Loading...
HomeMy WebLinkAboutDocumentation_Pension General_Tab 16_02/16/2006Betty Laur m; Gwen Carlisle [gcarlisle@tequesta.org] ~t; Tuesday, November 29, 2005 11:36 AM o; Betty Laur Subject: FW: Senate passes pension legislation with Provisions Affecting Public Sector Maybe as an fyi at the next regular meetings. -----Original Message----- From: JoAnn Forsythe [mailto:jforsythe@tequesta.org] Sent: Tuesday, November 29, 2005 9:01 AM To: Patrice Monaco; Gwen Carlisle Subject: Senate passes pension legislation with Provisions Affecting Public Sector Gwen, I just received this information today and thought you might want to pass it on t'o the Pension Board Trustees. Senate Passes Pension Legislation with Provisions Affecting Public Sector On November 16, the Senate passed the Pension Security and Transparency Act (S. 1783) http://www.estoregfoa.org/StaticContent/staticpages/51783.pdf The legislation largely affects private sector defined benefit (DB) plans; however, it does include the following provisions important to the public sector: ~ows all state and local governments to maintain 401(k) arrangements beginning January 1, 2006. Makes an exception from the 10 percent early withdrawal tax for any distributions from a governmental DB plan to a qualified public safety employee who separates from service on or after age 50. Clarifies the ability of public employees to purchase service credit in their DB plan. Provides relief from minimum required distribution regulations. Allows DB plans to accept after-tax rollovers, provided the plans separately track the after-tax and pre-tax funds. The House expects to consider its pension bill, H.R. 2830, after the Thanksgiving recess. Again, although largely affecting private sector DB plans, the House bill makes permanent the pension provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), some of which are important to the public sector. It also includes a provision allowing public safety officers who retire or become disabled to make tax-free distributions of up to $5,000 annually from governmental pension plans to purchase health or long-term care insurance. However, H.R. 2830 does not currently include the additional pension provisions important to the public sector that are found in the Senate-passed bill. After the House approves its legislation, negotiators from both bodies will have to work to reach a consensus on final legislation. JoAnn R. Forsythe, CPA nance Director llage of Tequesta 1 109th CONGRESS 1st Session S. 1783 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. IN THE SENATE OF THE UNITED STATES September 28, 2005 Mr. GRASSLEY (for himself, Mr. ENZI, Mr. KENNEDY, and Mr. BAUCUS) introduced the following bill; which was read twice and ordered to be placed on the calendar A BILL '. amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue '.Code of 1986 to reform the pension funding rules, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. (a) Short Title- This Act may be cited as the ~ Pension Security and Transparency Act of 2005'. (b} Table of Contents- The table of contents for this Act is as follows: Sec. 1. Short title and table of contents. TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER 'DEFINED BENEFIT PLANS AND RELATED PROVISIONS Subtitle A--Amendments to Employee Retirement Income Security Act of 1974 • ~ Sec. 101. Minimum funding standards. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 /18/2005 Search Results -THOMAS (Library of Congress) • 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. Page 2 of 21 Sec. 105. Special rules for multiple employer plans of certain cooperatives. Subtitle B--Amendments to Internal Revenue Code of 1986 Sec. 111. Modifications of the minimum funding standards. Sec. 112. Funding rules applicable to single-employer pension plans. Sec. 113. Benefit limitations under single-employer plans. Sec. 114. Increase in deduction limit for single-employer plans. Sec. 115. Technical and conforming amendments. Subtitle C--Interest Rate Assumptions and Deductible Amounts for 2006 Sec. 121. Extension of replacement of 30-year Treasury rates. • Sec. 122. Deduction limits for plan contributions. Sec. 123. Updating deduction rules for combination of plans. TITLE II--FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS Subtitle A--Funding Rules Part I--Amendments to Employee Retirement Income Security Act of 1974 Sec. 201. Funding rules for multiemployer defined benefit plans. Sec. 202. Additional funding rules for multiemployer plans in endangered or critical status. Sec. 203. Measures to forestall insolvency of multiemployer plans. Part II--Amendments to Internal Revenue Code of 1986 Sec. 211. Funding rules for multiemployer defined benefit plans. • 11/18/2005 http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 Search Results -THOMAS (Library of Congress) Page 3 of 21 • Sec. 212. Additional funding rules