 1974, this 
part shall apply in the case of plan years beginning after 
December 31, 1975.
  [(c)(1) In the case of a plan maintained on January 1, 1974, 
pursuant to one or more agreements which the Secretary finds to 
be collective bargaining agreements between employee 
representatives and one or more employers, this part shall 
apply only with respect to plan years beginning after the 
earlier of the date specified in subparagraph (A) or (B) of 
section 211(c)(1).
  [(2) This subsection shall apply with respect to a plan if 
(and only if) the application of this subsection results in a 
later effective date for this part than the effective date 
required by subsection (b).
  [(d) In the case of a plan the administrator of which elects 
under section 1017(d) of this Act to have the provisions of the 
Internal Revenue Code of 1954 relating to participation, 
vesting, funding, and form of benefit to apply to a plan year 
and to all subsequent plan years, this part shall apply to plan 
years beginning on the earlier of the first plan year to which 
such election applies or the first plan year determined under 
subsections (a), (b), and (c) of this section.
  [(e) In the case of a plan maintained by a labor organization 
which is exempt from tax under section 501(c)(5) of the 
Internal Revenue Code 1954 exclusively for the benefit of its 
employees and their beneficiaries, this part shall be applied 
by substituting for the term ``December 31, 1975'' in 
subsection (b), the earlier of--
          [(1) the date on which the second convention of such 
        labor organization held after the date of the enactment 
        of this Act ends, or
          [(2) December 31, 1980,
but in no event shall a date earlier than the later of December 
31, 1975, or the date determined under subsection (c) be 
substituted.
  [(f) The preceding provisions of this section shall not apply 
with respect to amendments made to this part in provisions 
enacted after the date of the enactment of this Act.]

                       MINIMUM FUNDING STANDARDS

  Sec. 302. (a) Requirement to Meet Minimum Funding Standard.--
          (1) In general.--A plan to which this part applies 
        shall satisfy the minimum funding standard applicable 
        to the plan for any plan year.
          (2) Minimum funding standard.--For purposes of 
        paragraph (1), a plan shall be treated as satisfying 
        the minimum funding standard for a plan year if--
                  (A) in the case of a defined benefit plan 
                which is a single-employer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which, in the aggregate, are not 
                less than the minimum required contribution 
                determined under section 303 for the plan for 
                the plan year,
                  (B) in the case of a money purchase plan 
                which is a single-employer plan, the employer 
                makes contributions to or under the plan for 
                the plan year which are required under the 
                terms of the plan, and
                  (C) in the case of a multiemployer plan, the 
                employers make contributions to or under the 
                plan for any plan year which, in the aggregate, 
                are sufficient to ensure that the plan does not 
                have an accumulated funding deficiency under 
                section 304 as of the end of the plan year.
  (b) Liability for Contributions.--
          (1) In general.--Except as provided in paragraph (2), 
        the amount of any contribution required by this section 
        (including any required installments under 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.--In the case of a single-employer 
        plan, if the employer referred to in paragraph (1) is a 
        member of a controlled group, each member of such group 
        shall be jointly and severally liable for payment of 
        such contributions.
  (c) Variance From Minimum Funding Standards.--
          (1) Waiver in case of business hardship.--
                  (A) In general.--If--
                          (i) an employer is (or in the case of 
                        a multiemployer plan, 10 percent or 
                        more of the number of employers 
                        contributing to or under the plan 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
                          (ii) consider--
                                  (I) any comments of the 
                                Corporation under clause 
                                (i)(II), and
                                  (II) any views of any 
                                employee organization (within 
                                the meaning of section 3(4)) 
                                representing participants in 
                                the plan which are submitted in 
                                writing to the Secretary of the 
                                Treasury in connection with 
                                such application.
                Information provided to the Corporation under 
                this subparagraph shall be considered tax 
                return information and subject to the 
                safeguarding and reporting requirements of 
                section 6103(p) of the Internal Revenue Code of 
                1986.
