Internal Revenue Code:Sec. 430. Minimum Funding Standards for Single-Employer Defined Benefit Pension Plans
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TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter D - Deferred Compensation, Etc.
PART III - MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION PLANS.
Statute
Sec. 430. Minimum Funding Standards for Single-Employer Defined Benefit Pension Plans
(a) Minimum Required Contribution.--For purposes of this section
and section 412(a)(2)(A), except as provided in subsection (f), the term
`minimum required contribution' means, with respect to any plan year of
a defined benefit plan which is not a multiemployer plan--
(1) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) is less than the
funding target of the plan for the plan year, the sum of--
(A) the target normal cost of the plan for the
plan year,
(B) the shortfall amortization charge (if any) for
the plan for the plan year determined under subsection
(c), and
(C) the waiver amortization charge (if any) for
the plan for the plan year as determined under
subsection (e);
(2) in any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(B)) equals or exceeds
the funding target of the plan for the plan year, the target
normal cost of the plan for the plan year reduced (but not below
zero) by such excess.
(b) Target Normal Cost.--For purposes of this section, except as
provided in subsection (i)(2) with respect to plans in at-risk status,
the term `target normal cost' means, for any plan year, the present
value of all benefits which are expected to accrue
or to be earned under the plan during the plan year. For purposes of
this subsection, if any benefit attributable to services performed in a
preceding plan year is increased by reason of any increase in
compensation during the current plan year, the increase in such benefit
shall be treated as having accrued during the current plan year.
(c) Shortfall Amortization Charge.--
(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan year is
the aggregate total (not less than zero) of the shortfall
amortization installments for such plan year with respect to the
shortfall amortization bases for such plan year and each of the
6 preceding plan years.
(2) Shortfall amortization installment.--For purposes of
paragraph (1)--
(A) Determination.--The shortfall amortization
installments are the amounts necessary to amortize the
shortfall amortization base of the plan for any plan
year in level annual installments over the 7-plan-year
period beginning with such plan year.
(B) Shortfall installment.--The shortfall
amortization installment for any plan year in the 7-
plan-year period under subparagraph (A) with respect to
any shortfall amortization base is the annual
installment determined under subparagraph (A) for that
year for that base.
(C) Segment rates.--In determining any shortfall
amortization installment under this paragraph, the plan
sponsor shall use the segment rates determined under
subparagraph (C) of subsection (h)(2), applied under
rules similar to the rules of subparagraph (B) of
subsection (h)(2).
(3) Shortfall amortization base.--For purposes of this
section, the shortfall amortization base of a plan for a plan
year is--
(A) the funding shortfall of such plan for such
plan year, minus
(B) the present value (determined using the
segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the
rules of subparagraph (B) of subsection (h)(2)) of the
aggregate total of the shortfall amortization
installments and waiver amortization installments which
have been determined for such plan year and any
succeeding plan year with respect to the shortfall
amortization bases and waiver amortization bases of the
plan for any plan year preceding such plan year.
(4) Funding shortfall.--For purposes of this section, the
funding shortfall of a plan for any plan year is the excess (if
any) of--
(A) the funding target of the plan for the plan
year, over
(B) the value of plan assets of the plan (as
reduced under subsection (f)(4)(B)) for the plan year
which are held by the plan on the valuation date.
(5) Exemption from new shortfall amortization base.--
(A) In general.--In any case in which the value of
plan assets of the plan (as reduced under subsection
(f)(4)(A)) is equal to or greater than the funding
target of the plan for the plan year, the shortfall
amortization base of the plan for such plan year shall
be zero.
(B) Transition rule.--
(i) In general.--Except as provided in
clauses (iii) and (iv), in the case of plan years
beginning after 2007 and before 2011, only the
applicable percentage of the funding target shall
be taken into account under paragraph (3)(A) in
determining the funding shortfall for the plan
year for purposes of subparagraph (A).
(ii) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage shall
be determined in accordance with the following
table:
In the case The applicable............................
year
beginning inpercentage is.............................
year:
2008.................................... 92
2009.................................... 94
2010.................................... 96.
(iii) Limitation.--Clause (i) shall not
apply with respect to any plan year after 2008
unless the shortfall amortization base for each of
the preceding years beginning after 2007 was zero
(determined after application of this
subparagraph).
(iv) Transition relief not available for new
or deficit reduction plans.--Clause (i) shall not
apply to a plan--
(I) which was not in effect for a
plan year beginning in 2007, or
(II) which was in effect for a
plan year beginning in 2007 and which
was subject to section 412(l) (as in
effect for plan years beginning in
2007), determined after the application
of paragraphs (6) and (9) thereof.
(6) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the
shortfall amortization charge for such plan year and succeeding
plan years, the shortfall amortization bases for all preceding
plan years (and all shortfall amortization installments
determined with respect to such bases) shall be reduced to zero.
(d) Rules Relating to Funding Target.--For purposes of this
section--
(1) Funding target.--Except as provided in subsection
(i)(1) with respect to plans in at-risk status, the funding
target of a plan for a plan year is the present value of all
benefits accrued or earned under the plan as of the beginning of
the plan year.
(2) Funding target attainment percentage.--The `funding
target attainment percentage' of a plan for a plan year is the
ratio (expressed as a percentage) which--
(A) the value of plan assets for the plan year (as
reduced under subsection (f)(4)(B)), bears to
(B) the funding target of the plan for the plan
year (determined without regard to subsection (i)(1)).
(e) Waiver Amortization Charge.--
(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any plan year
is the aggregate total of the waiver amortization installments
for such plan year with respect to the waiver amortization bases
for each of the 5 preceding plan years.
(2) Waiver amortization installment.--For purposes of
paragraph (1)--
(A) Determination.--The waiver amortization
installments are the amounts necessary to amortize the
waiver amortization base of the plan for any plan year
in level annual installments over a period of 5 plan
years beginning with the succeeding plan year.
(B) Waiver installment.--The waiver amortization
installment for any plan year in the 5-year period under
subparagraph (A) with respect to any waiver amortization
base is the annual installment determined under
subparagraph (A) for that year for that base.
(3) Interest rate.--In determining any waiver amortization
installment under this subsection, the plan sponsor shall use
the segment rates determined under subparagraph (C) of
subsection (h)(2), applied under rules similar to the rules of
subparagraph (B) of subsection (h)(2).
(4) Waiver amortization base.--The waiver amortization
base of a plan for a plan year is the amount of the waived
funding deficiency (if any) for such plan year under section
412(c).
(5) Early deemed amortization upon attainment of funding
target.--In any case in which the funding shortfall of a plan
for a plan year is zero, for purposes of determining the waiver
amortization charge for such plan year and succeeding plan
years, the waiver amortization bases for all preceding plan
years (and all waiver amortization installments determined with
respect to such bases) shall be reduced to zero.
