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Trust Examination Manual


                     PENSION PROTECTION ACT OF 2006

Public Law 109-280
109th Congress

                                 An Act


 
     To provide economic security for all Americans, and for other 
             purposes.  

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress 
assembled,  

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited 
as the ``Pension Protection Act of 2006''.

    (b) Table of Contents.--The table of contents for this Act (other 
than so much of title XIV as follows section 1401) is as follows:

Sec. 1. Short title and table of contents.

  TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 
                              PENSION PLANS

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

Sec. 101. Minimum funding standards.
Sec. 102. Funding rules for single-employer defined benefit pension 
           plans.
Sec. 103. Benefit limitations under single-employer plans.
Sec. 104. Special rules for multiple employer plans of certain 
           cooperatives.
Sec. 105. Temporary relief for certain PBGC settlement plans.
Sec. 106. Special rules for plans of certain government contractors.
Sec. 107. Technical and conforming amendments.

         Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 111. Minimum funding standards.
Sec. 112. Funding rules for single-employer defined benefit pension 
           plans.
Sec. 113. Benefit limitations under single-employer plans.
Sec. 114. Technical and conforming amendments.
Sec. 115. Modification of transition rule to pension funding 
           requirements.
Sec. 116. Restrictions on funding of nonqualified deferred compensation 
           plans by employers maintaining underfunded or terminated 
           single-employer plans.

  TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND 
                           RELATED PROVISIONS

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

Sec. 201. Funding rules for multiemployer defined benefit plans.
Sec. 202. Additional funding rules for multiemployer plans in endangered 
           or critical status.
Sec. 203. Measures to forestall insolvency of multiemployer plans.
Sec. 204. Withdrawal liability reforms.
Sec. 205. Prohibition on retaliation against employers exercising their 
           rights to petition the Federal Government.
Sec. 206. Special rule for certain benefits funded under an agreement 
           approved by the Pension Benefit Guaranty Corporation.

         Subtitle B--Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.
Sec. 212. Additional funding rules for multiemployer plans in endangered 
           or critical status.
Sec. 213. Measures to forestall insolvency of multiemployer plans.
Sec. 214. Exemption from excise taxes for certain multiemployer pension 
           plans.

             Subtitle C--Sunset of Additional Funding Rules

Sec. 221. Sunset of additional funding rules.

                  TITLE III--INTEREST RATE ASSUMPTIONS

Sec. 301. Extension of replacement of 30-year Treasury rates.
Sec. 302. Interest rate assumption for determination of lump sum 
           distributions.
Sec. 303. Interest rate assumption for applying benefit limitations to 
           lump sum distributions.

             TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS

Sec. 401. PBGC premiums.
Sec. 402. Special funding rules for certain plans maintained by 
           commercial airlines.
Sec. 403. Limitation on PBGC guarantee of shutdown and other benefits.
Sec. 404. Rules relating to bankruptcy of employer.
Sec. 405. PBGC premiums for small plans.
Sec. 406. Authorization for PBGC to pay interest on premium overpayment 
           refunds.
Sec. 407. Rules for substantial owner benefits in terminated plans.
Sec. 408. Acceleration of PBGC computation of benefits attributable to 
           recoveries from employers.
Sec. 409. Treatment of certain plans where cessation or change in 
           membership of a controlled group.
Sec. 410. Missing participants.
Sec. 411. Director of the Pension Benefit Guaranty Corporation.
Sec. 412. Inclusion of information in the PBGC annual report.

                           TITLE V--DISCLOSURE

Sec. 501. Defined benefit plan funding notice.
Sec. 502. Access to multiemployer pension plan information.
Sec. 503. Additional annual reporting requirements.
Sec. 504. Electronic display of annual report information.
Sec. 505. Section 4010 filings with the PBGC.
Sec. 506. Disclosure of termination information to plan participants.
Sec. 507. Notice of freedom to divest employer securities.
Sec. 508. Periodic pension benefit statements.
Sec. 509. Notice to participants or beneficiaries of blackout periods.

  TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY 
                                  RULES

                      Subtitle A--Investment Advice

Sec. 601. Prohibited transaction exemption for provision of investment 
           advice.

                   Subtitle B--Prohibited Transactions

Sec. 611. Prohibited transaction rules relating to financial 
           investments.
Sec. 612. Correction period for certain transactions involving 
           securities and commodities.

                  Subtitle C--Fiduciary and Other Rules

Sec. 621. Inapplicability of relief from fiduciary liability during 
           suspension of ability of participant or beneficiary to direct 
           investments.
Sec. 622. Increase in maximum bond amount.
Sec. 623. Increase in penalties for coercive interference with exercise 
           of ERISA rights.
Sec. 624. Treatment of investment of assets by plan where participant 
           fails to exercise investment election.
Sec. 625. Clarification of fiduciary rules.

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

Sec. 701. Benefit accrual standards.
Sec. 702. Regulations relating to mergers and acquisitions.

             TITLE VIII--PENSION RELATED REVENUE PROVISIONS

                    Subtitle A--Deduction Limitations

Sec. 801. Increase in deduction limit for single-employer plans.
Sec. 802. Deduction limits for multiemployer plans.
Sec. 803. Updating deduction rules for combination of plans.

          Subtitle B--Certain Pension Provisions Made Permanent

Sec. 811. Pensions and individual retirement arrangement provisions of 
           Economic Growth and Tax Relief Reconciliation Act of 2001 
           made permanent.
Sec. 812. Saver's credit.

Subtitle C--Improvements in Portability, Distribution, and Contribution 
                                  Rules

Sec. 821. Clarifications regarding purchase of permissive service 
           credit.
Sec. 822. Allow rollover of after-tax amounts in annuity contracts.
Sec. 823. Clarification of minimum distribution rules for governmental 
           plans.
Sec. 824. Allow direct rollovers from retirement plans to Roth IRAs.
Sec. 825. Eligibility for participation in retirement plans.
Sec. 826. Modifications of rules governing hardships and unforseen 
           financial emergencies.
Sec. 827. Penalty-free withdrawals from retirement plans for individuals 
           called to active duty for at least 179 days.
Sec. 828. Waiver of 10 percent early withdrawal penalty tax on certain 
           distributions of pension plans for public safety employees.
Sec. 829. Allow rollovers by nonspouse beneficiaries of certain 
           retirement plan distributions.
Sec. 830. Direct payment of tax refunds to individual retirement plans.
Sec. 831. Allowance of additional IRA payments in certain bankruptcy 
           cases.
Sec. 832. Determination of average compensation for section 415 limits.
Sec. 833. Inflation indexing of gross income limitations on certain 
           retirement savings incentives.

                 Subtitle D--Health and Medical Benefits

Sec. 841. Use of excess pension assets for future retiree health 
           benefits and collectively bargained retiree health benefits.
Sec. 842. Transfer of excess pension assets to multiemployer health 
           plan.
Sec. 843. Allowance of reserve for medical benefits of plans sponsored 
           by bona fide associations.
Sec. 844. Treatment of annuity and life insurance contracts with a long-
           term care insurance feature.
Sec. 845. Distributions from governmental retirement plans for health 
           and long-term care insurance for public safety officers.