                  (C) Exception for certain waivers.--
                          (i) In general.--The preceding 
                        provisions of this paragraph shall not 
                        apply to any plan with respect to which 
                        the sum of--
                                  (I) the aggregate unpaid 
                                minimum required contribution 
                                for the plan year and all 
                                preceding plan years, and
                                  (II) the present value of all 
                                waiver amortization 
                                installments determined for the 
                                plan year and succeeding plan 
                                years under section 303(e)(2),
                        is less than $1,000,000.
                          (ii) Treatment of waivers for which 
                        applications are pending.--The amount 
                        described in clause (i)(I) shall 
                        include any increase in such amount 
                        which would result if all applications 
                        for waivers of the minimum funding 
                        standard under this subsection which 
                        are pending with respect to such plan 
                        were denied.
                          (iii) Unpaid minimum required 
                        contribution.--For purposes of this 
                        subparagraph--
                                  (I) In general.--The term 
                                ``unpaid minimum required 
                                contribution'' means, with 
                                respect to any plan year, any 
                                minimum required contribution 
                                under section 303 for the plan 
                                year which is not paid on or 
                                before the due date (as 
                                determined under section 
                                303(j)(1)) for the plan year.
                                  (II) Ordering rule.--For 
                                purposes of subclause (I), any 
                                payment to or under a plan for 
                                any plan year shall be 
                                allocated first to unpaid 
                                minimum required contributions 
                                for all preceding plan years on 
                                a first-in, first-out basis and 
                                then to the minimum required 
                                contribution under section 303 
                                for the plan year.
          (5) Special rules for single-employer plans.--
                  (A) Application must be submitted before date 
                2\1/2\ months after close of year.--In the case 
                of a single-employer plan, no waiver may be 
                granted under this subsection with respect to 
                any plan for any plan year unless an 
                application therefor is submitted to the 
                Secretary of the Treasury not later than the 
                15th day of the 3rd month beginning after the 
                close of such plan year.
                  (B) Special rule if employer is member of 
                controlled group.--In the case of a single-
                employer plan, if an employer is a member of a 
                controlled group, the temporary substantial 
                business hardship requirements of paragraph (1) 
                shall be treated as met only if such 
                requirements are met--
                          (i) with respect to such employer, 
                        and
                          (ii) with respect to the controlled 
                        group of which such employer is a 
                        member (determined by treating all 
                        members of such group as a single 
                        employer).
                The Secretary of the Treasury may provide that 
                an analysis of a trade or business or industry 
                of a member need not be conducted if the 
                Secretary of the Treasury determines such 
                analysis is not necessary because the taking 
                into account of such member would not 
                significantly affect the determination under 
                this paragraph.
          (6) Advance notice.--
                  (A) In general.--The Secretary of the 
                Treasury shall, before granting a waiver under 
                this subsection, require each applicant to 
                provide evidence satisfactory to such Secretary 
                that the applicant has provided notice of the 
                filing of the application for such waiver to 
                each affected party (as defined in section 
                4001(a)(21)). Such notice shall include a 
                description of the extent to which the plan is 
                funded for benefits which are guaranteed under 
                title IV and for benefit liabilities.
                  (B) Consideration of relevant information.--
                The Secretary of the Treasury shall consider 
                any relevant information provided by a person 
                to whom notice was given under subparagraph 
                (A).
          (7) Restriction on plan amendments.--
                  (A) In general.--No amendment of a plan which 
                increases the liabilities of the plan by reason 
                of any increase in benefits, any change in the 
                accrual of benefits, or any change in the rate 
                at which benefits become nonforfeitable under 
                the plan shall be adopted if a waiver under 
                this subsection or an extension of time under 
                section 304(d) is in effect with respect to the 
                plan, or if a plan amendment described in 
                subsection (d)(2) has been made at any time in 
                the preceding 24 months. If a plan is amended 
                in violation of the preceding sentence, any 
                such waiver, or extension of time, shall not 
                apply to any plan year ending on or after the 
                date on which such amendment is adopted.