(f) Reduction of Minimum Required Contribution by Prefunding
Balance and Funding Standard Carryover Balance.--
(1) Election to maintain balances.--
(A) Prefunding balance.--The plan sponsor of a
defined benefit plan which is not a multiemployer plan
may elect to maintain a prefunding balance.
(B) Funding standard carryover balance.--
(i) In general.--In the case of a defined
benefit plan (other than a multiemployer plan)
described in clause (ii), the plan sponsor may
elect to maintain a funding standard carryover
balance, until such balance is reduced to zero.
(ii) Plans maintaining funding standard
account in 2007.--A plan is described in this
clause if the plan--
(I) was in effect for a plan year
beginning in 2007, and
(II) had a positive balance in the
funding standard account under section
412(b) as in effect for such plan year
and determined as of the end of such
plan year.
(2) Application of balances.--A prefunding balance and a
funding standard carryover balance maintained pursuant to this
paragraph--
(A) shall be available for crediting against the
minimum required contribution, pursuant to an election
under paragraph (3),
(B) shall be applied as a reduction in the amount
treated as the value of plan assets for purposes of this
section, to the extent provided in paragraph (4), and
(C) may be reduced at any time, pursuant to an
election under paragraph (5).
(3) Election to apply balances against minimum required
contribution.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), in the case of any plan year
in which the plan sponsor elects to credit against the
minimum required contribution for the current plan year
all or a portion of the prefunding balance or the
funding standard carryover balance for the current plan
year (not in excess of such minimum required
contribution), the minimum required contribution for the
plan year shall be reduced as of the first day of the
plan year by the amount so credited by the plan sponsor
as of the first day of the plan year. For purposes of
the preceding sentence, the minimum required
contribution shall be determined after taking into
account any waiver under section 412(c).
(B) Coordination with funding standard carryover
balance.--To the extent that any plan has a funding
standard carryover balance greater than zero, no amount
of the prefunding balance of such plan may be credited
under this paragraph in reducing the minimum required
contribution.
(C) Limitation for underfunded plans.--The
preceding provisions of this paragraph shall not apply
for any plan year if the ratio (expressed as a
percentage) which--
(i) the value of plan assets for the
preceding plan year (as reduced under paragraph
(4)(C)), bears to
(ii) the funding target of the plan for the
preceding plan year (determined without regard to
subsection (i)(1)),
is less than 80 percent. In the case of plan years
beginning in 2008, the ratio under this subparagraph may
be determined using such methods of estimation as the
Secretary may prescribe.
(4) Effect of balances on amounts treated as value of plan
assets.--In the case of any plan maintaining a prefunding
balance or a funding standard carryover balance pursuant to this
subsection, the amount treated as the value of plan assets shall
be deemed to be such amount, reduced as provided in the
following subparagraphs:
(A) Applicability of shortfall amortization
base.--For purposes of subsection (c)(5), the value of
plan assets is deemed to be such amount, reduced by the
amount of the prefunding balance, but only if an
election under
paragraph (2) applying any portion of the prefunding
balance in reducing the minimum required contribution is
in effect for the plan year.
(B) Determination of excess assets, funding
shortfall, and funding target attainment percentage.--
(i) In general.--For purposes of subsections
(a), (c)(4)(B), and (d)(2)(A), the value of plan
assets is deemed to be such amount, reduced by the
amount of the prefunding balance and the funding
standard carryover balance.
(ii) Special rule for certain binding
agreements with pbgc.--For purposes of subsection
(c)(4)(B), the value of plan assets shall not be
deemed to be reduced for a plan year by the amount
of the specified balance if, with respect to such
balance, there is in effect for a plan year a
binding written agreement with the Pension Benefit
Guaranty Corporation which provides that such
balance is not available to reduce the minimum
required contribution for the plan year. For
purposes of the preceding sentence, the term
`specified balance' means the prefunding balance
or the funding standard carryover balance, as the
case may be.
(C) Availability of balances in plan year for
crediting against minimum required contribution.--For
purposes of paragraph (3)(C)(i) of this subsection, the
value of plan assets is deemed to be such amount,
reduced by the amount of the prefunding balance.
(5) Election to reduce balance prior to determinations of
value of plan assets and crediting against minimum required
contribution.--
(A) In general.--The plan sponsor may elect to
reduce by any amount the balance of the prefunding
balance and the funding standard carryover balance for
any plan year (but not below zero). <<NOTE: Effective
date.>> Such reduction shall be effective prior to any
determination of the value of plan assets for such plan
year under this section and application of the balance
in reducing the minimum required contribution for such
plan for such plan year pursuant to an election under
paragraph (2).
(B) Coordination between prefunding balance and
funding standard carryover balance.--To the extent that
any plan has a funding standard carryover balance
greater than zero, no election may be made under
subparagraph (A) with respect to the prefunding balance.
(6) Prefunding balance.--
(A) In general.--A prefunding balance maintained
by a plan shall consist of a beginning balance of zero,
increased and decreased to the extent provided in
subparagraphs (B) and (C), and adjusted further as
provided in paragraph (8).
(B) Increases.--
(i) In general.--As of the <<NOTE: Effective
date.>> first day of each plan year beginning
after 2008, the prefunding balance of a plan shall
be increased by the amount elected by
the plan sponsor for the plan year. Such amount
shall not exceed the excess (if any) of--
(I) the aggregate total of
employer contributions to the plan for
the preceding plan year, over--
(II) the minimum required
contribution for such preceding plan
year.
(ii) Adjustments for interest.--Any excess
contributions under clause (i) shall be properly
adjusted for interest accruing for the periods
between the first day of the current plan year and
the dates on which the excess contributions were
made, determined by using the effective interest
rate for the preceding plan year and by treating
contributions as being first used to satisfy the
minimum required contribution.
(iii) Certain contributions necessary to
avoid benefit limitations disregarded.--The excess
described in clause (i) with respect to any
preceding plan year shall be reduced (but not
below zero) by the amount of contributions an
employer would be required to make under paragraph
(1), (2), or (4) of section 206(g) to avoid a
benefit limitation which would otherwise be
imposed under such paragraph for the preceding
plan year. Any contribution which may be taken
into account in satisfying the requirements of
more than 1 of such paragraphs shall be taken into
account only once for purposes of this clause.
(C) Decreases.--The prefunding balance of a plan
shall be decreased (but not below zero) by the sum of--
(i) as of the first day of each plan year
after 2008, the amount of such balance credited
under paragraph (2) (if any) in reducing the
minimum required contribution of the plan for the
preceding plan year, and
(ii) as of the time specified in paragraph
(5)(A), any reduction in such balance elected
under paragraph (5).
(7) Funding standard carryover balance.--
(A) In general.--A funding standard carryover
balance maintained by a plan shall consist of a
beginning balance determined under subparagraph (B),
decreased to the extent provided in subparagraph (C),
and adjusted further as provided in paragraph (8).