            Subtitle E--United States Tax Court Modernization

Sec. 851. Cost-of-living adjustments for Tax Court judicial survivor 
           annuities.
Sec. 852. Cost of life insurance coverage for Tax Court judges age 65 or 
           over.
Sec. 853. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 854. Annuities to surviving spouses and dependent children of 
           special trial judges of the Tax Court.
Sec. 855. Jurisdiction of Tax Court over collection due process cases.
Sec. 856. Provisions for recall.
Sec. 857. Authority for special trial judges to hear and decide certain 
           employment status cases.
Sec. 858. Confirmation of authority of Tax Court to apply doctrine of 
           equitable recoupment.
Sec. 859. Tax Court filing fee in all cases commenced by filing 
           petition.
Sec. 860. Expanded use of Tax Court practice fee for pro se taxpayers.

                      Subtitle F--Other Provisions

Sec. 861. Extension to all governmental plans of current moratorium on 
           application of certain nondiscrimination rules applicable to 
           State and local plans.
Sec. 862. Elimination of aggregate limit for usage of excess funds from 
           black lung disability trusts.
Sec. 863. Treatment of death benefits from corporate-owned life 
           insurance.
Sec. 864. Treatment of test room supervisors and proctors who assist in 
           the administration of college entrance and placement exams.
Sec. 865. Grandfather rule for church plans which self-annuitize.
Sec. 866. Exemption for income from leveraged real estate held by church 
           plans.
Sec. 867. Church plan rule.
Sec. 868. Gratuitous transfer for benefits of employees.

TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND 
                        OTHER PENSION PROVISIONS

Sec. 901. Defined contribution plans required to provide employees with 
           freedom to invest their plan assets.
Sec. 902. Increasing participation through automatic contribution 
           arrangements.
Sec. 903. Treatment of eligible combined defined benefit plans and 
           qualified cash or deferred arrangements.
Sec. 904. Faster vesting of employer nonelective contributions.
Sec. 905. Distributions during working retirement.
Sec. 906. Treatment of certain pension plans of Indian tribal 
           governments.

       TITLE X--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

Sec. 1001. Regulations on time and order of issuance of domestic 
           relations orders.
Sec. 1002. Entitlement of divorced spouses to railroad retirement 
           annuities independent of actual entitlement of employee.
Sec. 1003. Extension of tier II railroad retirement benefits to 
           surviving former spouses pursuant to divorce agreements.
Sec. 1004. Requirement for additional survivor annuity option.

                   TITLE XI--ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.
Sec. 1102. Notice and consent period regarding distributions.
Sec. 1103. Reporting simplification.
Sec. 1104. Voluntary early retirement incentive and employment retention 
           plans maintained by local educational agencies and other 
           entities.
Sec. 1105. No reduction in unemployment compensation as a result of 
           pension rollovers.
Sec. 1106. Revocation of election relating to treatment as multiemployer 
           plan.
Sec. 1107. Provisions relating to plan amendments.

         TITLE XII--PROVISIONS RELATING TO EXEMPT ORGANIZATIONS

                Subtitle A--Charitable Giving Incentives

Sec. 1201. Tax-free distributions from individual retirement plans for 
           charitable purposes.
Sec. 1202. Extension of modification of charitable deduction for 
           contributions of food inventory.
Sec. 1203. Basis adjustment to stock of S corporation contributing 
           property.
Sec. 1204. Extension of modification of charitable deduction for 
           contributions of book inventory.
Sec. 1205. Modification of tax treatment of certain payments to 
           controlling exempt organizations.
Sec. 1206. Encouragement of contributions of capital gain real property 
           made for conservation purposes.
Sec. 1207. Excise taxes exemption for blood collector organizations.

               Subtitle B--Reforming Exempt Organizations

                         Part 1--General Reforms

Sec. 1211. Reporting on certain acquisitions of interests in insurance 
           contracts in which certain exempt organizations hold an 
           interest.
Sec. 1212. Increase in penalty excise taxes relating to public 
           charities, social welfare organizations, and private 
           foundations.
Sec. 1213. Reform of charitable contributions of certain easements in 
           registered historic districts and reduced deduction for 
           portion of qualified conservation contribution attributable 
           to rehabilitation credit.
Sec. 1214. Charitable contributions of taxidermy property.
Sec. 1215. Recapture of tax benefit for charitable contributions of 
           exempt use property not used for an exempt use.
Sec. 1216. Limitation of deduction for charitable contributions of 
           clothing and household items.
Sec. 1217. Modification of recordkeeping requirements for certain 
           charitable contributions.
Sec. 1218. Contributions of fractional interests in tangible personal 
           property.
Sec. 1219. Provisions relating to substantial and gross overstatements 
           of valuations.
Sec. 1220. Additional standards for credit counseling organizations.
Sec. 1221. Expansion of the base of tax on private foundation net 
           investment income.
Sec. 1222. Definition of convention or association of churches.
Sec. 1223. Notification requirement for entities not currently required 
           to file.
Sec. 1224. Disclosure to State officials relating to exempt 
           organizations.
Sec. 1225. Public disclosure of information relating to unrelated 
           business income tax returns.
Sec. 1226. Study on donor advised funds and supporting organizations.

         Part 2--Improved Accountability of Donor Advised Funds

Sec. 1231. Excise taxes relating to donor advised funds.
Sec. 1232. Excess benefit transactions involving donor advised funds and 
           sponsoring organizations.
Sec. 1233. Excess business holdings of donor advised funds.
Sec. 1234. Treatment of charitable contribution deductions to donor 
           advised funds.
Sec. 1235. Returns of, and applications for recognition by, sponsoring 
           organizations.

       Part 3--Improved Accountability of Supporting Organizations

Sec. 1241. Requirements for supporting organizations.
Sec. 1242. Excess benefit transactions involving supporting 
           organizations.
Sec. 1243. Excess business holdings of supporting organizations.
Sec. 1244. Treatment of amounts paid to supporting organizations by 
           private foundations.
Sec. 1245. Returns of supporting organizations.

                      TITLE XIII--OTHER PROVISIONS

Sec. 1301. Technical corrections relating to mine safety.
Sec. 1302. Going-to-the-sun road.
Sec. 1303. Exception to the local furnishing requirement of the tax-
           exempt bond rules.
Sec. 1304. Qualified tuition programs.

                      TITLE XIV--TARIFF PROVISIONS

Sec. 1401. Short title; table of contents.

  TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT 
                              PENSION PLANS

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

SEC. 101. MINIMUM FUNDING STANDARDS.

    (a) Repeal of Existing Funding Rules.--Sections 302 through 308 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082 
through 1086) are repealed.
    (b) New Minimum Funding Standards.--Part 3 of subtitle B of title I 
of such Act (as amended by subsection (a)) is amended by inserting after 
section 301 the following new section:

``SEC. 302. MINIMUM FUNDING STANDARDS.