                  (B) Exception.--Paragraph (1) 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 substantial business hardship 
        (as determined under subsection (c)(2)) 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.

 MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
                                 PLANS

  Sec. 303. (a) Minimum Required Contribution.--For purposes of 
this section and section 302(a)(2)(A), except as provided in 
subsection (f), the term ``minimum required contribution'' 
means, with respect to any plan year of a defined benefit plan 
which is a single employer plan--
          (1) in any case in which the value of plan assets of 
        the plan (as reduced under subsection (f)(4)) is less 
        than the funding target of the plan for the plan year, 
        the sum of--
                  (A) the target normal cost of the plan for 
                the plan year,
                  (B) the shortfall amortization charge (if 
                any) for the plan for the plan year determined 
                under subsection (c), and
                  (C) the waiver amortization charge (if any) 
                for the plan for the plan year as determined 
                under subsection (e);
          (2) in any case in which the value of plan assets of 
        the plan (as reduced under subsection (f)(4)) exceeds 
        the funding target of the plan for the plan year, the 
        target normal cost of the plan for the plan year 
        reduced by such excess; or
          (3) in any other case, the target normal cost of the 
        plan for the plan year.
  (b) Target Normal Cost.--For purposes of this section, except 
as provided in subsection (i)(2) with respect to plans in at-
risk status, the term ``target normal cost'' means, for any 
plan year, the present value of all benefits which are expected 
to accrue or to be earned under the plan during the plan year. 
For purposes of this subsection, if any benefit attributable to 
services performed in a preceding plan year is increased by 
reason of any increase in compensation during the current plan 
year, the increase in such benefit shall be treated as having 
accrued during the current plan year.
  (c) Shortfall Amortization Charge.--
          (1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan 
        year is the aggregate total of the shortfall 
        amortization installments for such plan year with 
        respect to the shortfall amortization bases for such 
        plan year and each of the 6 preceding plan years.
          (2) Shortfall amortization installment.--The plan 
        sponsor shall determine, with respect to the shortfall 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such shortfall 
        amortization base, in level annual installments over a 
        period of 7 plan years beginning with such plan year. 
        For purposes of paragraph (1), the annual installment 
        of such amortization for each plan year in such 7-plan-
        year period is the shortfall amortization installment 
        for such plan year with respect to such shortfall 
        amortization base. In determining any shortfall 
        amortization installment under this paragraph, the plan 
        sponsor shall use the segment rates determined under 
        subparagraph (C) of subsection (h)(2), applied under 
        rules similar to the rules of subparagraph (B) of 
        subsection (h)(2).
          (3) Shortfall amortization base.--For purposes of 
        this section, the shortfall amortization base of a plan 
        for a plan year is the excess (if any) of--
                  (A) the funding shortfall of such plan for 
                such plan year, over
                  (B) the sum of--
                          (i) 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, for such plan year and 
                        the 5 succeeding plan years, which have 
                        been determined with respect to the 
                        shortfall amortization bases of the 
                        plan for each of the 6 plan years 
                        preceding such plan year, and
                          (ii) the present value (as so 
                        determined) of the aggregate total of 
                        the waiver amortization installments 
                        for such plan year and the 5 succeeding 
                        plan years, which have been determined 
                        with respect to the waiver amortization 
                        bases of the plan for each of the 5 
                        plan years preceding such plan year.
                In any case in which the value of plan assets 
                of the plan (as reduced under subsection 
                (f)(4)) 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.
          (4) Funding shortfall.--
                  (A) In general.--For purposes of this 
                section, except as provided in subparagraph 
                (B), the funding shortfall of a plan for any 
                plan year is the excess (if any) of--
                          (i) the funding target of the plan 
                        for the plan year, over
                          (ii) the value of plan assets of the 
                        plan (as reduced under subsection 
                        (f)(4)) for the plan year which are 
                        held by the plan on the valuation date.