(B) Beginning balance.--The beginning balance of
the funding standard carryover balance shall be the
positive balance described in paragraph (1)(B)(ii)(II).
(C) Decreases.--The funding standard carryover
balance of a plan shall be decreased (but not below
zero) by--
(i) as of the first day of each plan year
after 2008, the amount of such balance credited
under paragraph (2) (if any) in reducing the
minimum required contribution of the plan for the
preceding plan year, and
(ii) as of the time specified in paragraph
(5)(A), any reduction in such balance elected
under paragraph (5).
(8) Adjustments for investment experience.--In determining
the prefunding balance or the funding standard carryover balance
of a plan as of the first day of the plan year, the plan sponsor
shall, in accordance with regulations prescribed by the
Secretary of the Treasury, adjust such balance to reflect the
rate of return on plan assets for the preceding plan year.
Notwithstanding subsection (g)(3), such rate of return shall be
determined on the basis of fair market value and shall properly
take into account, in accordance with such regulations, all
contributions, distributions, and other plan payments made
during such period.
(9) Elections.--Elections <<NOTE: Regulations.>> under
this subsection shall be made at such times, and in such form
and manner, as shall be prescribed in regulations of the
Secretary.
(g) Valuation of Plan Assets and Liabilities.--
(1) Timing of determinations.--Except
as <<NOTE: Deadline.>> 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 participants with respect to
such employer or member shall be taken into account.
(C) Application of certain rules in determination
of plan size.--For purposes of this paragraph--
(i) Plans not in existence in preceding
year.--In the case of the first plan year of any
plan, subparagraph (B) shall apply to such plan by
taking into account the number of participants
that the plan is reasonably expected to have on
days during such first plan year.
(ii) Predecessors.--Any reference in
subparagraph (B) to an employer shall include a
reference to any predecessor of such employer.
(3) Determination of value of plan assets.--For purposes
of this section--
(A) In general.--Except as provided in
subparagraph (B), the value of plan assets shall be the
fair market value of the assets.
(B) Averaging allowed.--A plan may determine the
value of plan assets on the basis of the averaging of
fair market values, but only if such method--
(i) is permitted under regulations
prescribed by the Secretary,
(ii) does not provide for averaging of such
values over more than the period beginning on the
last day of the 25th month preceding the month in
which the
valuation date occurs and ending on the valuation
date (or a similar period in the case of a
valuation date which is not the 1st day of a
month), and
(iii) does not result in a determination of
the value of plan assets which, at any time, is
lower than 90 percent or greater than 110 percent
of the fair market value of such assets at such
time.
Any such averaging shall be adjusted for contributions
and distributions (as provided by the Secretary).
(4) Accounting for contribution receipts.--For purposes of
determining the value of assets under paragraph (3)--
(A) Prior year contributions.--If--
(i) an employer makes any contribution to
the plan after the valuation date for the plan
year in which the contribution is made, and
(ii) the contribution is for a preceding
plan year,
the contribution shall be taken into account as an asset
of the plan as of the valuation date, except that in the
case of any plan year beginning after 2008, only the
present value (determined as of the valuation date) of
such contribution may be taken into account. For
purposes of the preceding sentence, present value shall
be determined using the effective interest rate for the
preceding plan year to which the contribution is
properly allocable.
(B) Special rule for current year contributions
made before valuation date.--If any contributions for
any plan year are made to or under the plan during the
plan year but before the valuation date for the plan
year, the assets of the plan as of the valuation date
shall not include--
(i) such contributions, and
(ii) interest on such contributions for the
period between the date of the contributions and
the valuation date, determined by using the
effective interest rate for the plan year.
(h) Actuarial Assumptions and Methods.--
(1) In general.--Subject to this subsection, the
determination of any present value or other computation under
this section shall be made on the basis of actuarial assumptions
and methods--
(A) each of which is reasonable (taking into
account the experience of the plan and reasonable
expectations), and
(B) which, in combination, offer the actuary's
best estimate of anticipated experience under the plan.
(2) Interest rates.--
(A) Effective interest rate.--For purposes of this
section, the term `effective interest rate' means, with
respect to any plan for any plan year, the single rate
of interest which, if used to determine the present
value of the plan's accrued or earned benefits referred
to in subsection (d)(1), would result in an amount equal
to the funding target of the plan for such plan year.
(B) Interest rates for determining funding
target.--For purposes of determining the funding target
of
a plan for any plan year, the interest rate used in
determining the present value of the liabilities of the
plan shall be--
(i) in the case of benefits reasonably
determined to be payable during the 5-year period
beginning on the first day of the plan year, the
first segment rate with respect to the applicable
month,
(ii) in the case of benefits reasonably
determined to be payable during the 15-year period
beginning at the end of the period described in
clause (i), the second segment rate with respect
to the applicable month, and
(iii) in the case of benefits reasonably
determined to be payable after the period
described in clause (ii), the third segment rate
with respect to the applicable month.
(C) Segment rates.--For purposes of this para-
graph--
(i) First segment rate.--The term `first
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary for such month on the
basis of the corporate bond yield curve for such
month, taking into account only that portion of
such yield curve which is based on bonds maturing
during the 5-year period commencing with such
month.
(ii) Second segment rate.--The term `second
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary for such month on the
basis of the corporate bond yield curve for such
month, taking into account only that portion of
such yield curve which is based on bonds maturing
during the 15-year period beginning at the end of
the period described in clause (i).
(iii) Third segment rate.--The term `third
segment rate' means, with respect to any month,
the single rate of interest which shall be
determined by the Secretary for such month on the
basis of the corporate bond yield curve for such
month, taking into account only that portion of
such yield curve which is based on bonds maturing
during periods beginning after the period
described in clause (ii).
(D) Corporate bond yield curve.--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
for such month and which reflects the average, for
the 24-month period ending with the month
preceding such month, of monthly yields on
investment grade corporate bonds with varying
maturities and that are in the top 3 quality
levels available.
(ii) Election to use yield curve.--Solely
for purposes of determining the minimum required
contribution under this section, the plan sponsor
may,
in lieu of the segment rates determined under
subparagraph (C), elect to use interest rates
under the corporate bond yield curve. For purposes
of the preceding sentence such curve shall be
determined without regard to the 24-month
averaging described in clause (i). Such election,
once made, may be revoked only with the consent of
the Secretary.
(E) Applicable month.--For purposes of this
paragraph, the term `applicable month' means, with
respect to any plan for any plan year, the month which
includes the valuation date of such plan for such plan
year or, at the election of the plan sponsor, any of the
4 months which precede such month. Any election made
under this subparagraph shall apply to the plan year for
which the election is made and all succeeding plan
years, unless the election is revoked with the consent
of the Secretary.