    ``(a) Requirement To Meet Minimum Funding Standard.--
            ``(1) In general.--A plan to which this part applies shall 
        satisfy the minimum funding standard applicable to the plan for 
        any plan year.
            ``(2) Minimum funding standard.--For purposes of paragraph 
        (1), a plan shall be treated as satisfying the minimum funding 
        standard for a plan year if--
                    ``(A) in the case of a defined benefit plan which is 
                a single-employer plan, the employer makes contributions 
                to or under the plan for the plan year which, in the 
                aggregate, are not less than the minimum required 
                contribution determined under section 303 for the plan 
                for the plan year,
                    ``(B) in the case of a money purchase plan which is 
                a single-employer plan, the employer makes contributions 
                to or under the plan for the plan year which are 
                required under the terms of the plan, and
                    ``(C) in the case of a multiemployer plan, the 
                employers make contributions to or under the plan for 
                any plan year which, in the aggregate, are sufficient to 
                ensure that the plan does not have an accumulated 
                funding deficiency under section 304 as of the end of 
                the plan year.

    ``(b) Liability for Contributions.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of any contribution required by this section (including 
        any required installments under paragraphs (3) and (4) of 
        section 303(j)) shall be paid by the employer responsible for 
        making contributions to or under the plan.
            ``(2) Joint and several liability where employer member of 
        controlled group.--If the employer referred to in paragraph (1) 
        is a member of a controlled group, each member of such group 
        shall be jointly and severally liable for payment of such 
        contributions.

    ``(c) Variance From Minimum Funding Standards.--
            ``(1) Waiver in case of business hardship.--
                    ``(A) In general.--If--
                          ``(i) an employer is (or in the case of a 
                      multiemployer plan, 10 percent or more of the 
                      number of employers contributing to or under the 
                      plan is) unable to satisfy the minimum funding 
                      standard for a plan year without temporary 
                      substantial business hardship (substantial 
                      business hardship in the case of a multiemployer 
                      plan), and
                          ``(ii) application of the standard would be 
                      adverse to the interests of plan participants in 
                      the aggregate,
                the Secretary of the Treasury may, subject to 
                subparagraph (C), waive the requirements of subsection 
                (a) for such year with respect to all or any portion of 
                the minimum funding standard. The Secretary of the 
                Treasury shall not waive the minimum funding standard 
                with respect to a plan for more than 3 of any 15 (5 of 
                any 15 in the case of a multiemployer plan) consecutive 
                plan years.
                    ``(B) Effects of waiver.--If a waiver is granted 
                under subparagraph (A) for any plan year--
                          ``(i) in the case of a single-employer plan, 
                      the minimum required contribution under section 
                      303 for the plan year shall be reduced by the 
                      amount of the waived funding deficiency and such 
                      amount shall be amortized as required under 
                      section 303(e), and
                          ``(ii) in the case of a multiemployer plan, 
                      the funding standard account shall be credited 
                      under section 304(b)(3)(C) with the amount of the 
                      waived funding deficiency and such amount shall be 
                      amortized as required under section 304(b)(2)(C).
                    ``(C) Waiver of amortized portion not allowed.--The 
                Secretary of the Treasury may not waive under 
                subparagraph (A) any portion of the minimum funding 
                standard under subsection (a) for a plan year which is 
                attributable to any waived funding deficiency for any 
                preceding plan year.
            ``(2) Determination of business hardship.--For purposes of 
        this subsection, the factors taken into account in determining 
        temporary substantial business hardship (substantial business
        hardship in the case of a multiemployer plan) shall include (but 
        shall not be limited to) whether or not--
                    ``(A) the employer is operating at an economic loss,
                    ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in the 
                industry concerned,
                    ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                    ``(D) it is reasonable to expect that the plan will 
                be continued only if the waiver is granted.
            ``(3) Waived funding deficiency.--For purposes of this part, 
        the term `waived funding deficiency' means the portion of the 
        minimum funding standard under subsection (a) (determined 
        without regard to the waiver) for a plan year waived by the 
        Secretary of the Treasury and not satisfied by employer 
        contributions.
            ``(4) Security for waivers for single-employer plans, 
        consultations.--
                    ``(A) Security may be required.--
                          ``(i) In general.--Except as provided in 
                      subparagraph (C), the Secretary of the Treasury 
                      may require an employer maintaining a defined 
                      benefit plan which is a single-employer plan 
                      (within the meaning of section 4001(a)(15)) to 
                      provide security to such plan as a condition for 
                      granting or modifying a waiver under paragraph 
                      (1).
                          ``(ii) Special rules.--Any security provided 
                      under clause (i) may be perfected and enforced 
                      only by the Pension Benefit Guaranty Corporation, 
                      or at the direction of the Corporation, by a 
                      contributing sponsor (within the meaning of 
                      section 4001(a)(13)), or a member of such 
                      sponsor's controlled group (within the meaning of 
                      section 4001(a)(14)).
                    ``(B) Consultation with the pension benefit guaranty 
                corporation.--Except as provided in subparagraph (C), 
                the Secretary of the Treasury shall, before granting or 
                modifying a waiver under this subsection with respect to 
                a plan described in subparagraph (A)(i)--
                          ``(i) provide the Pension Benefit Guaranty 
                      Corporation with--
                                    ``(I) notice of 
                                the completed application for any waiver 
                                or modification, and
                                    ``(II) an 
                                opportunity to comment on such 
                                application within 30 days after receipt 
                                of such notice, and
                          ``(ii) consider--
                                    ``(I) any comments of the 
                                Corporation under clause (i)(II), and
                                    ``(II) any views of any employee 
                                organization (within the meaning of 
                                section 3(4)) representing participants 
                                in the plan which are submitted in 
                                writing to the Secretary of the Treasury 
                                in connection with such application.
                Information provided to the Corporation under this 
                subparagraph shall be considered tax return information 
                and subject to the safeguarding and reporting 
                requirements of section 6103(p) of the Internal Revenue 
                Code of 1986.
                    ``(C) Exception for certain waivers.--
                          ``(i) In general.--The preceding provisions of 
                      this paragraph shall not apply to any plan with 
                      respect to which the sum of--
                                    ``(I) the aggregate unpaid minimum 
                                required 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 a single-employer 
                plan, no waiver may be granted under this subsection 
                with respect to any plan for any plan year unless an 
                application therefor is submitted to the Secretary of 
                the Treasury not later than the 15th day of the 3rd 
                month beginning after the close of such plan year.
                    ``(B) Special rule if employer is member of 
                controlled group.--In the case of a single-employer 
                plan, if an employer is a member of a controlled group, 
                the temporary substantial business hardship requirements 
                of paragraph (1) shall be treated as met only if such 
                requirements are met--
                          ``(i) with respect to such employer, and
                          ``(ii) with respect to the controlled group of 
                      which such employer is a member (determined by 
                      treating all members of such group as a single 
                      employer).
                The Secretary of the Treasury may provide that an 
                analysis of a trade or business or industry of a member 
                need not be conducted if such Secretary determines such 
                analysis is not necessary because the taking into 
                account of such member would not significantly affect 
                the determination under this paragraph.
            ``(6) Advance notice.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall, before granting a waiver under this subsection, 
                require each applicant to provide evidence satisfactory 
                to such Secretary that the applicant has provided notice 
                of the filing of the application for such waiver to each 
                affected party (as defined in section 4001(a)(21)). Such 
                notice shall include a description of the extent to 
                which the plan is funded for benefits which are 
                guaranteed under title IV and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under subparagraph (A).
            ``(7) Restriction on plan amendments.--
                    ``(A) In general.--No amendment of a plan which 
                increases the liabilities of the plan by reason of any 
                increase in benefits, any change in the accrual of 
                benefits, or any change in the rate at which benefits 
                become nonforfeitable under the plan shall be adopted if 
                a waiver under this subsection or an extension of time 
                under section 304(d) is in effect with respect to the 
                plan, or if a plan amendment described in subsection 
                (d)(2) has been made at any time in the preceding 12 
                months (24 months in the case of a multiemployer plan). 
                If a plan is amended in violation of the preceding 
                sentence, any such waiver, or extension of time, shall 
                not apply to any plan year ending on or after the date 
                on which such amendment is adopted.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any plan amendment which--
                          ``(i) the Secretary of the Treasury determines 
                      to be reasonable and which provides for only de 
                      minimis increases in the liabilities of the plan,
                          ``(ii) only repeals an amendment described in 
                      subsection (d)(2), or
                          ``(iii) is required as a condition of 
                      qualification under part I of subchapter D of 
                      chapter 1 of the Internal Revenue Code of 1986.
            ``(8) Cross reference.--For corresponding duties of the 
        Secretary of the Treasury with regard to implementation of the 
        Internal Revenue Code of 1986, see section 412(c) of such Code.