                  (B) Transition rule.--
                          (i) In general.--For purposes of 
                        paragraph (3), in the case of a non-
                        defecit reduction plan, subparagraph 
                        (A) shall be applied to plan years 
                        beginning after 2005 and before 2010 by 
                        substituting for the amount described 
                        in subparagraph (A)(i) the applicable 
                        percentage of the funding target of the 
                        plan for the plan year determined under 
                        the following table:



                                                                 The
                                                             applicable
  In the case of a plan year beginning in calendar year:     percentage
                                                                 is:


2006......................................................    92 percent
2007......................................................    94 percent
2008......................................................    96 percent
2009......................................................   98 percent.

                          (ii) Non-deficit reduction plan.--For 
                        purposes of clause (i), the term ``non-
                        deficit reduction plan'' means any 
                        plan--
                                  (I) to which this part (as in 
                                effect on the day before the 
                                date of the enactment of the 
                                Pension Protection Act of 2005) 
                                applied for the plan year 
                                beginning in 2005, and
                                  (II) to which section 302(d) 
                                (as so in effect) did not apply 
                                for such plan year.
          (5) Early deemed amortization upon attainment of 
        funding target.--In any case in which the funding 
        shortfall of a plan for a plan year is zero, for 
        purposes of determining the shortfall amortization 
        charge for such plan year and succeeding plan years, 
        the shortfall amortization bases for all preceding plan 
        years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced 
        to zero.
  (d) Rules Relating to Funding Target.--For purposes of this 
section--
          (1) Funding target.--Except as provided in subsection 
        (i)(1) with respect to plans in at-risk status, the 
        funding target of a plan for a plan year is the present 
        value of all liabilities to participants and their 
        beneficiaries under the plan for 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)), 
                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.--The plan 
        sponsor shall determine, with respect to the waiver 
        amortization base of the plan for any plan year, the 
        amounts necessary to amortize such waiver amortization 
        base, in level annual installments over a period of 5 
        plan years beginning with the succeeding plan year. For 
        purposes of paragraph (1), the annual installment of 
        such amortization for each plan year in such 5-plan 
        year period is the waiver amortization installment for 
        such plan year with respect to such waiver amortization 
        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 base for all preceding plan years 
        shall be reduced to zero.
  (f) Reduction of Minimum Required Contribution by Pre-Funding 
Balance and Funding Standard Carryover Balance.--
          (1) Election to maintain balances.--
                  (A) Pre-funding balance.--The plan sponsor of 
                a single-employer plan may elect to maintain a 
                pre-funding 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 2005.--A plan is 
                        described in this clause if the plan--
                                  (I) was in effect for a plan 
                                year beginning in 2005, 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 pre-funding 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 pre-funding 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 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 pre-funding 
                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)), 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.
          (4) Effect of balances on amounts treated as value of 
        plan assets.--In the case of any plan maintaining a 
        pre-funding 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 
                charge and waiver amortization charge.--For 
                purposes of subsection (c)(3), the value of 
                plan assets is deemed to be such amount, 
                reduced by the amount of the pre-funding 
                balance, but only if an election under 
                paragraph (2) applying any portion of the pre-
                funding 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.--For purposes of subsections (a), 
                (c)(4)(A)(ii), and (d)(2)(A), the value of plan 
                assets is deemed to be such amount, reduced by 
                the amount of the pre-funding balance and the 
                funding standard carryover balance.
                  (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 pre-funding 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 pre-
                funding 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 pre-funding 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 pre-funding balance.
          (6) Pre-funding balance.--
                  (A) In general.--A pre-funding 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).
                  (B) Increases.--As of the valuation date for 
                each plan year beginning after 2006, the pre-
                funding 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 (increased by interest on any 
                        portion of such minimum required 
                        contribution remaining unpaid as of the 
                        valuation date for the current plan 
                        year, at the effective interest rate 
                        for the plan for the preceding plan 
                        year, for the period beginning with the 
                        first day of such preceding plan year 
                        and ending on the date that payment of 
                        such portion is made).