for multiemployer plans in endangered or critical status. Part III--Sunset of Funding Rules Sec. 216. Sunset of funding rules. Subtitle B--Deduction and Related Provisions Sec. 221. Deduction limits for multiemployer plans. Sec. 222. Transfer of excess pension assets to multiemployer health plan. TITLE III--INTEREST RATE ASSUMPTIONS Sec. 301. Interest rate assumption for determination of lump sum distributions. Sec. 302. Interest rate assumption for applying benefit limitations to lump sum distributions. Sec. 303. Restrictions on funding of nonqualified deferred compensation plans by employers maintaining underfunded or terminated single-employer plans. S Sec. 304. Modification of pension funding requirements for plans subject to current transition rule. TITLE IV--IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS Sec. 401. Increases in PBGC premiums. Sec. 402. Authority to enter alternative funding agreements to prevent plan terminations: Sec. 403. Special funding rules for plans maintained by commercial airlines that are amended to cease future benefit accruals. Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits. Sec. 405. Rules relating to bankruptcy of employer. Sec. 406. PBGC premiums for new plans of small employers. Sec. 407. PBGC premiums for small and new plans. Sec. 408. Authorization for PBGC to pay interest on premium overpayment refunds. • http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 /18/2005 Search Results -THOMAS (Library of Congress) Page 4 of 21 • Sec. 409. Rules for substantial owner benefits in terminated plans. Sec. 410. Acceleration of PBGC computation of benefits attributable to recoveries from employers. TITLE V--DISCLOSURE Sec. 501. Defined benefit plan funding notice. Sec. 502. Access to multiemployer pension plan information. Sec. 503. Additional annual reporting requirements. Sec. 504. Timing of annual reporting requirements. Sec. 505. Section 4010 filings with the PBGC. Sec. 506. Disclosure of termination information to plan participants. Sec. 507. Study and report by Government Accountability Office. TITLE VI--TREATMENT OF CASH BALANCE AND OTHER HYBRID DEFINED ~ENEFIT PENSION PLANS Sec. 601. Prospective application of age discrimination, conversion, and present value assumption rules. Sec. 602. Regulations relating to mergers and acquisitions. TITLE VII--DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS UNDER DEFINED CONTRIBUTION PLANS Sec. 701. Defined contribution plans required to provide employees with freedom to invest their plan assets. Sec. 702. Notice of freedom to divest employer securities or real property. Sec. 703. Periodic pension benefit statements. Sec. 704. Notice to participants or beneficiaries of blackout periods. Sec. 705. Allowance of, and credit for, additional IRA payments in certain bankruptcy cases. ITLE VIII--INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 5 of 21 • Sec. 801. Defined contribution plans required to provide adequate investment education to participants. Sec. 802. Independent investment advice provided to plan participants. Sec. 803. Treatment of qualified retirement planning services. Sec. 804. Administrative provisions. TITLE IX--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION Sec. 901. Regulations on time and order of issuance of domestic relations orders. Sec. 902. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee. Sec. 903. Extension of tier II railroad retirement benefits to surviving former spouses pursuant to divorce agreements. Sec. 904. Requirement for additional survivor annuity option. TITLE X--IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION RULES • Sec. 1001. Clarifications regarding purchase of permissive service credit. Sec. 1002. Allow rollover of after-tax amounts in annuity contracts. Sec. 1003. Clarification of minimum distribution rules for governmental plans. Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees. Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions. Sec. 1006. Faster vesting of employer nonelective contributions. Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAs. Sec. 1008. Elimination of higher penalty on certain simple plan distributions. Sec. 1009. Simple plan portability. Sec. 1010. Eligibility for participation in retirement plans. • Sec. 1011. Transfers to. the PBGC. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 /18/2005 Search Results -THOMAS (Library of Congress) Page 6 of 21 • Sec. 1012. Missing participants. TITLE XI--ADMINISTRATIVE PROVISIONS Sec. 1101. Employee plans compliance resolution system. Sec. 1102. Extension to all governmental plans of moratorium on application of certain nondiscrimination rules applicable to State and local plans. Sec. 1103. Notice and consent period regarding distributions Sec. 1104. Reporting simplification. Sec. 1105. Voluntary early retirement incentive and employment retention plans maintained by local educational agencies and other entities. Sec. 1106. No reduction in unemployment compensation as a result of pension rollovers. Sec. 1107. Withholding on distributions from governmental section 457 plans. Sec. 1108. Clarification of treatment of defined benefit plans of Indian Tribal • governments. Sec. 1109. Treatment of defined benefit plan as governmental plan. TITLE XII--UNITED STATES TAX COURT MODERNIZATION Sec. 1200. Amendment of 1986 Code. Sec. 1201. Annuities for survivors of Tax Court judges who are assassinated. Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor annuities. Sec. 1203. Life insurance coverage for Tax Court judges. Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65 or over. Sec. 1205. Modification of timing of lump-sum payment of judges' accrued annual leave. Sec. 1206. Participation of Tax Court judges in the Thrift Savings Plan. Sec. 1207. Exemption of teaching compensation of retired judges from limitation on outside earned income. •. Sec. 1208. General provisions relating to Magistrate Judges of the Tax Court. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109WEoQL9 11/18/2005 Search Results -THOMAS (Library of Congress) Page 7 of 21 • Sec. 1209. Annuities to surviving spouses and dependent children of Magistrate Judges of the Tax Court. Sec. 1210. Retirement and annuity program. Sec. 1211. Incumbent Magistrate Judges of the Tax Court. Sec. 1212. Provisions for recall. Sec. 1213. Effective date. TITLE XIII--OTHER PROVISIONS Subtitle A--Administrative Provision Sec. 1301. Provisions relating to plan amendments. Sec. 1302. Authority to the Secretary of Labor, Secretary of the Treasury, and the Pension Benefit Guaranty Corporation to postpone certain deadlines. Subtitle B--Governmental Pension Plan Equalization Sec. 1311. Definition of governmental plan. Sec. 1312. Extension to all governmental plans of current moratorium on application of certain nondiscrimination rules applicable to State and local plans. Sec. 1313. Clarification that Tribal governments are subject to the same defined benefit plan rules and regulations applied to State and other local governments, their police and firefighters. Sec. 1314. Effective date. Subtitle C--Miscellaneous Provisions Sec. 1321. Transfer of excess funds from black lung disability trusts to United Mine Workers of America Combined Benefit Fund. Sec. 1322. Treatment of death benefits from corporate-owned life insurance. TITLE I--FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS Subtitle A--Amendments to Employee Retirement Income Security Act of 1974 ~EC. 101. MINIMUM FUNDING STANDARDS... http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 8 of 21 • (a) Repeal of Existing Funding Rules- Sections 302 through 308 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082 through 1086) are repealed. (b) New Minimum Funding Standards- Part 3 of subtitle B of title I of such Act (as amended by subsection (a)) is amended by inserting after section 301 the following new section: MINIMUM FUNDING STANDARDS 'SEC. 302. (a) Requirement to Meet Minimum Funding Standard- ' (1) IN GENERAL- A plan to which this part applies shall satisfy the minimum funding standard applicable to the plan for any plan year. ' (2) MINIMUM- FUNDING STANDARD- For purposes of paragraph (1), a plan shall be treated as satisfying the minimum funding standard for a plan year if-- ' (A) in the case of a defined benefit plan which is asingle-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 asingle-employer plan, the employer makes contributions to or under the plan for the plan year which are required under the terms of the plan, and ' (C) in the case of a multiemployer plan, the employers make contributions to or under the plan for any plan year which, in the aggregate, are sufficient to ensure that the plan does not have an accumulated funding deficiency under section 304 as of the end of the plan year. ' (b) Liability for Contributions- ' (1) IN GENERAL- Except as provided in paragraph (2), the amount of any contribution required by this section (including any required installments under section 303(j)) shall be paid by the employer responsible for making contributions to or under the plan. (2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER MEMBER OF CONTROLLED GROUP- If the employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for payment of such contributions. ' (c) Variance From Minimum Funding Standards- • ' (1) WAIVER IN CASE OF BUSINESS HARDSHIP- http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 9 of 2 I • ' (A) IN GENERAL- If-- (i) an employer is (or in the case of a multiemployer plan, 10 percent or more of the number of employers contributing to or under the plan are) unable to satisfy the minimum funding standard for a plan year without temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan), and ' (ii) application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary of the Treasury may, subject to subparagraph (C), waive the requirements of subsection (a) for such year with respect to all or any portion of the minimum funding standard. The Secretary of the Treasury shall not waive the minimum funding standard with respect to a plan for more than 3 of any 15 (5 of any 15 in the case of a multiemployer plan) consecutive plan years. ' (B) EFFECTS OF WAIVER- If a waiver is granted under subparagraph (A) for any plan year-- ' (i) in the case of asingle-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, http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 10 of 21 • 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 asingle-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. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 11 of 21 Information provided to the Corporation under this subparagraph shall be • considered tax return information and subject to the safeguarding and reporting requirements of section 6103(p) of the Internal Revenue Code of 1986. (C) EXCEPTION FOR CERTAIN WAIVERS- (i) IN GENERAL- The preceding provisions of this paragraph shall not apply to any plan with respect to which the sum of-- (I) the. aggregate unpaid minimum required contributions for the plan year and all preceding plan years, and (II) the present value of all waiver amortization installments determined for the plan year and succeeding plan years under section 303(e)(2), is less than $1,000,000. (ii) TREATMENT OF WAIVERS FOR WHICH APPLICATIONS ARE PENDING- The amount described in clause (i)(I) shall include any increase in such amount which would result if all applications for waivers of the minimum funding standard under this subsection which are pending with respect to such plan were denied. • ~ (iii) UNPAID MINIMUM REQUIRED CONTRIBUTION- For purposes of this subparagraph-- (I) IN GENERAL- The term ~ unpaid minimum required contribution' means, with respect to any plan year, any minimum required contribution under section 303 for the plan year which is not paid on or before the due date (as determined under section 303(j)(1)) for the plan year. (II) ORDERING RULE- For purposes of subclause (I), any payment to or under a plan for any plan year shall be allocated first to unpaid minimum required contributions for all preceding plan years on a first-in, first-out basis and then to the minimum required contribution under section 303 for the plan year. (5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS- (A) APPLICATION MUST BE SUBMITTED BEFORE DATE 2 1/2 MONTHS AFTER CLOSE OF YEAR- In the case of asingle-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. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109WEoQL9 11/18/2005 Search Results -THOMAS (Library of Congress) Page 12 of 21 • ~ (B) SPECIAL RULE IF EMPLOYER IS MEMBER OF CONTROLLED GROUP- In the case of asingle-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)) and in the case of a multiemployer plan, to each employer required to contribute to the plan under subsection (b)(1). Such notice shall include a description of the extent to which the plan is funded for benefits which are guaranteed under title IV and for benefit liabilities. (B) CONSIDERATION OF RELEVANT INFORMATION- The Secretary of the Treasury shall consider any relevant information provided by a person to whom notice was given under subparagraph (A). (7) RESTRICTION ON PLAN AMENDMENTS- (A) IN GENERAL- No amendment of a plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver under this subsection or an extension of time under section 304(d) is in effect with respect to the plan, or if a plan amendment described in subsection (d)(2) has been made at any time in the preceding 24 months. If a plan is amended in violation of the preceding sentence, any such waiver, or extension of time, shall not apply to any plan year ending on or after the date on which such amendment is adopted. (B) EXCEPTION- Subparagraph (A) shall not apply to any plan amendment • which-- http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109WEoQL9 11/18/2005 Search Results -THOMAS (Library of Congress) Page 13 of 21 • ~ (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.'. http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/--c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 14 of 21 • (c) Clerical Amendment- The table of contents in section 1 of such Act is amended by striking the items relating to sections 302 through 308 and inserting the following new item: Sec. 302. Minimum funding standards.'