    ``(d) Miscellaneous Rules.--
            ``(1) Change in method or year.--If the funding method, the 
        valuation date, or a plan year for a plan is changed, the change 
        shall take effect only if approved by the Secretary of the 
        Treasury.
            ``(2) Certain retroactive plan amendments.--For purposes of 
        this section, any amendment applying to a plan year which--
                    ``(A) is adopted after the 
                close of such plan year but no later than 2\1/2\ months 
                after the close of the plan year (or, in the case of a 
                multiemployer plan, no later than 2 years after the 
                close of such plan year),
                    ``(B) does not reduce the accrued benefit of any 
                participant determined as of the beginning of the first 
                plan year to which the amendment applies, and
                    ``(C) does not reduce the accrued benefit of any 
                participant determined as of the time of adoption except 
                to the extent required by the circumstances,
        shall, at the election of the plan administrator, be deemed to 
        have been made on the first day of such plan year. No amendment 
        described in this paragraph which reduces the accrued benefits 
        of any participant shall take effect unless the plan 
        administrator files a notice with the Secretary of the Treasury 
        notifying him of such amendment and such Secretary has approved 
        such amendment, or within 90 days after the date on which such 
        notice was filed, failed to disapprove such amendment. No 
        amendment described in this subsection shall be approved by the 
        Secretary of the Treasury unless such Secretary determines that 
        such amendment is necessary because of a temporary substantial 
        business hardship (as determined under subsection (c)(2)) or a 
        substantial business hardship (as so determined) in the case of 
        a multiemployer plan and that a waiver under subsection (c) (or, 
        in the case of a multiemployer plan, any extension of the 
        amortization period under section 304(d)) is unavailable or 
        inadequate.
            ``(3) Controlled group.--For purposes of this section, the 
        term `controlled group' means any group treated as a single 
        employer under subsection (b), (c), (m), or (o) of section 414 
        of the Internal Revenue Code of 1986.''.

    (c) Clerical Amendment.--The table of contents in section 1 of such 
Act is amended by striking the items relating to sections 302 through 
308 and inserting the following new item:

``Sec. 302. Minimum funding standards.''.

    (d) Effective Date.--The amendments made 
by this section shall apply to plan years beginning after 2007.

SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
            PLANS.

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by section 101 of 
this Act) is amended by inserting after section 302 the following new 
section:

``SEC. 303. MINIMUM FUNDING STANDARDS FOR SINGLE-
            EMPLOYER DEFINED BENEFIT PENSION PLANS.

    ``(a) Minimum Required Contribution.--For purposes of this section 
and section 302(a)(2)(A), except as provided in subsection (f), the term 
`minimum required contribution' means, with respect to any plan year of 
a single-employer plan--
            ``(1) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)(B)) is less than the 
        funding target of the plan for the plan year, the sum of--
                    ``(A) the target normal cost of the plan for the 
                plan year,
                    ``(B) the shortfall amortization charge (if any) for 
                the plan for the plan year determined under subsection 
                (c), and
                    ``(C) the waiver amortization charge (if any) for 
                the plan for the plan year as determined under 
                subsection (e); or
            ``(2) in any case in which the value of plan assets of the 
        plan (as reduced under subsection (f)(4)(B)) equals or exceeds
        the funding target of the plan for the plan year, the target 
        normal cost of the plan for the plan year reduced (but not below 
        zero) by such excess.

    ``(b) Target Normal Cost.--For purposes of this section, except as 
provided in subsection (i)(2) with respect to plans in at-risk status, 
the term `target normal cost' means, for any plan year, the present 
value of all benefits which are expected to accrue or to be earned under 
the plan during the plan year. For purposes of this subsection, if any 
benefit attributable to services performed in a preceding plan year is 
increased by reason of any increase in compensation during the current 
plan year, the increase in such benefit shall be treated as having 
accrued during the current plan year.
    ``(c) Shortfall Amortization Charge.--
            ``(1) In general.--For purposes of this section, the 
        shortfall amortization charge for a plan for any plan year is 
        the aggregate total (not less than zero) of the shortfall 
        amortization installments for such plan year with respect to the 
        shortfall amortization bases for such plan year and each of the 
        6 preceding plan years.
            ``(2) Shortfall amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The shortfall amortization 
                installments are the amounts necessary to amortize the 
                shortfall amortization base of the plan for any plan 
                year in level annual installments over the 7-plan-year 
                period beginning with such plan year.
                    ``(B) Shortfall installment.--The shortfall 
                amortization installment for any plan year in the 7-
                plan-year period under subparagraph (A) with respect to 
                any shortfall amortization base is the annual 
                installment determined under subparagraph (A) for that 
                year for that base.
                    ``(C) Segment rates.--In determining any shortfall 
                amortization installment under this paragraph, the plan 
                sponsor shall use the segment rates determined under 
                subparagraph (C) of subsection (h)(2), applied under 
                rules similar to the rules of subparagraph (B) of 
                subsection (h)(2).
            ``(3) Shortfall amortization base.--For purposes of this 
        section, the shortfall amortization base of a plan for a plan 
        year is--
                    ``(A) the funding shortfall of such plan for such 
                plan year, minus
                    ``(B) the present value (determined using the 
                segment rates determined under subparagraph (C) of 
                subsection (h)(2), applied under rules similar to the 
                rules of subparagraph (B) of subsection (h)(2)) of the 
                aggregate total of the shortfall amortization 
                installments and waiver amortization installments which 
                have been determined for such plan year and any 
                succeeding plan year with respect to the shortfall 
                amortization bases and waiver amortization bases of the 
                plan for any plan year preceding such plan year.
            ``(4) Funding shortfall.--For purposes of this section, the 
        funding shortfall of a plan for any plan year is the excess (if 
        any) of--
                    ``(A) the funding target of the plan for the plan 
                year, over
                    ``(B) the value of plan assets of the plan (as 
                reduced under subsection (f)(4)(B)) for the plan year 
                which are held by the plan on the valuation date.
            ``(5) Exemption from new shortfall amortization base.--
                    ``(A) In general.--In any case in which the value of 
                plan assets of the plan (as reduced under subsection 
                (f)(4)(A)) is equal to or greater than the funding 
                target of the plan for the plan year, the shortfall 
                amortization base of the plan for such plan year shall 
                be zero.
                    ``(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 ofThe applicable............................
    year
                beginning in cpercentage 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 302(d) (as in 
                                effect for plan years beginning in 
                                2007), determined after the application 
                                of paragraphs (6) and (9) thereof.
            ``(6) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the 
        shortfall amortization charge for such plan year and succeeding 
        plan years, the shortfall amortization bases for all preceding 
        plan years (and all shortfall amortization installments 
        determined with respect to such bases) shall be reduced to zero.