                  (C) Decreases.--As of the valuation date for 
                each plan year after 2006, the pre-funding 
                balance of a plan shall be decreased (but not 
                below zero) by the sum of--
                          (i) 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) 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.--As of the valuation date for 
                each plan year after 2006, the funding standard 
                carryover balance of a plan shall be decreased 
                (but not below zero) by the sum of--
                          (i) 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) any reduction in such balance 
                        elected under paragraph (5).
          (8) Adjustments to balances.--In determining the pre-
        funding balance or the funding standard carryover 
        balance of a plan as of the valuation date (before 
        applying any increase or decrease under paragraph (6) 
        or (7)), the plan sponsor shall, in accordance with 
        regulations which shall be prescribed by the Secretary 
        of the Treasury, adjust such balance so as to reflect 
        the rate of net gain or loss (determined, 
        notwithstanding subsection (g)(3), on the basis of fair 
        market value) experienced by all plan assets for the 
        period beginning with the valuation date for the 
        preceding plan year and ending with the date preceding 
        the valuation date for the current plan year, properly 
        taking 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 
                500 or fewer participants, the plan may 
                designate any day during the plan year as its 
                valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans (other 
                than multiemployer plans) maintained by the 
                same employer (or any member of such employer's 
                controlled group) shall be treated as 1 plan, 
                but only employees of such employer or member 
                shall be taken into account.
                  (C) Application of certain rules in 
                determination of plan size.--For purposes of 
                this paragraph--
                          (i) Plans not in existence in 
                        preceding year.--In the case of the 
                        first plan year of any plan, 
                        subparagraph (B) shall apply to such 
                        plan by taking into account the number 
                        of participants that the plan is 
                        reasonably expected to have on days 
                        during such first plan year.
                          (ii) Predecessors.--Any reference in 
                        subparagraph (B) to an employer shall 
                        include a reference to any predecessor 
                        of such employer.
          (3) Authorization of use of actuarial value.--For 
        purposes of this section, the value of plan assets 
        shall be determined on the basis of any reasonable 
        actuarial method of valuation which takes into account 
        fair market value and which is permitted under 
        regulations prescribed by the Secretary of the 
        Treasury, except that--
                  (A) any such method providing for averaging 
                of fair market values may not provide for 
                averaging of such values over more than the 3 
                most recent plan years (including the current 
                plan year), and
                  (B) any such method may 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.
          (4) Accounting for contribution receipts.--For 
        purposes of this section--
                  (A) Contributions for prior plan years taken 
                into account.--For purposes of determining the 
                value of plan assets for any current plan year, 
                in any case in which a contribution properly 
                allocable to amounts owed for a preceding plan 
                year is made on or after the valuation date of 
                the plan for such current plan year, such 
                contribution shall be taken into account, 
                except that any such contribution made during 
                any such current plan year beginning after 2006 
                shall be taken into account only in an amount 
                equal to its present value (determined using 
                the effective rate of interest for the plan for 
                the preceding plan year) as of the valuation 
                date of the plan for such current plan year.
                  (B) Contributions for current plan year 
                disregarded.--For purposes of determining the 
                value of plan assets for any current plan year, 
                contributions which are properly allocable to 
                amounts owed for such plan year shall not be 
                taken into account, and, in the case of any 
                such contribution made before the valuation 
                date of the plan for such plan year, such value 
                of plan assets shall be reduced for interest on 
                such amount determined using the effective rate 
                of interest of the plan for the preceding plan 
                year for the period beginning when such payment 
                was made and ending on the valuation date of 
                the plan.
          (5) Accounting for plan liabilities.--For purposes of 
        this section--
                  (A) Liabilities taken into account for 
                current plan year.--In determining the value of 
                liabilities under a plan for a plan year, 
                liabilities shall be taken into account to the 
                extent attributable to benefits (including any 
                early retirement or similar benefit) accrued or 
                earned as of the beginning of the plan year.
                  (B) Accruals during current plan year 
                disregarded.--For purposes of subparagraph (A), 
                benefits accrued or earned during such plan 
                year shall not be taken into account, 
                irrespective of whether the valuation date of 
                the plan for such plan year is later than the 
                first day of such plan year.