. (d) Effective Date- The amendments made by this section shall apply to plan years beginning after 2006. SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION PLANS. (a) In General- Part 3 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (as amended by section 101 of this Act) is amended by inserting after section 302 the following new section: MINIMUM FUNDING STANDARDS FOR SINGLE- EMPLOYER DEFINED BENEFIT PENSION PLANS 'SEC. 303. (a) Minimum Required Contribution- For purposes of this section and section 302(a)(2)(A), except as provided in subsection (f), the term ~ minimum required contribution' means, with respect to any plan year of a defined benefit plan which is a • single employer plan-- (1) in any case in which the value of plan assets of the plan (as reduced under subsection (f)(4)) is less than the funding target of the plan for the plan year, the sum of-- (A) the target normal cost of the plan for the plan year, (B) the shortfall amortization charge (if any) for the plan for the plan year determined under subsection (c), and (C) the waiver amortization charge (if any) for the plan for the plan year as determined under subsection (e); or (2) in any case in which the value of plan assets of the plan (as reduced under subsection (f)(4)) equals or exceeds the funding target of the plan for the plan year, the target normal cost of the plan for the plan year reduced (but not below zero) by any such excess. (b) Target Normal Cost- For purposes of this section, except as provided in subsection (i)(Z) 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 http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 15 of 21 • attributable to services performed in a preceding plan year is increased by reason of any increase in compensation during the current plan year, the increase in such benefit shall be treated as having accrued during the current plan year. (c) Shortfall Amortization Charge- (1) IN GENERAL- For purposes of this section, the shortfall amortization charge for a plan for any plan year is the aggregate total of the shortfall amortization installments for such plan year with respect to the shortfall amortization bases for such plan year and each of the 6 preceding plan years. (2) SHORTFALL AMORTIZATION INSTALLMENT- For purposes of paragraph (1)-- (A) DETERMINATION- The plan sponsor shall determine the amounts necessary to amortize the shortfall amortization base of the plan for any plan year in level annual installments over the 7-plan-year period beginning with such plan year. (B) SHORTFALL INSTALLMENT- The shortfall amortization installment for any plan year in the 7-plan-year period under subparagraph (A) with respect to any shortfall amortization base is the annual installment determined under subparagraph (A) for that year for that base. (C) SEGMENT RATES- In determining any shortfall amortization installment under this paragraph, the plan sponsor shall use the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2). (3) SHORTFALL AMORTIZATION BASE- For purposes of this section, the shortfall amortization base of a plan for a plan year is the excess (if any) of-- (A) the funding shortfall of such plan for such plan year, over (B) the present value (determined using the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of the shortfall amortization installments and waiver amortization installments which have been determined for such plan year and any succeeding plan year with respect to the shortfall amortization bases and waiver amortization bases of the plan for any plan year preceding such plan year. (4) FUNDING SHORTFALL- (A) IN GENERAL- For purposes of this section, except as provided in subparagraph {B), the funding shortfall of a plan for any plan year is the excess • (if any) of-- http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 / 18/2005 Search Results -THOMAS (Library of Congress) Page 16 of 21 ' (i) the funding target of the plan for the plan year, over • ' (ii) the value of plan assets of the plan (as reduced under subsection (f) (4)) for the plan year which are held by the plan on the valuation date. ' (B) TRANSITION RULE FOR AMORTIZATION OF FUNDING SHORTFALL- ' (i) IN GENERAL- Solely for purposes of applying paragraph (3) in the case of plan years beginning after 2006 and before 2011, only the applicable percentage of the funding target shall be taken into account under paragraph (3)(A) in determining the funding shortfall for the plan year. ' (ii) APPLICABLE PERCENTAGE- For purposes of subparagraph (A)-- ' (I) IN GENERAL- Except as provided in clause (ii), the applicable percentage shall be 93 percent for plan years beginning in 2007, 96 percent for plan years beginning in 2008, and 100 percent for any succeeding plan year. ' (II) SMALL PLANS- In the case of a plan described in subsection (g) (2)(B), the applicable percentage shall be determined in accordance with the following table: • ' In the case of a plan year The applicable beginning in calendar year: percentage is-- 2007 92 2008 94 2009 96 2010 C7 http://thomas.loc.gov/cgi-bin query/C?c 109:./temp/~c 109WEoQL9 11 /18/2005 Search Results -THOMAS (Library of Congress) Page 17 of 21 • ~ (5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF FUNDING TARGET- In any case in which the funding shortfall of a plan fora plan year is zero, for purposes of determining the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero. (d) Rules Relating to Funding Target- For purposes of this section-- (1) FUNDING TARGET- Except as provided in subsection (i)(1) with respect to plans in at-risk status, the funding target of a plan for a plan year is the present value of all benefits accrued or earned under the plan as of the beginning of the plan year. (2) FUNDING TARGET ATTAINMENT PERCENTAGE- The ~ funding target attainment percentage' of a plan for a plan year is the ratio (expressed as a percentage) which- (A) the value of plan assets for the plan year, bears to (B) the funding target of the plan for the plan year (determined without regard to subsection (i)(1)}. (e) Waiver Amortization Charge- . ~ (1) DETERMINATION OF WAIVER AMORTIZATION CHARGE- The waiver amortization charge (if any) for a plan for any plan year is the aggregate total of the waiver amortization installments for such plan year with respect to the waiver amortization bases for each of the 5 preceding plan years. ' (2) WAIVER AMORTIZATION INSTALLMENT- For purposes of paragraph (1)-- (A) DETERMINATION- The plan sponsor shall determine the amounts necessary to amortize the waiver amortization base of the plan for any plan year in level annual installments over a period of 5 plan years beginning with the succeeding plan year. (B) WAIVER INSTALLMENT- The waiver amortization installment for any plan year in the 5-year period under subparagraph (A) with respect to any waiver amortization base is the annual installment determined under subparagraph (A) for that year for that base. (3) INTEREST RATE- In determining any waiver amortization installment under this subsection, the plan sponsor shall use the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2). • ~ (4) WAIVER AMORTIZATION BASE- The waiver amortization base of a plan for a http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 /18/2005 Search Results -THOMAS (Library of Congress) Page 18 of 21 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) Use of Prefunding Balances To Satisfy Minimum Required Contributions- ' (1) IN GENERAL- A plan sponsor may credit any amount of a plan's prefunding balance for a plan year against the minimum required contribution for the plan year and the amount of the contributions an employer is required to make under section 302(b) for the plan year shall be reduced by the amount so credited. Any such amount shall be credited on the first day of the plan year. ' (2) PREFUNDING BALANCE- ' (A) BEGINNING BALANCE- The beginning balance of a prefunding balance maintained by a plan shall be zero, except that if a plan was in effect for a plan year beginning in 2006 and had a positive balance in the funding standard account under section 302(b) (as in effect for such plan year) as of the end of • such plan year, the beginning balance for the plan for its first plan year beginning after 2006 shall be such positive balance. ' (B) INCREASES- ' (i) IN GENERAL- As of the first day of each plan year beginning after 2007, the prefunding balance of a plan shall be increased by the excess (if any) of-- ' (I) the aggregate amount of employer contributions to the plan for the preceding plan year, over ' (II) the minimum required contribution for the preceding plan year. ' (ii) ADJUSTMENTS FOR INTEREST- Any excess contributions under clause (i) shall be properly adjusted for interest accruing for the periods between the first day of the current plan year and the dates on which the excess contributions were made, determined by using the effective interest rate for the preceding plan year and by treating contributions as being first used to satisfy the minimum required contribution. ' (iii) CERTAIN CONTRIBUTIONS DISREGARDED- Any contribution which is • required to be made under section 206(g) in addition to any contribution required under this section shall not be taken into account for purposes of http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109WEoQL9 11 / 18/2005 Page 19 of 21 Search Results -THOMAS (Library of Congress) • clause (i). (C) DECREASES- As of the fi halldbe dec eased (butanot belowoero) by the prefunding balance of a plan s ainst the minimum amount of the balance credited under paragraph (1) ag required .contribution of the plan for the preceding plan year. ' (D) ADJUSTMENTS FOR INVESTMENT EXPERIENCE- In determining the prefunding balance of a plan as of the first day of the plan year, the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance to reflect the rate of net gain or loss with respect to plan assets for the preceding plan year. Notwithstanding subsection (g)(3), such rate of net gain or loss shall be determined on the basis of fair market value and shall properly take into account, in accordance with