    ``(d) Rules Relating to Funding Target.--For purposes of this 
section--
            ``(1) Funding target.--Except as provided in subsection 
        (i)(1) with respect to plans in at-risk status, the funding 
        target of a plan for a plan year is the present value of all 
        benefits accrued or earned under the plan as of the beginning of 
        the plan year.
            ``(2) Funding target attainment percentage.--The `funding 
        target attainment percentage' of a plan for a plan year is the 
        ratio (expressed as a percentage) which--
                    ``(A) the value of plan assets for the plan year (as 
                reduced under subsection (f)(4)(B)), bears to
                    ``(B) the funding target of the plan for the plan 
                year (determined without regard to subsection (i)(1)).

    ``(e) Waiver Amortization Charge.--
            ``(1) Determination of waiver amortization charge.--The 
        waiver amortization charge (if any) for a plan for any plan year 
        is the aggregate total of the waiver amortization installments 
        for such plan year with respect to the waiver amortization bases 
        for each of the 5 preceding plan years.
            ``(2) Waiver amortization installment.--For purposes of 
        paragraph (1)--
                    ``(A) Determination.--The waiver amortization 
                installments are the amounts necessary to amortize the 
                waiver amortization base of the plan for any plan year 
                in level annual installments over a period of 5 plan 
                years beginning with the succeeding plan year.
                    ``(B) Waiver installment.--The waiver amortization 
                installment for any plan year in the 5-year period under 
                subparagraph (A) with respect to any waiver amortization 
                base is the annual installment determined under 
                subparagraph (A) for that year for that base.
            ``(3) Interest rate.--In determining any waiver amortization 
        installment under this subsection, the plan sponsor shall use 
        the segment rates determined under subparagraph (C) of 
        subsection (h)(2), applied under rules similar to the rules of 
        subparagraph (B) of subsection (h)(2).
            ``(4) Waiver amortization base.--The waiver amortization 
        base of a plan for a plan year is the amount of the waived 
        funding deficiency (if any) for such plan year under section 
        302(c).
            ``(5) Early deemed amortization upon attainment of funding 
        target.--In any case in which the funding shortfall of a plan 
        for a plan year is zero, for purposes of determining the waiver 
        amortization charge for such plan year and succeeding plan 
        years, the waiver amortization bases for all preceding plan 
        years (and all waiver amortization installments determined with 
        respect to such bases) shall be reduced to zero.