(F) Publication requirements.--The Secretary shall
publish for each month the corporate bond yield curve
(and the corporate bond yield curve reflecting the
modification described in section 417(e)(3)(D)(i)) for
such month and each of the rates determined under
subparagraph (B) for such month. The Secretary shall
also publish a description of the methodology used to
determine such yield curve and such rates which is
sufficiently detailed to enable plans to make reasonable
projections regarding the yield curve and such rates for
future months based on the plan's projection of future
interest rates.
(G) Transition rule.--
(i) In general.--Notwithstanding the
preceding provisions of this paragraph, for plan
years beginning in 2008 or 2009, the first,
second, or third segment rate for a plan with
respect to any month shall be equal to the sum
of--
(I) the product of such rate for
such month determined without regard to
this subparagraph, multiplied by the
applicable percentage, and
(II) the product of the rate
determined under the rules of section
412(b)(5)(B)(ii)(II) (as in effect for
plan years beginning in 2007),
multiplied by a percentage equal to 100
percent minus the applicable percentage.
(ii) Applicable percentage.--For purposes of
clause (i), the applicable percentage is 33\1/3\
percent for plan years beginning in 2008 and 66\2/
3\ percent for plan years beginning in 2009.
(iii) New plans ineligible.--Clause (i)
shall not apply to any plan if the first plan year
of the plan begins after December 31, 2007.
(iv) Election.--The plan sponsor may elect
not to have this subparagraph apply. Such
election, once made, may be revoked only with the
consent of the Secretary.
(3) Mortality tables.--
(A) In general.--Except
as <<NOTE: Regulations.>> provided in subparagraph (C)
or (D), the Secretary shall by regulation prescribe
mortality tables to be used in determining any present
value or making any computation under this section. Such
tables shall be based on the actual experience of pension plans
and projected trends in such experience. In prescribing
such tables, the Secretary shall take into account
results of available independent studies of mortality of
individuals covered by pension plans.
(B) Periodic revision.--The Secretary shall (at
least every 10 years) make revisions in any table in
effect under subparagraph (A) to reflect the actual
experience of pension plans and projected trends in such
experience.
(C) Substitute mortality table.--
(i) In general.--Upon request by the plan
sponsor and approval by the Secretary, a mortality
table which meets the requirements of clause (iii)
shall be used in determining any present value or
making any computation under this section during
the period of consecutive plan years (not to
exceed 10) specified in the request.
(ii) Early termination of period.--
Notwithstanding clause (i), a mortality table
described in clause (i) shall cease to be in
effect as of the earliest of--
(I) the date on which there is a
significant change in the participants
in the plan by reason of a plan spinoff
or merger or otherwise, or
(II) the date on which the plan
actuary determines that such table does
not meet the requirements of clause
(iii).
(iii) Requirements.--A mortality table meets
the requirements of this clause if--
(I) there is a sufficient number
of plan participants, and the pension
plans have been maintained for a
sufficient period of time, to have
credible information necessary for
purposes of subclause (II), and
(II) such table reflects the
actual experience of the pension plans
maintained by the sponsor and projected
trends in general mortality experience.
(iv) All plans in controlled group must use
separate table.--Except as provided by the
Secretary, a plan sponsor may not use a mortality
table under this subparagraph for any plan
maintained by the plan sponsor unless--
(I) a separate mortality table is
established and used under this
subparagraph for each other plan
maintained by the plan sponsor and if
the plan sponsor is a member of a
controlled group, each member of the
controlled group, and
(II) the requirements of clause
(iii) are met separately with respect to
the table so established for each such
plan, determined by only taking into
account the participants of such plan,
the time such plan has been in
existence, and the actual experience of
such plan.
(v) Deadline for submission and disposition
of application.--
(I) Submission.--The plan sponsor
shall submit a mortality table to the
Secretary for
approval under this subparagraph at
least 7 months before the 1st day of the
period described in clause (i).
(II) Disposition.--Any mortality
table submitted to the Secretary for
approval under this subparagraph shall
be treated as in effect as of the 1st
day of the period described in clause
(i) unless the Secretary, during the
180-day period beginning on the date of
such submission, disapproves of such
table and provides the reasons that such
table fails to meet the requirements of
clause (iii). <<NOTE: Extension.>> The
180-day period shall be extended upon
mutual agreement of the Secretary and
the plan sponsor.
(D) Separate mortality tables for the disabled.--
Notwithstanding subparagraph (A)--
(i) In general.--The Secretary shall
establish mortality tables which may be used (in
lieu of the tables under subparagraph (A)) under
this subsection for individuals who are entitled
to benefits under the plan on account of
disability. The Secretary shall establish separate
tables for individuals whose disabilities occur in
plan years beginning before January 1, 1995, and
for individuals whose disabilities occur in plan
years beginning on or after such date.
(ii) Special rule for disabilities occurring
after 1994.--In the case
of <<NOTE: Applicability.>> disabilities occurring
in plan years beginning after December 31, 1994,
the tables under clause (i) shall apply only with
respect to individuals described in such subclause
who are disabled within the meaning of title II of
the Social Security Act and the regulations
thereunder.
(iii) Periodic revision.--The Secretary
shall (at least every 10 years) make revisions in
any table in effect under clause (i) to reflect
the actual experience of pension plans and
projected trends in such experience.
(4) Probability of benefit payments in the form of lump
sums or other optional forms.--For purposes of determining any
present value or making any computation under this section,
there shall be taken into account--
(A) the probability that future benefit payments
under the plan will be made in the form of optional
forms of benefits provided under the plan (including
lump sum distributions, determined on the basis of the
plan's experience and other related assumptions), and
(B) any difference in the present value of such
future benefit payments resulting from the use of
actuarial assumptions, in determining benefit payments
in any such optional form of benefits, which are
different from those specified in this subsection.
(5) Approval of large changes in actuarial assumptions.--
(A) In general.--No actuarial assumption used to
determine the funding target for a plan to which this
paragraph applies may be changed without the approval of
the Secretary.
(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan only if--
(i) the plan is a defined benefit plan
(other than a multiemployer plan) to which title
IV of the Employee Retirement Income Security Act
of 1974 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 the
Employee Retirement Income Security Act of 1974)
of such plan and all other plans maintained by the
contributing sponsors (as defined in section
4001(a)(13) of such Act) and members of such
sponsors' controlled groups (as defined in section
4001(a)(14) of such Act) which are covered by
title IV (disregarding plans with no unfunded
vested benefits) exceed $50,000,000, and
(iii) the change in assumptions (determined
after taking into account any changes in interest
rate and mortality table) results in a decrease in
the funding shortfall of the plan for the current
plan year that exceeds $50,000,000, or that
exceeds $5,000,000 and that is 5 percent or more
of the funding target of the plan before such
change.