  (h) Actuarial Assumptions and Methods.--
          (1) In general.--Subject to this subsection, the 
        determination of any present value or other computation 
        under this section shall be made on the basis of 
        actuarial assumptions and methods--
                  (A) each of which is reasonable (taking into 
                account the experience of the plan and 
                reasonable expectations), and
                  (B) which, in combination, offer the 
                actuary's best estimate of anticipated 
                experience under the plan.
          (2) Interest rates.--
                  (A) Effective interest rate.--For purposes of 
                this section, the term ``effective interest 
                rate'' means, with respect to any plan for any 
                plan year, the single rate of interest which, 
                if used to determine the present value of the 
                plan's liabilities referred to in subsection 
                (d)(1), would result in an amount equal to the 
                funding target of the plan for such plan year.
                  (B) Interest rates for determining funding 
                target.--For purposes of determining the 
                funding target of a plan for any plan year, the 
                interest rate used in determining the present 
                value of the liabilities of the plan shall be--
                          (i) in the case of liabilities 
                        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 liabilities 
                        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 liabilities 
                        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 a 3-year weighted average of 
                        yields on investment grade corporate 
                        bonds with varying maturities.
                          (ii) 3-year weighted average.--The 
                        term ``3-year weighted average'' means 
                        an average determined by using a 
                        methodology under which the most recent 
                        year is weighted 50 percent, the year 
                        preceding such year is weighted 35 
                        percent, and the second year preceding 
                        such year is weighted 15 percent.
                  (E) Applicable month.--For purposes of this 
                paragraph, the term ``applicable month'' means, 
                with respect to any plan for any plan year, the 
                month which includes the valuation date of such 
                plan for such plan year or, at the election of 
                the plan administrator, any of the 4 months 
                which precede such month. Any election made 
                under this subparagraph shall apply to the plan 
                year for which the election is made and all 
                succeeding plan years, unless the election is 
                revoked with the consent of the Secretary of 
                the Treasury.
                  (F) Publication requirements.--The Secretary 
                of the Treasury shall publish for each month 
                the corporate bond yield curve (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.
                  (G) Transition rule.--
                          (i) In general.--Notwithstanding the 
                        preceding provisions of this paragraph, 
                        for plan years beginning in 2006 or 
                        2007, 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 2005), 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 2006 and 66\2/3\ 
                        percent for plan years beginning in 
                        2007.
          (3) Mortality table.--
                  (A) In general.--Except as provided in 
                subparagraph (C), the mortality table used in 
                determining any present value or making any 
                computation under this section shall be the RP-
                2000 Combined Mortality Table, using Scale AA, 
                as published by the Society of Actuaries, as in 
                effect on the date of the enactment of the 
                Pension Protection Act of 2005 and as revised 
                from time to time under subparagraph (B).
                  (B) Periodic revision.--The Secretary of the 
                Treasury shall (at least every 10 years) make 
                revisions in any table in effect under 
                subparagraph (A) to reflect the actual 
                experience of pension plans and projected 
                trends in such experience.
                  (C) Substitute mortality table.--
                          (i) In general.--Upon request by the 
                        plan sponsor and approval by the 
                        Secretary of the Treasury for a period 
                        not to exceed 10 years, a mortality 
                        table which meets the requirements of 
                        clause (ii) shall be used in 
                        determining any present value or making 
                        any computation under this section. A 
                        mortality table described in this 
                        clause shall cease to be in effect if 
                        the plan actuary determines at any time 
                        that such table does not meet the 
                        requirements of subclauses (I) and (II) 
                        of clause (ii).
                          (ii) Requirements.--A mortality table 
                        meets the requirements of this clause 
                        if the Secretary of the Treasury 
                        determines that--
                                  (I) such table reflects the 
                                actual experience of the 
                                pension plan and projected 
                                trends in such experience, and
                                  (II) such table is 
                                significantly different from 
                                the table described in 
                                subparagraph (A).