    ``(f) Reduction of Minimum Required Contribution by Prefunding 
Balance and Funding Standard Carryover Balance.--
            ``(1) Election to maintain balances.--
                    ``(A) Prefunding balance.--The plan sponsor of a 
                single-employer plan may elect to maintain a prefunding 
                balance.
                    ``(B) Funding standard carryover balance.--
                          ``(i) In general.--In the case of a single-
                      employer plan described in clause (ii), the plan 
                      sponsor may elect to maintain a funding standard 
                      carryover balance, until such balance is reduced 
                      to zero.
                          ``(ii) Plans maintaining funding standard 
                      account in 2007.--A plan is described in this 
                      clause if the plan--
                                    ``(I) was in effect for a plan year 
                                beginning in 2007, and
                                    ``(II) had a positive balance in the 
                                funding standard account under section 
                                302(b) as in effect for such plan year 
                                and determined as of the end of such 
                                plan year.
            ``(2) Application of balances.--A prefunding balance and a 
        funding standard carryover balance maintained pursuant to this 
        paragraph--
                    ``(A) shall be available for crediting against the 
                minimum required contribution, pursuant to an election 
                under paragraph (3),
                    ``(B) shall be applied as a reduction in the amount 
                treated as the value of plan assets for purposes of this 
                section, to the extent provided in paragraph (4), and
                    ``(C) may be reduced at any time, pursuant to an 
                election under paragraph (5).
            ``(3) Election to apply balances against minimum required 
        contribution.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), in the case of any plan year 
                in which the plan sponsor elects to credit against the 
                minimum required contribution for the current plan year 
                all or a portion of the prefunding balance or the 
                funding standard carryover balance for the current plan 
                year (not in excess of such minimum required 
                contribution), the minimum required contribution for the 
                plan year shall be reduced as of the first day of the 
                plan year by the amount so credited by the plan sponsor. 
                For purposes of the preceding sentence, the minimum 
                required contribution shall be determined after taking 
                into account any waiver under section 302(c).
                    ``(B) Coordination with funding standard carryover 
                balance.--To the extent that any plan has a funding 
                standard carryover balance greater than zero, no amount 
                of the prefunding balance of such plan may be credited 
                under this paragraph in reducing the minimum required 
                contribution.
                    ``(C) Limitation for underfunded plans.--The 
                preceding provisions of this paragraph shall not apply 
                for any plan year if the ratio (expressed as a 
                percentage) which--
                          ``(i) the value of plan assets for the 
                      preceding plan year (as reduced under paragraph 
                      (4)(C)), bears to
                          ``(ii) the funding target of the plan for the 
                      preceding plan year (determined without regard to 
                      subsection (i)(1)),
                is less than 80 percent. In the case of plan years 
                beginning in 2008, the ratio under this subparagraph may 
                be determined using such methods of estimation as the 
                Secretary of the Treasury may prescribe.
            ``(4) Effect of balances on amounts treated as value of plan 
        assets.--In the case of any plan maintaining a prefunding 
        balance or a funding standard carryover balance pursuant to this 
        subsection, the amount treated as the value of plan assets shall 
        be deemed to be such amount, reduced as provided in the 
        following subparagraphs:
                    ``(A) Applicability of shortfall amortization 
                base.--For purposes of subsection (c)(5), the value of 
                plan assets is deemed to be such amount, reduced by the 
                amount of the prefunding balance, but only if an 
                election under paragraph (2) applying any portion of the 
                prefunding balance in reducing the minimum required 
                contribution is in effect for the plan year.
                    ``(B) Determination of excess assets, funding 
                shortfall, and funding target attainment percentage.--
                          ``(i) In general.--For purposes of subsections 
                      (a), (c)(4)(B), and (d)(2)(A), the value of plan 
                      assets is deemed to be such amount, reduced by the 
                      amount of the prefunding balance and the funding 
                      standard carryover balance.
                          ``(ii) Special rule for certain binding 
                      agreements with pbgc.--For purposes of subsection 
                      (c)(4)(B), the value of plan assets shall not be 
                      deemed to be reduced for a plan year by the amount 
                      of the specified balance if, with respect to such 
                      balance, there is in effect for a plan year a 
                      binding written agreement with the Pension Benefit 
                      Guaranty Corporation which provides that such 
                      balance is not available to reduce the minimum 
                      required contribution for the plan year. For 
                      purposes of the preceding sentence, the term 
                      `specified balance' means the prefunding balance 
                      or the funding standard carryover balance, as the 
                      case may be.
                    ``(C) Availability of balances in plan year for 
                crediting against minimum required contribution.--For 
                purposes of paragraph (3)(C)(i) of this subsection, the 
                value of plan assets is deemed to be such amount, 
                reduced by the amount of the prefunding balance.
            ``(5) Election to reduce balance prior to determinations of 
        value of plan assets and crediting against minimum required 
        contribution.--
                    ``(A) In general.--The plan sponsor may elect to 
                reduce by any amount the balance of the prefunding 
                balance and the funding standard carryover balance for 
                any plan year (but not below zero). Such reduction shall 
                be effective prior to any determination of the value of 
                plan assets for such plan year under this section and 
                application of the balance in reducing the minimum 
                required contribution for such plan for such plan year 
                pursuant to an election under paragraph (2).
                    ``(B) Coordination between prefunding balance and 
                funding standard carryover balance.--To the extent that 
                any plan has a funding standard carryover balance 
                greater than zero, no election may be made under 
                subparagraph (A) with respect to the prefunding balance.
            ``(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 first day of each 
                      plan year beginning after 2008, the prefunding 
                      balance of a plan shall be increased by the amount 
                      elected by the plan sponsor for the plan year. 
                      Such amount shall not exceed the excess (if any) 
                      of--
                                    ``(I) the aggregate total of 
                                employer contributions to the plan for 
                                the preceding plan year, over--
                                    ``(II) the minimum required 
                                contribution for such preceding plan 
                                year.
                          ``(ii) Adjustments for interest.--Any excess 
                      contributions under clause (i) shall be properly 
                      adjusted for interest accruing for the periods 
                      between the first day of the current plan year and 
                      the dates on which the excess contributions were 
                      made, determined by using the effective interest 
                      rate for the preceding plan year and by treating 
                      contributions as being first used to satisfy the 
                      minimum required contribution.
                          ``(iii) Certain contributions necessary to 
                      avoid benefit limitations disregarded.--The excess 
                      described in clause (i) with respect to any 
                      preceding plan year shall be reduced (but not 
                      below zero) by the amount of contributions an 
                      employer would be required to make under paragraph 
                      (1), (2), or (4) of section 206(g) to avoid a 
                      benefit limitation which would otherwise be 
                      imposed under such paragraph for the preceding 
                      plan year. Any contribution which may be taken 
                      into account in satisfying the requirements of 
                      more than 1 of such paragraphs shall be taken into 
                      account only once for purposes of this clause.
                    ``(C) Decrease.--The prefunding balance of a plan 
                shall be decreased (but not below zero) by--
                          ``(i) as of the first day of each plan year 
                      after 2008, the amount of such balance credited 
                      under paragraph (2) (if any) in reducing the 
                      minimum required contribution of the plan for the 
                      preceding plan year, and
                          ``(ii) as of the time specified in paragraph 
                      (5)(A), any reduction in such balance elected 
                      under paragraph (5).
            ``(7) Funding standard carryover balance.--
                    ``(A) In general.--A funding standard carryover 
                balance maintained by a plan shall consist of a 
                beginning balance determined under subparagraph (B), 
                decreased to the extent provided in subparagraph (C), 
                and adjusted further as provided in paragraph (8).
                    ``(B) Beginning balance.--The beginning balance of 
                the funding standard carryover balance shall be the 
                positive balance described in paragraph (1)(B)(ii)(II).
                    ``(C) Decreases.--The funding standard carryover 
                balance of a plan shall be decreased (but not below 
                zero) by--
                          ``(i) as of the first day of each plan year 
                      after 2008, the amount of such balance credited 
                      under paragraph (2) (if any) in reducing the 
                      minimum required contribution of the plan for the 
                      preceding plan year, and
                          ``(ii) as of the time specified in paragraph 
                      (5)(A), any reduction in such balance elected 
                      under paragraph (5).
            ``(8) Adjustments for investment 
        experience.--In determining the prefunding balance or the 
        funding standard carryover balance of a plan as of the first day 
        of the plan year, the plan sponsor shall, in accordance with 
        regulations prescribed by the Secretary of the Treasury, adjust 
        such balance to reflect the rate of return on plan assets for 
        the preceding plan year. Notwithstanding subsection (g)(3), such 
        rate of return shall be determined on the basis of fair market 
        value and shall properly take into account, in accordance with 
        such regulations, all contributions, distributions, and other 
        plan payments made during such period.
            ``(9) Elections.--Elections under 
        this subsection shall be made at such times, and in such form 
        and manner, as shall be prescribed in regulations of the 
        Secretary of the Treasury.

    ``(g) Valuation of Plan Assets and Liabilities.--
            ``(1) Timing of determinations.--Except as otherwise 
        provided under this subsection, all determinations under this 
        section for a plan year shall be made as of the valuation date 
        of the plan for such plan year.
            ``(2) Valuation date.--For purposes of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the valuation date of a plan for any 
                plan year shall be the first day of the plan year.
                    ``(B) Exception for small plans.--If, on each day 
                during the preceding plan year, a plan had 100 or fewer 
                participants, the plan may designate any day during the 
                plan year as its valuation date for such plan year and 
                succeeding plan years. For purposes of this 
                subparagraph, all defined benefit plans which are 
                single-employer plans and are maintained by the same 
                employer (or any member of such employer's controlled 
                group) shall be treated as 1 plan, but only participants 
                with respect to such employer or member shall be taken 
                into account.
                    ``(C) Application of certain rules in determination 
                of plan size.--For purposes of this paragraph--
                          ``(i) Plans not in existence in preceding 
                      year.--In the case of the first plan year of any 
                      plan, subparagraph (B) shall apply to such plan by 
                      taking into account the number of participants 
                      that the plan is reasonably expected to have on 
                      days during such first plan year.
                          ``(ii) Predecessors.--Any reference in 
                      subparagraph (B) to an employer shall include a 
                      reference to any predecessor of such employer.
            ``(3) Determination of value of plan assets.--For purposes 
        of this section--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the value of plan assets shall be the 
                fair market value of the assets.
                    ``(B) Averaging allowed.--A plan may determine the 
                value of plan assets on the basis of the averaging of 
                fair market values, but only if such method--
                          ``(i) is permitted under regulations 
                      prescribed by the Secretary of the Treasury,
                          ``(ii) does not provide for averaging of such 
                      values over more than the period beginning on the 
                      last day of the 25th month preceding the month in 
                      which the valuation date occurs and ending on the 
                      valuation date (or a similar period in the case of 
                      a valuation date which is not the 1st day of a 
                      month), and
                          ``(iii) does not result in a determination of 
                      the value of plan assets which, at any time, is 
                      lower than 90 percent or greater than 110 percent 
                      of the fair market value of such assets at such 
                      time.
                Any such averaging shall be adjusted for contributions 
                and distributions (as provided by the Secretary of the 
                Treasury).
            ``(4) Accounting for contribution receipts.--For purposes of 
        determining the value of assets under paragraph (3)--
                    ``(A) Prior year contributions.--If--
                          ``(i) an employer makes any contribution to 
                      the plan after the valuation date for the plan 
                      year in which the contribution is made, and
                          ``(ii) the contribution is for a preceding 
                      plan year,
                the contribution shall be taken into account as an asset 
                of the plan as of the valuation date, except that in the 
                case of any plan year beginning after 2008, only the 
                present value (determined as of the valuation date) of 
                such contribution may be taken into account. For 
                purposes of the preceding sentence, present value shall 
                be determined using the effective interest rate for the 
                preceding plan year to which the contribution is 
                properly allocable.
                    ``(B) Special rule for current year contributions 
                made before valuation date.--If any contributions for 
                any plan year are made to or under the plan during the 
                plan year but before the valuation date for the plan 
                year, the assets of the plan as of the valuation date 
                shall not include--
                          ``(i) such contributions, and
                          ``(ii) interest on such contributions for the 
                      period between the date of the contributions and 
                      the valuation date, determined by using the 
                      effective interest rate for the plan year.