(i) Special Rules for At-Risk Plans.--
(1) Funding target for plans in at-risk status.--
(A) In general.--In the case of a plan which is in
at-risk status for a plan year, the funding target of
the plan for the plan year shall be equal to the sum
of--
(i) the present value of all benefits
accrued or earned under the plan as of the
beginning of the plan year, as determined by using
the additional actuarial assumptions described in
subparagraph (B), and
(ii) in the case of a plan which also has
been in at-risk status for at least 2 of the 4
preceding plan years, a loading factor determined
under subparagraph (C).
(B) Additional actuarial assumptions.--The
actuarial assumptions described in this subparagraph are
as follows:
(i) All employees who are not otherwise
assumed to retire as of the valuation date but who
will be eligible to elect benefits during the plan
year and the 10 succeeding plan years shall be
assumed to retire at the earliest retirement date
under the plan but not before the end of the plan
year for which the at-risk funding target and at-
risk target normal cost are being determined.
``(ii) All employees shall be assumed to elect
the retirement benefit available under the plan at
the assumed retirement age (determined after
application of clause (i)) which would result in
the highest present value of benefits.
(C) Loading factor.--The loading factor applied
with respect to a plan under this paragraph for any plan
year is the sum of--
(i) $700, times the number of participants
in the plan, plus
(ii) 4 percent of the funding target
(determined without regard to this paragraph) of
the plan for the plan year.
(2) Target normal cost of at-risk plans.--In the case of a
plan which is in at-risk status for a plan year, the target
normal cost of the plan for such plan year shall be equal to the
sum of--
(A) the present value of all benefits which are
expected to accrue or be earned under the plan during
the plan year, determined using the additional actuarial
assumptions described in paragraph (1)(B), plus
(B) in the case of a plan which also has been in
at-risk status for at least 2 of the 4 preceding plan
years, a loading factor equal to 4 percent of the target
normal cost (determined without regard to this
paragraph) of the plan for the plan year.
(3) Minimum amount.--In no event shall--
(A) the at-risk funding target be less than the
funding target, as determined without regard to this
subsection, or
(B) the at-risk target normal cost be less than
the target normal cost, as determined without regard to
this subsection.
(4) Determination of at-risk status.--For purposes of this
subsection--
(A) In general.--A plan is in at-risk status for a
plan year if--
(i) the funding target attainment percentage
for the preceding plan year (determined under this
section without regard to this subsection) is less
than 80 percent, and
(ii) the funding target attainment
percentage for the preceding plan year (determined
under this section by using the additional
actuarial assumptions described in paragraph
(1)(B) in computing the funding target) is less
than 70 percent.
(B) Transition rule.--In
the <<NOTE: Applicability.>> case of plan years
beginning in 2008, 2009, and 2010, subparagraph (A)(i)
shall be applied by substituting the following
percentages for `80 percent':
(i) 65 percent in the case of 2008.
(ii) 70 percent in the case of 2009.
(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008, the funding
target attainment percentage for the preceding plan year
under subparagraph (A)(ii) may be determined using such
methods of estimation as the Secretary may provide.
(C) Special rule for employees offered early
retirement in 2006.--
(i) In general.--For purposes of
subparagraph (A)(ii), the additional actuarial
assumptions described in paragraph (1)(B) shall
not be taken into account with respect to any
employee if--
(I) such employee is employed by a
specified automobile manufacturer,
(II) <<NOTE: Deadline.>> such
employee is offered a substantial amount
of additional cash compensation,
substantially enhanced retirement
benefits under the plan, or materially
reduced employment duties on the
condition that by a specified date (not
later than December 31, 2010) the
employee retires (as defined under the
terms of the plan),
(III) <<NOTE: Deadline.>> such
offer is made during 2006 and pursuant
to a bona fide retirement incentive
program and requires, by the terms of
the offer, that such offer can be
accepted not later than a specified date
(not later than December 31, 2006), and
(IV) such employee does not elect
to accept such offer before the
specified date on which the offer
expires.
(ii) Specified automobile manufacturer.--For
purposes of clause (i), the term `specified
automobile manufacturer' means--
(I) any manufacturer of
automobiles, and
(II) any manufacturer of
automobile parts which supplies such
parts directly to a manufacturer of
automobiles and which, after a
transaction or series of transactions
ending in 1999, ceased to be a member of
a controlled group which included such
manufacturer of automobiles.
(5) Transition between applicable funding targets and
between applicable target normal costs.--
(A) In general.--In any case in which a plan which
is in at-risk status for a plan year has been in such
status for a consecutive period of fewer than 5 plan
years, the applicable amount of the funding target and
of the target normal cost shall be, in lieu of the
amount determined without regard to this paragraph, the
sum of--
(i) the amount determined under this section
without regard to this subsection, plus
(ii) the transition percentage for such plan
year of the excess of the amount determined under
this subsection (without regard to this paragraph)
over the amount determined under this section
without regard to this subsection.
(B) Transition percentage.--For purposes of
subparagraph (A), the transition percentage shall be
determined in accordance with the following table:
If the consecuti .........................................
of
years (includingThe transition............................
year)
the plan is in apercentage is--...........................
status is--
1........................................... 20
2........................................... 40
3........................................... 60
4........................................... 80.
(C) Years before effective date.--For purposes of
this paragraph, plan years beginning before 2008 shall
not be taken into account.
(6) Small plan exception.--If, on each day during the
preceding plan year, a plan had 500 or fewer participants, the
plan shall not be treated as in at-risk status for the plan
year. For <<NOTE: Applicability.>> purposes of this paragraph,
all defined benefit plans (other than multiemployer plans)
maintained by the same employer (or any member of such
employer's controlled group) shall be treated as 1 plan, but
only participants with respect to such employer or member shall
be taken into account and the rules of subsection (g)(2)(C)
shall apply.
(j) Payment of Minimum Required Contributions.--
(1) In general.--For purposes of this section, the due
date for any payment of any minimum required contribution for
any plan year shall be 8\1/2\ months after the close of the plan
year.
(2) Interest.--Any payment required under paragraph (1)
for a plan year that is made on a date other than the valuation
date for such plan year shall be adjusted for interest accruing
for the period between the valuation date and the payment date,
at the effective rate of interest for the plan for such plan
year.
(3) Accelerated quarterly contribution schedule for
underfunded plans.--
(A) Failure to timely make required installment.--
In any case in which the plan has a funding shortfall
for the preceding plan year, the employer maintaining
the plan shall make the required installments under this
paragraph and if the employer fails to pay the full
amount of a required installment for the plan year, then
the amount of interest charged under paragraph (2) on
the underpayment for the period of underpayment shall be
determined by using a rate of interest equal to the rate
otherwise used under paragraph (2) plus 5 percentage
points.