such regulations, all contributions, distributions, and other plan payments made during such period. ' (3) LIMITATION FOR UNDERFUNDED PLANS- ' (A) IN GENERAL- If the ratio (expressed as a percentage) for any plan year which-- ' (i) the value of plan assets for the preceding plan year, bears to • ' (ii) the funding target of the plan for the preceding plan year (determined without regard to subsection (i)(1)), is less than 80 percent, the preceding provisions of this subsection shall not apply unless employers liable for contributions to the plan under section 302(b) make contributions to the plan for the plan year in an aggr Ant cont~butiont less than the amount determined under subparagraph (B). y required by this subparagraph may not be reduced by any credit otherwise allowable under paragraph (1). ' (B) APPLICABLE AMOUNT- The amount determined under this subparagraph for any plan year is the greater of-- ' (i) the target normal cost of the plan for the plan year, or ' (ii) 25 percent of the minimum required contribution under subsection (a) for the plan year without regard to this subsection. ' (4) REDUCTION IN VALUE OF ASSETS- Solely for purposes of applying subsections (a) and (c)(4)(A)(ii) in determining the minimum required contribution under this section, the value of the plan assets otherwise determined without regard to this paragraph shall be reduced by the amount of the prefunding balance under this • subsection. 11 / 18/2005 http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 Search Results -THOMAS (Library of Congress) Page 20 of 21 ' (g) Valuation of Plan Assets and Liabilities- • 1 TIMING OF DETERMINATIONS- Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date of the plan for such plan year. ' (2) VALUATION DATE- For purposes of this section-- ' (A) IN GENERAL- Except as provided in subparagraph (B), the valuation date of a plan for any plan year shall be the first day of the plan year. ' (B) EXCEPTION FOR SMALL PLANS- If, on each day during the preceding plan year, a plan had 100 or fewer participants, the plan may designate any day during the plan year as its valuation date for such plan year and succeeding plan years. For purposes of this subparagraph, all defined benefit plans (other than multiemployer plans) maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only employees of such employer or member shall be taken into account. ' (C) APPLICATION OF CERTAIN RULES IN DETERMINATION OF PLAN SIZE- For purposes of this paragraph-- ' (i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of the • 1=trst plan year of any plan, subparagraph (B) shall apply to such plan by taking into account the number of participants that the plan is reasonably expected to have on days during such first plan year. ' (ii) PREDECESSORS- Any reference in subparagraph (B) to an employer shall include a reference to any predecessor of such employer. ' (3) DETERMINATION OF VALUE OF PLAN ASSETS- For purposes of this section-- ' (A) IN GENERAL- Except as provided in subparagraph (B), the value of plan assets shall be the fair market value of the assets. ' (B) AVERAGING ALLOWED- A plan may determine the value of plan assets on the basis of any reasonable actuarial method of valuation providing for the averaging of fair market values, but only if such method-- ' (i) is permitted under regulations prescribed by the Secretary of the Treasury, and ' (ii) does not provide for averaging of such values over more than the period beginning on the last day of the 12th month preceding the valuation date and ending on the valuation date (or a similar period in the case of a valuation date which is not the 1st day of a month). • http://thomas.loc.gov/cgi-bin/query/C?c109:./temp/~c109WEoQL9 11/18/2005 Search Results -THOMAS (Library of Congress) Page 21 of 21 (4) ACCOUNTING FOR CONTRIBUTION RECEIPTS- For purposes of determining the value of assets under paragraph (3)-- - (A) PRIOR YEAR CONTRIBUTIONS- If-- (i) an employer makes any contribution to the plan after the valuation date for the plan year in which the contribution is made, and (ii) the contribution is for a preceding plan year, the contribution shall be taken into account as an asset of the plan as of the valuation date, except that in the case of any plan year beginning after 2007, only the present value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the preceding sentence, present value shall be determined using the effective interest rate for the preceding plan year to which the contribution is properly allocable. (B) SPECIAL RULE FOR CURRENT YEAR CONTRIBUTIONS MADE BEFORE VALUATION DATE- If any contributions for any plan year are made to or under the plan during the plan year but before the valuation date for the plan year, the assets of the plan as of the valuation date shall not include-- • • http://thomas.loc.gov/cgi-bin/query/C?c 109:./temp/~c 109 WEoQL9 11 /18/2005