    ``(h) Actuarial Assumptions and Methods.--
            ``(1) In general.--Subject to this subsection, the 
        determination of any present value or other computation under 
        this section shall be made on the basis of actuarial assumptions 
        and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(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 
                and normal cost of a plan for any plan year, the 
                interest rate used in determining the present value of 
                the benefits of the plan shall be--
                          ``(i) in the case of benefits reasonably 
                      determined to be payable during the 5-year period 
                      beginning on the first day of the plan year, the 
                      first segment rate with respect to the applicable 
                      month,
                          ``(ii) in the case of benefits reasonably 
                      determined to be payable during the 15-year period 
                      beginning at the end of the period described in 
                      clause (i), the second segment rate with respect 
                      to the applicable month, and
                          ``(iii) in the case of benefits reasonably 
                      determined to be payable after the period 
                      described in clause (ii), the third segment rate 
                      with respect to the applicable month.
                    ``(C) Segment rates.--For purposes of this 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 of the Treasury for 
                      such month on the basis of the corporate bond 
                      yield curve for such month, taking into account 
                      only that portion of such yield curve which is 
                      based on bonds maturing during the 5-year period 
                      commencing with such month.
                          ``(ii) Second segment rate.--The term `second 
                      segment rate' means, with respect to any month, 
                      the single rate of interest which shall be 
                      determined by the Secretary of the Treasury for 
                      such month on the basis of the corporate bond 
                      yield curve for such month, taking into account 
                      only that portion of such yield curve which is 
                      based on bonds maturing during the 15-year period 
                      beginning at the end of the period described in 
                      clause (i).
                          ``(iii) Third segment rate.--The term `third 
                      segment rate' means, with respect to any month, 
                      the single rate of interest which shall be 
                      determined by the Secretary of the Treasury for 
                      such month on the basis of the corporate bond 
                      yield curve for such month, taking into account 
                      only that portion of such yield curve which is 
                      based on bonds maturing during periods beginning 
                      after the period described in clause (ii).
                    ``(D) Corporate bond yield curve.--For purposes of 
                this paragraph--
                          ``(i) In general.--The term `corporate bond 
                      yield curve' means, with respect to any month, a 
                      yield curve which is prescribed by the Secretary 
                      of the Treasury for such month and which reflects 
                      the average, for the 24-month period ending with 
                      the month preceding such month, of monthly yields 
                      on investment grade corporate bonds with varying 
                      maturities and that are in the top 3 quality 
                      levels available.
                          ``(ii) Election to use yield curve.--Solely 
                      for purposes of determining the minimum required 
                      contribution under this section, the plan sponsor 
                      may, in lieu of the segment rates determined under 
                      subparagraph (C), elect to use interest rates 
                      under the corporate bond yield curve. For purposes 
                      of the preceding sentence such curve shall be 
                      determined without regard to the 24-month 
                      averaging described in clause (i). Such election, 
                      once made, may be revoked only with the consent of 
                      the Secretary of the Treasury.
                    ``(E) Applicable month.--For purposes of this 
                paragraph, the term `applicable month' means, with 
                respect to any plan for any plan year, the month which 
                includes the valuation date of such plan for such plan 
                year or, at the election of the plan sponsor, any of the 
                4 months which precede such month. Any election made 
                under this subparagraph shall apply to the plan year for 
                which the election is made and all succeeding plan 
                years, unless the election is revoked with the consent 
                of the Secretary of the Treasury.
                    ``(F) Publication requirements.--The Secretary of 
                the Treasury shall publish for each month the corporate 
                bond yield curve (and the corporate bond yield curve 
                reflecting the modification described in section 
                205(g)(3)(B)(iii)(I)) for such month and each of the 
                rates determined under subparagraph (B) for such month. 
                The Secretary of the Treasury shall also publish a 
                description of the methodology used to determine such 
                yield curve and such rates which is sufficiently 
                detailed to enable plans to make reasonable projections 
                regarding the yield curve and such rates for future 
                months based on the plan's projection of future interest 
                rates.
                    ``(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 
                                302(b)(5)(B)(ii)(II) (as in effect for 
                                plan years beginning in 2007), 
                                multiplied by a percentage equal to 100 
                                percent minus the applicable percentage.
                          ``(ii) Applicable percentage.--For purposes of 
                      clause (i), the applicable percentage is 33\1/3\ 
                      percent for plan years beginning in 2008 and 66\2/
                      3\ percent for plan years beginning in 2009.
                          ``(iii) New plans ineligible.--Clause (i) 
                      shall not apply to any plan if the first plan year 
                      of the plan begins after December 31, 2007.
                          ``(iv) Election.--The plan sponsor may elect 
                      not to have this subparagraph apply. Such 
                      election, once made, may be revoked only with the 
                      consent of the Secretary of the Treasury.
            ``(3) Mortality tables.--
                    ``(A) In general.--Except as 
                provided in subparagraph (C) or (D), the Secretary of 
                the Treasury shall by regulation prescribe mortality 
                tables to be used in determining any present value or 
                making any computation under this section. Such tables 
                shall be based on the actual experience of pension plans 
                and projected trends in such experience. In prescribing 
                such tables, the Secretary of the Treasury shall take 
                into account results of available independent studies of 
                mortality of individuals covered by pension plans.
                    ``(B) Periodic revision.--The Secretary of the 
                Treasury shall (at least every 10 years) make revisions 
                in any table in effect under subparagraph (A) to reflect 
                the actual experience of pension plans and projected 
                trends in such experience.
                    ``(C) Substitute mortality table.--
                          ``(i) In general.--Upon request by the plan 
                      sponsor and approval by the Secretary of the 
                      Treasury, a mortality table which meets the 
                      requirements of clause (iii) shall be used in 
                      determining any present value or making any 
                      computation under this section during the period 
                      of consecutive plan years (not to exceed 10) 
                      specified in the request.
                          ``(ii) Early termination of period.--
                      Notwithstanding clause (i), a mortality table 
                      described in clause (i) shall cease to be in 
                      effect as of the earliest of--
                                    ``(I) the date on which there is a 
                                significant change in the participants 
                                in the plan by reason of a plan spinoff 
                                or merger or otherwise, or
                                    ``(II) the date on which the plan 
                                actuary determines that such table does 
                                not meet the requirements of clause 
                                (iii).
                          ``(iii) Requirements.--A mortality table meets 
                      the requirements of this clause if--
                                    ``(I) there is a sufficient number 
                                of plan participants, and the pension 
                                plans have been maintained for a 
                                sufficient period of time, to have 
                                credible information necessary for 
                                purposes of subclause (II), and
                                    ``(II) such table reflects the 
                                actual experience of the pension plans 
                                maintained by the sponsor and projected 
                                trends in general mortality experience.
                          ``(iv) All plans in controlled group must use 
                      separate table.--Except as provided by the 
                      Secretary of the Treasury, a plan sponsor may not 
                      use a mortality table under this subparagraph for 
                      any plan maintained by the plan sponsor unless--
                                    ``(I) a separate mortality table is 
                                established and used under this 
                                subparagraph for each other plan 
                                maintained by the plan sponsor and if 
                                the plan sponsor is a member of a 
                                controlled group, each member of the 
                                controlled group, and
                                    ``(II) the requirements of clause 
                                (iii) are met separately with respect to 
                                the table so established for each such 
                                plan, determined by only taking into 
                                account the participants of such plan, 
                                the
                                time such plan has been in existence, 
                                and the actual experience of such plan.
                          ``(v) Deadline for submission and disposition 
                      of application.--
                                    ``(I) Submission.--The plan sponsor 
                                shall submit a mortality table to the 
                                Secretary of the Treasury for approval 
                                under this subparagraph at least 7 
                                months before the 1st day of the period 
                                described in clause (i).
                                    ``(II) Disposition.--Any mortality 
                                table submitted to the Secretary of the 
                                Treasury for approval under this 
                                subparagraph shall be treated as in 
                                effect as of the 1st day of the period 
                                described in clause (i) unless the 
                                Secretary of the Treasury, during the 
                                180-day period beginning on the date of 
                                such submission, disapproves of such 
                                table and provides the reasons that such 
                                table fails to meet the requirements of 
                                clause (iii). The 180-day period shall 
                                be extended upon mutual agreement of the 
                                Secretary of the Treasury and the plan 
                                sponsor.
                    ``(D) Separate mortality tables for the disabled.--
                Notwithstanding subparagraph (A)--
                          ``(i) In general.--The Secretary of the 
                      Treasury shall establish mortality tables which 
                      may be used (in lieu of the tables under 
                      subparagraph (A)) under this subsection for 
                      individuals who are entitled to benefits under the 
                      plan on account of disability. The Secretary of 
                      the Treasury shall establish separate tables for 
                      individuals whose disabilities occur in plan years 
                      beginning before January 1, 1995, and for 
                      individuals whose disabilities occur in plan years 
                      beginning on or after such date.
                          ``(ii) Special rule for disabilities occurring 
                      after 1994.--In the case 
                      of disabilities occurring 
                      in plan years beginning after December 31, 1994, 
                      the tables under clause (i) shall apply only with 
                      respect to individuals described in such subclause 
                      who are disabled within the meaning of title II of 
                      the Social Security Act and the regulations 
                      thereunder.
                          ``(iii) Periodic revision.--The Secretary of 
                      the Treasury shall (at least every 10 years) make 
                      revisions in any table in effect under clause (i) 
                      to reflect the actual experience of pension plans 
                      and projected trends in such experience.
            ``(4) Probability of benefit payments in the form of lump 
        sums or other optional forms.--For purposes of determining any 
        present value or making any computation under this section, 
        there shall be taken into account--
                    ``(A) the probability that future benefit payments 
                under the plan will be made in the form of optional 
                forms of benefits provided under the plan (including 
                lump sum distributions, determined on the basis of the 
                plan's experience and other related assumptions), and
                    ``(B) any difference in the present value of such 
                future benefit payments resulting from the use of 
                actuarial assumptions, in determining benefit payments 
                in any such
                optional form of benefits, which are different from 
                those specified in this subsection.
            ``(5) Approval of large changes in actuarial assumptions.--
                    ``(A) In general.--No actuarial assumption used to 
                determine the funding target for a plan to which this 
                paragraph applies may be changed without the approval of 
                the Secretary of the Treasury.
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan only if--
                          ``(i) the plan is a single-employer plan to 
                      which title IV applies,
                          ``(ii) the aggregate unfunded vested benefits 
                      as of the close of the preceding plan year (as 
                      determined under section 4006(a)(3)(E)(iii)) of 
                      such plan and all other plans maintained by the 
                      contributing sponsors (as defined in section 
                      4001(a)(13)) and members of such sponsors' 
                      controlled groups (as defined in section 
                      4001(a)(14)) which are covered by title IV 
                      (disregarding plans with no unfunded vested 
                      benefits) exceed $50,000,000, and
                          ``(iii) the change in assumptions (determined 
                      after taking into account any changes in interest 
                      rate and mortality table) results in a decrease in 
                      the funding shortfall of the plan for the current 
                      plan year that exceeds $50,000,000, or that 
                      exceeds $5,000,000 and that is 5 percent or more 
                      of the funding target of the plan before such 
                      change.