(B) Amount of underpayment, period of
underpayment.--For purposes of subparagraph (A)--
(i) Amount.--The amount of the underpayment
shall be the excess of--
(I) the required installment, over
(II) the amount (if any) of the
installment contributed to or under the
plan on or before the due date for the
installment.
(ii) Period of underpayment.--The period for
which any interest is charged under this paragraph
with respect to any portion of the underpayment
shall run from the due date for the installment to
the date on which such portion is contributed to
or under the plan.
(iii) Order of crediting contributions.--For
purposes of clause (i)(II), contributions shall be
credited against unpaid required installments in
the order in which such installments are required
to be paid.
(C) Number of required installments; due dates.--
For purposes of this paragraph--
(i) Payable in 4 installments.--There shall
be 4 required installments for each plan year.
(ii) Time for payment of installments.--The
due dates for required installments are set forth
in the following table:
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 (determined
without regard to this subsection) to
the plan for the plan year under this
section, or
(II) 100 percent of the minimum
required contribution (determined
without regard to this subsection or 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.
(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
described in subsection (g)(2)(B)) 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 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--
(I) the base amount with respect
to such quarter, over
(II) the value (as of such last
day) of the plan's liquid assets.
(ii) Base amount.--
(I) In general.--The term `base
amount' means, with respect to any
quarter, an amount equal to 3 times the
sum of the adjusted disbursements from
the plan for the 12 months ending on the
last day of such quarter.
(II) Special rule.--If the amount
determined under subclause (I) exceeds
an amount equal to 2 times the sum of
the adjusted disbursements from the plan
for the 36 months ending on the last day
of the quarter and an enrolled actuary
certifies to the satisfaction of the
Secretary that such excess is the result
of nonrecurring circumstances, the base
amount with respect to such quarter
shall be determined without regard to
amounts related to those nonrecurring
circumstances.
(iii) Disbursements from the plan.--The term
`disbursements from the plan' means all
disbursements from the trust, including purchases
of annuities, payments of single sums and other
benefits, and administrative expenses.
(iv) Adjusted disbursements.--The term
`adjusted disbursements' means disbursements from
the plan reduced by the product of--
(I) the plan's funding target
attainment percentage for the plan year,
and
(II) <<NOTE: Regulations.>> the
sum of the purchases of annuities,
payments of single sums, and such other
disbursements as the Secretary shall
provide in regulations.
(v) Liquid assets.--
The <<NOTE: Regulations.>> term `liquid assets'
means cash, marketable securities, and such other
assets as specified by the Secretary in
regulations.
(vi) Quarter.--The term `quarter' means,
with respect to any required installment, the 3-
month period
preceding the month in which the due date for such
installment occurs.
(F) Regulations.--The Secretary may prescribe such
regulations as are necessary to carry out this
paragraph.
(k) Imposition of Lien Where Failure to Make Required
Contributions.--
(1) In general.--In the case of a plan to which this
subsection applies, if--
(A) any person fails to make a contribution
payment required by section 412 and this section before
the due date for such payment, and
(B) the unpaid balance of such payment (including
interest), when added to the aggregate unpaid balance of
all preceding such payments for which payment was not
made before the due date (including interest), exceeds
$1,000,000,
then there shall be a lien in favor of the plan in the amount
determined under paragraph (3) upon all property and rights to
property, whether real or personal, belonging to such person and
any other person who is a member of the same controlled group of
which such person is a member.
(2) Plans to which subsection applies.--This subsection
shall apply to a defined benefit plan (other than a
multiemployer plan) covered under section 4021 of the Employee
Retirement Income Security Act of 1974 for any plan year for
which the funding target attainment percentage (as defined in
subsection (d)(2)) of such plan is less than 100 percent.
(3) Amount of lien.--For purposes of paragraph (1), the
amount of the lien shall be equal to the aggregate unpaid
balance of contribution payments required under this section and
section 412 for which payment has not been made before the due
date.
`(4) Notice of failure; lien.--
(A) Notice of failure.--
A <<NOTE: Deadline.>> person committing a failure
described in paragraph (1) shall notify the Pension
Benefit Guaranty Corporation of such failure within 10
days of the due date for the required contribution
payment.
(B) Period of lien.--The lien imposed by paragraph
(1) shall arise on the due date for the required
contribution payment and shall continue until the last
day of the first plan year in which the plan ceases to
be described in paragraph (1)(B). Such lien shall
continue to run without regard to whether such plan
continues to be described in paragraph (2) during the
period referred to in the preceding sentence.
(C) Certain rules to apply.--Any amount with
respect to which a lien is imposed under paragraph (1)
shall be treated as taxes due and owing the United
States and rules similar to the rules of subsections
(c), (d), and (e) of section 4068 of the Employee
Retirement Income Security Act of 1974 shall apply with
respect to a lien imposed by subsection (a) and the
amount with respect to such lien.
(5) Enforcement.--Any lien created under paragraph (1) may
be perfected and enforced only by the Pension Benefit Guaranty
Corporation, or at the direction of the Pension Benefit
Guaranty Corporation, by the contributing sponsor (or any member
of the controlled group of the contributing sponsor).
(6) Definitions.--For purposes of this subsection--
(A) Contribution payment.--The term `contribution
payment' means, in connection with a plan, a
contribution payment required to be made to the plan,
including any required installment under paragraphs (3)
and (4) of subsection (j).
(B) Due date; required installment.--The terms
`due date' and `required installment' have the meanings
given such terms by subsection (j), except that in the
case of a payment other than a required installment, the
due date shall be the date such payment is required to
be made under section 430.
(C) Controlled group.--The term `controlled group'
means any group treated as a single employer under
subsections (b), (c), (m), and (o) of section 414.
(l) Qualified Transfers to Health Benefit Accounts.--In the case
of a qualified transfer (as defined in section 420), any assets so
transferred shall not, for purposes of this section, be treated as
assets in the plan.
Miscellaneous
AMENDMENTS
EFFECTIVE DATE OF 2006 AMENDMENT
Pension Protection Act of 2006 (P.L. 109-280) Section 112
(b) Effective Date.--The <<NOTE: 26 USC 430 note.>> amendments made
by this section shall apply with respect to plan years beginning after
December 31, 2007.
Notes
Pension Protection Act of 2006 (P.L. 109-280)
SEC. 402. <<NOTE: 26 USC 430 note.>> SPECIAL FUNDING RULES FOR CERTAIN
PLANS MAINTAINED BY COMMERCIAL AIRLINES.
(a) In General.--The plan sponsor of an eligible plan may elect to
either--
(1) have the rules of subsection (b) apply, or
(2) have section 303 of the Employee Retirement Income
Security Act of 1974 and section 430 of the Internal Revenue
Code of 1986 applied to its first taxable year beginning in 2008
by amortizing the shortfall amortization base for such taxable
year over a period of 10 plan years (rather than 7 plan years)
beginning with such plan year.