                          (iii) Deadline for disposition of 
                        application.--Any mortality table 
                        submitted to the Secretary of the 
                        Treasury for approval under this 
                        subparagraph shall be treated as in 
                        effect for the succeeding plan year 
                        unless the Secretary of the Treasury, 
                        during the 180-day period beginning on 
                        the date of such submission, 
                        disapproves of such table and provides 
                        the reasons that such table fails to 
                        meet the requirements of clause (ii).
                  (D) Transition rule.--Under regulations of 
                the Secretary of the Treasury, any difference 
                in assumptions as set forth in the mortality 
                table specified in subparagraph (A) and 
                assumptions as set forth in the mortality table 
                described in section 302(d)(7)(C)(ii) (as in 
                effect for plan years beginning in 2005) shall 
                be phased in ratably over the first period of 5 
                plan years beginning in or after 2006 so as to 
                be fully effective for the fifth plan year.
          (4) Probability of benefit payments in the form of 
        lump sums or other optional forms.--For purposes of 
        determining any present value or making any computation 
        under this section, there shall be taken into account--
                  (A) the probability that future benefit 
                payments under the plan will be made in the 
                form of optional forms of benefits provided 
                under the plan (including lump sum 
                distributions, determined on the basis of the 
                plan's experience and other related 
                assumptions), and
                  (B) any difference in the present value of 
                such future benefit payments resulting from the 
                use of actuarial assumptions, in determining 
                benefit payments in any such optional form of 
                benefits, which are different from those 
                specified in this subsection.
          (5) Approval of large changes in actuarial 
        assumptions.--
                  (A) In general.--No actuarial assumption used 
                to determine the funding target for a single-
                employer plan to which this paragraph applies 
                may be changed without the approval of the 
                Secretary of the Treasury.
                  (B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                          (i) the aggregate unfunded 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
                          (ii) the change in assumptions 
                        (determined after taking into account 
                        any changes in interest rate and 
                        mortality table) results in a decrease 
                        in the funding shortfall of the plan 
                        for the current plan year that exceeds 
                        $50,000,000, or that exceeds $5,000,000 
                        and that is 5 percent or more of the 
                        funding target of the plan before such 
                        change.
  (i) Special Rules for at-Risk Plans.--
          (1) Funding target for plans in at-risk status.--
                  (A) In general.--In any case in which a plan 
                is in at-risk status for a plan year, the 
                funding target of the plan for the plan year is 
                the sum of--
                          (i) the present value of all 
                        liabilities to participants and their 
                        beneficiaries under the plan for the 
                        plan year, as determined by using, in 
                        addition to the actuarial assumptions 
                        described in subsection (g), the 
                        supplemental actuarial assumptions 
                        described in subparagraph (B), plus
                          (ii) a loading factor determined 
                        under subparagraph (C).
                  (B) Supplemental actuarial assumptions.--The 
                actuarial assumptions used in determining the 
                valuation of the funding target shall include, 
                in addition to the actuarial assumptions 
                described in subsection (h), an assumption that 
                all participants will elect benefits at such 
                times and in such forms as will result in the 
                highest present value of liabilities under 
                subparagraph (A)(i).
                  (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 any case 
        in which a plan is in at-risk status for a plan year, 
        the target normal cost of the plan for such plan year 
        shall be 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 under the 
                actuarial assumptions used under paragraph (1), 
                plus
                  (B) the loading factor under paragraph 
                (1)(C), excluding the portion of the loading 
                factor described in paragraph (1)(C)(i).
          (3) Determination of at-risk status.--For purposes of 
        this subsection, a plan is in ``at-risk status'' for a 
        plan year if the funding target attainment percentage 
        of the plan for the preceding plan year was less than 
        60 percent.
          (4) 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 
                this paragraph, the ``transition percentage'' 
                for a plan year is the product derived by 
                multiplying--
                          (i) 20 percent, by
                          (ii) the number of plan years during 
                        the period described in subparagraph 
                        (A).