(b) Alternative Funding Schedule.--
(1) In general.--If an election is made under subsection
(a)(1) to have this subsection apply to an eligible plan and the
requirements of paragraphs (2) and (3) are met with respect to
the plan--
(A) in the case of any applicable plan year
beginning before January 1, 2008, the plan shall not
have an accumulated funding deficiency for purposes of
section 302 of the Employee Retirement Income Security
Act of 1974 and sections 412 and 4971 of the Internal
Revenue Code of 1986 if contributions to the plan for
the plan year are not less than the minimum required
contribution determined under subsection (e) for the
plan for the plan year, and
(B) in the case of any applicable plan year
beginning on or after January 1, 2008, the minimum
required contribution determined under sections 303 of
such Act and 430 of such Code shall, for purposes of
sections 302 and 303 of such Act and sections 412, 430,
and 4971 of such Code, be equal to the minimum required
contribution determined under subsection (e) for the
plan for the plan year.
(2) Accrual restrictions.--
(A) In general.--The requirements of this paragraph
are met if, effective as of the first day of the first
applicable plan year and at all times thereafter while
an election under this section is in effect, the plan
provides that--
(i) the accrued benefit, any death or
disability benefit, and any social security
supplement described in the last sentence of
section 411(a)(9) of such Code and section
204(b)(1)(G) of such Act, of each participant are
frozen at the amount of such benefit or supplement
immediately before such first day, and
(ii) all other benefits under the plan are
eliminated,
but only to the extent the freezing or elimination of
such benefits would have been permitted under section
411(d)(6) of such Code and section 204(g) of such Act if
they had been implemented by a plan amendment adopted
immediately before such first day.
(B) Increases in section 415 limits.--If a plan
provides that an accrued benefit of a participant which
has been subject to any limitation under section 415 of
such Code will be increased if such limitation is
increased, the plan shall not be treated as meeting the
requirements of this section unless, effective as of the
first day of the first applicable plan year (or, if
later, the date of the enactment of this Act) and at all
times thereafter while an election under this section is
in effect, the plan provides that any such increase
shall not take effect. A plan shall not fail to meet the
requirements of section 411(d)(6) of such Code and
section 204(g) of such Act solely because the plan is
amended to meet the requirements of this subparagraph.
(3) Restriction on applicable benefit increases.--
(A) In general.--The requirements of this paragraph
are met if no applicable benefit increase takes effect
at any time during the period beginning on July 26,
2005, and ending on the day before the first day of the
first applicable plan year.
(B) Applicable benefit increase.--For purposes of
this paragraph, the term ``applicable benefit increase''
means, with respect to any plan year, any increase in
liabilities of the plan by plan amendment (or otherwise
provided in regulations provided by the Secretary)
which, but for this paragraph, would occur during the
plan year by reason of--
(i) any increase in benefits,
(ii) any change in the accrual of benefits, or
(iii) any change in the rate at which benefits
become nonforfeitable under the plan.
(4) Exception for imputed disability service.--Paragraphs
(2) and (3) shall not apply to any accrual or increase with
respect to imputed service provided to a participant during any
period of the participant's disability occurring on or after the
effective date of the plan amendment providing the restrictions
under paragraph (2) (or on or after July 26, 2005, in the case
of the restrictions under paragraph (3)) if the partici- pant--
(A) was receiving disability benefits as of such
date, or
(B) was receiving sick pay and subsequently
determined to be eligible for disability benefits as of
such date.
(c) Definitions.--For purposes of this section--
(1) Eligible plan.--The term ``eligible plan'' means a
defined benefit plan (other than a multiemployer plan) to which
sections 302 of such Act and 412 of such Code applies which is
sponsored by an employer--
(A) which is a commercial airline passenger airline,
or
(B) the principal business of which is providing
catering services to a commercial passenger airline.
(2) Applicable plan year.--The term ``applicable plan year''
means each plan year to which the election under subsection
(a)(1) applies under subsection (d)(1)(A).
(d) Elections and Related Terms.--
(1) <<NOTE: Deadlines.>> Years for which election made.--
(A) Alternative funding schedule.--If an election
under subsection (a)(1) was made with respect to an
eligible plan, the plan sponsor may select either a plan
year beginning in 2006 or a plan year beginning in 2007
as the first plan year to which such election applies.
The election shall apply to such plan year and all
subsequent years. The election shall be made--
(i) not later than December 31, 2006, in the
case of an election for a plan year beginning in
2006, or
(ii) not later than December 31, 2007, in the
case of an election for a plan year beginning in
2007.
(B) 10 year amortization.--An election under
subsection (a)(2) shall be made not later than December
31, 2007.
(C) Election of new plan year for alternative
funding schedule.--In the case of an election under
subsection (a)(1), the plan sponsor may specify a new
plan year in such election and the plan year of the plan
may be changed to such new plan year without the
approval of the Secretary of the Treasury.
(2) Manner of election.--A plan sponsor shall make any
election under subsection (a) in such manner as the Secretary
of the Treasury may prescribe. Such election, once made, may be
revoked only with the consent of such Secretary.
(e) Minimum Required Contribution.--In the case of an eligible plan
with respect to which an election is made under subsection (a)(1)--
(1) In general.--In the case of any applicable plan year
during the amortization period, the minimum required
contribution shall be the amount necessary to amortize the
unfunded liability of the plan, determined as of the first day
of the plan year, in equal annual installments (until fully
amortized) over the remainder of the amortization period. Such
amount shall be separately determined for each applicable plan
year.
(2) Years after amortization period.--In the case of any
plan year beginning after the end of the amortization period,
section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of
such Code shall apply to such plan, but the prefunding balance
and funding standard carryover balance as of the first day of
the first of such years under section 303(f) of such Act and
section 430(f) of such Code shall be zero.
(3) Definitions.--For purposes of this section--
(A) Unfunded liability.--The term ``unfunded
liability'' means the unfunded accrued liability under
the plan, determined under the unit credit funding
method.
(B) Amortization period.--The term ``amortization
period'' means the 17-plan year period beginning with
the first applicable plan year.
(4) Other rules.--In determining the minimum required
contribution and amortization amount under this subsection--
(A) <<NOTE: Applicability.>> the provisions of
section 302(c)(3) of such Act and section 412(c)(3) of
such Code, as in effect before the date of enactment of
this section, shall apply,
(B) a rate of interest of 8.85 percent shall be used
for all calculations requiring an interest rate, and
(C) the value of plan assets shall be equal to their
fair market value.
(5) Special rule for certain plan spinoffs.--For purposes of
subsection (b), if, with respect to any eligible plan to which
this subsection applies--
(A) any applicable plan year includes the date of
the enactment of this Act,
(B) a plan was spun off from the eligible plan
during the plan year but before such date of enactment,
the minimum required contribution under paragraph (1) for the
eligible plan for such applicable plan year shall be an
aggregate amount determined as if the plans were a single plan
for that plan year (based on the full 12-month plan year in
effect prior to the spin-off). The employer shall designate the
allocation of such aggregate amount between such plans for the
applicable plan year.
(f) Special Rules for Certain Balances and Waivers.--In the case of
an eligible plan with respect to which an election is made under
subsection (a)(1)--
(1) Funding standard account and credit balances.--Any
charge or credit in the funding standard account under section
302 of such Act or section 412 of such Code, and any prefunding
balance or funding standard carryover balance
under section 303 of such Act or section 430 of such Code, as of
the day before the first day of the first applicable plan year,
shall be reduced to zero.
(2) Waived funding deficiencies.--Any waived funding
deficiency under sections 302 and 303 of such Act or section 412
of such Code, as in effect before the date of enactment of this
section, shall be deemed satisfied as of the first day of the
first applicable plan year and the amount of such waived funding
deficiency shall be taken into account in determining the plan's
unfunded liability under subsection (e)(3)(A). In the case of a
plan amendment adopted to satisfy the requirements of subsection
(b)(2), the plan shall not be deemed to violate section 304(b)
of such Act or section 412(f) of such Code, as so in effect, by
reason of such amendment or any increase in benefits provided to
such plan's participants under a separate plan that is a defined
contribution plan or a multiemployer plan.
(g) Other Rules for Plans Making Election Under This Section.--
(1) Successor plans to certain plans.--If--
(A) an election under paragraph (1) or (2) of
subsection (a) is in effect with respect to any eligible
plan, and
(B) the eligible plan is maintained by an employer
that establishes or maintains 1 or more other defined
benefit plans (other than any multiemployer plan), and
such other plans in combination provide benefit accruals
to any substantial number of successor employees,
the Secretary of the Treasury may, in the Secretary's
discretion, determine that any trust of which any other such
plan is a part does not constitute a qualified trust under
section 401(a) of the Internal Revenue Code of 1986 unless all
benefit obligations of the eligible plan have been satisfied.
For purposes of this paragraph, the term ``successor employee''
means any employee who is or was covered by the eligible plan
and any employees who perform substantially the same type of
work with respect to the same business operations as an employee
covered by such eligible plan.
(2) Special rules for terminations.--
(A) PBGC liability limited.--Section 4022 of the
Employee Retirement Income Security Act of 1974, as
amended by this Act, <<NOTE: 29 USC 1322.>> is amended
by adding at the end the following new subsection:
``(h) Special Rule for Plans Electing Certain Funding
Requirements.--If any plan makes an election under section 402(a)(1) of
the Pension Protection Act of 2006 and is terminated effective before
the end of the 10-year period beginning on the first day of the first
applicable plan year--
``(1) this section shall be applied--
``(A) by treating the first day of the first
applicable plan year as the termination date of the
plan, and
``(B) by determining the amount of guaranteed
benefits on the basis of plan assets and liabilities as
of such assumed termination date, and
``(2) notwithstanding section 4044(a), plan assets shall
first be allocated to pay the amount, if any, by which--
``(A) the amount of guaranteed benefits under this
section (determined without regard to paragraph (1) and
on
the basis of plan assets and liabilities as of the
actual date of plan termination), exceeds
``(B) the amount determined under paragraph (1).''.
(B) Termination premium.--In applying section
4006(a)(7)(A) of the Employee Retirement Income Security
Act of 1974 to an eligible plan during any period in
which an election under subsection (a)(1) is in effect--
(i) ``$2,500'' shall be substituted for
``$1,250'' in such section if such plan terminates
during the 5-year period beginning on the first
day of the first applicable plan year with respect
to such plan, and
(ii) <<NOTE: Applicability.>> such section
shall be applied without regard to subparagraph
(B) of section 8101(d)(2) of the Deficit Reduction
Act of 2005 (relating to special rule for plans
terminated in bankruptcy).
The substitution described in clause (i) shall not apply
with respect to any plan if the Secretary of Labor
determines that such plan terminated as a result of
extraordinary circumstances such as a terrorist attack
or other similar event.
(3) Limitation on deductions under certain plans.--Section
404(a)(7)(C)(iv) of the Internal Revenue Code of 1986, as added
by this Act, shall not apply with respect to any taxable year of
a plan sponsor of an eligible plan if any applicable plan year
with respect to such plan ends with or within such taxable year.
(4) Notice.--In <<NOTE: Deadline.>> the case of a plan
amendment adopted in order to comply with this section, any
notice required under section 204(h) of such Act or section
4980F(e) of such Code shall be provided within 15 days of the
effective date of such plan amendment. This subsection shall not
apply to any plan unless such plan is maintained pursuant to one
or more collective bargaining agreements between employee
representatives and 1 or more employers.
Pension Protection Act of 2006 (P.L. 109-280)
SEC. 115. <<NOTE: 26 USC 430 note.>> MODIFICATION OF TRANSITION RULE TO
PENSION FUNDING REQUIREMENTS.
(a) In General.--In the <<NOTE: Applicability. Effective
date.>> 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 December 31, 2007.
(b) Modified Rules.--The rules described in this subsection are as
follows:
(1) For purposes of section 430(j)(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) Section 430(c)(5)(B) of such Code and section
303(c)(5)(B) of such Act (relating to phase-in of funding target
for exemption from new shortfall amortization base) shall each
be applied by substituting ``2012'' for ``2011'' therein and by
substituting for the table therein the following:
The
``In the case of a plan year beginning in applicable
calendar year: percentage
is:
2008.......................................... 90 percent
2009.......................................... 92 percent
2010.......................................... 94 percent
2011.......................................... 96 percent.
(c) Definitions.--Any term used in this section which is also used
in section 430 of such Code or section 303 of such Act shall have the
meaning provided such term in such section. If the same term has a
different meaning in such Code and such Act, such term shall, for
purposes of this section, have the meaning provided by such Code when
applied with respect to such Code and the meaning provided by such Act
when applied with respect to such Act.
(d) Special Rule for 2006 and 2007.--
(1) In general.--Section 769(c)(3) of the Retirement
Protection Act of 1994, as added by section 201 of the Pension
Funding Equity Act of 2004, is amended <<NOTE: 26 USC 412
note.>> by striking ``and 2005'' and inserting ``, 2005, 2006,
and 2007''.
(2) Effective date.--The <<NOTE: 26 USC 412
note.>> amendment made by paragraph (1) shall apply to plan
years beginning after December 31, 2005.
(e) Conforming Amendment.--
(1) Section 769 of the Retirement Protection Act of 1994 is
amended by striking subsection (c).
(2) The <<NOTE: Effective date. 26 USC 412 note.>> amendment
made by paragraph (1) shall take effect on December 31, 2007,
and shall apply to plan years beginning after such date.