  (j) Payment of Minimum Required Contributions.--
          (1) In general.--For purposes of this section, the 
        due date for any payment of any minimum required 
        contribution for any plan year shall be 8\1/2\ months 
        after the close of the plan year.
          (2) Interest.--Any payment required under paragraph 
        (1) for a plan year made after the valuation date for 
        such plan year shall be increased by interest, for the 
        period from the valuation date to the payment date, at 
        the effective rate of interest for the plan for such 
        plan year.
          (3) Accelerated quarterly contribution schedule for 
        underfunded plans.--
                  (A) Interest penalty for failure to meet 
                accelerated quarterly payment schedule.--In any 
                case in which the plan has a funding shortfall 
                for the preceding plan year, if the required 
                installment is not paid in full, then the 
                minimum required contribution for the plan year 
                (as increased under paragraph (2)) shall be 
                further increased by an amount equal to the 
                interest on the amount of the underpayment for 
                the period of the underpayment, using an 
                interest rate equal to the excess of--
                          (i) 175 percent of the Federal mid-
                        term rate (as in effect under section 
                        1274 of the Internal Revenue Code of 
                        1986 for the 1st month of such plan 
                        year), over
                          (ii) the effective rate of interest 
                        for the plan for the plan year.
                  (B) Amount of underpayment, period of 
                underpayment.--For purposes of subparagraph 
                (A)--
                          (i) Amount.--The amount of the 
                        underpayment shall be the excess of--
                                  (I) the required installment, 
                                over
                                  (II) the amount (if any) of 
                                the installment contributed to 
                                or under the plan on or before 
                                the due date for the 
                                installment.
                          (ii) Period of underpayment.--The 
                        period for which any interest is 
                        charged under this paragraph with 
                        respect to any portion of the 
                        underpayment shall run from the due 
                        date for the installment to the date on 
                        which such portion is contributed to or 
                        under the plan.
                          (iii) Order of crediting 
                        contributions.--For purposes of clause 
                        (i)(II), contributions shall be 
                        credited against unpaid required 
                        installments in the order in which such 
                        installments are required to be paid.
                  (C) Number of required installments; due 
                dates.--For purposes of this paragraph--
                          (i) Payable in 4 installments.--There 
                        shall be 4 required installments for 
                        each plan year.
                          (ii) Time for payment of 
                        installments.--The due dates for 
                        required installments are set forth in 
                        the following table:




In the case of the following        The due date is:
 required installment:
  1st.............................  April 15
  2nd.............................  July 15
  3rd.............................  October 15
  4th.............................  January 15 of the following year


                  (D) Amount of required installment.--For 
                purposes of this paragraph--
                          (i) In general.--The amount of any 
                        required installment shall be 25 
                        percent of the required annual payment.
                          (ii) Required annual payment.--For 
                        purposes of clause (i), the term 
                        ``required annual payment'' means the 
                        lesser of--
                                  (I) 90 percent of the minimum 
                                required contribution (without 
                                regard to any waiver under 
                                section 302(c)) to the plan for 
                                the plan year under this 
                                section, or
                                  (II) in the case of a plan 
                                year beginning after 2006, 100 
                                percent of the minimum required 
                                contribution (without regard to 
                                any waiver under section 
                                302(c)) to the plan for the 
                                preceding plan year.
                        Subclause (II) shall not apply if the 
                        preceding plan year referred to in such 
                        clause was not a year of 12 months.
                  (E) Fiscal years and short years.--
                          (i) Fiscal years.--In applying this 
                        paragraph to a plan year beginning on 
                        any date other than January 1, there 
                        shall be substituted for the months 
                        specified in this paragraph, the months 
                        which correspond thereto.
                          (ii) Short plan year.--This 
                        subparagraph shall be applied to plan 
                        years of less than 12 months in 
                        accordance with regulations prescribed 
                        by the Secretary of the Treasury.
          (4) Liquidity requirement in connection with 
        quarterly contributions.--
                  (A) In general.--A plan to which this 
                paragraph applies shall be treated as failing