    ``(i) Special Rules for At-Risk Plans.--
            ``(1) Funding target for plans in at-risk status.--
                    ``(A) In general.--In the case of a plan which is in 
                at-risk status for a plan year, the funding target of 
                the plan for the plan year shall be equal to the sum 
                of--
                          ``(i) the present value of all benefits 
                      accrued or earned under the plan as of the 
                      beginning of the plan year, as determined by using 
                      the additional actuarial assumptions described in 
                      subparagraph (B), and
                          ``(ii) in the case of a plan which also has 
                      been in at-risk status for at least 2 of the 4 
                      preceding plan years, a loading factor determined 
                      under subparagraph (C).
                    ``(B) Additional actuarial assumptions.--The 
                actuarial assumptions described in this subparagraph are 
                as follows:
                          ``(i) All employees who are not otherwise 
                      assumed to retire as of the valuation date but who 
                      will be eligible to elect benefits during the plan 
                      year and the 10 succeeding plan years shall be 
                      assumed to retire at the earliest retirement date 
                      under the plan but not before the end of the plan 
                      year for which the at-risk funding target and at-
                      risk target normal cost are being determined.
                          ``(ii) All employees shall be assumed to elect 
                      the retirement benefit available under the plan at 
                      the assumed retirement age (determined after 
                      application of clause (i)) which would result in 
                      the highest present value of benefits.
                    ``(C) Loading factor.--The loading factor applied 
                with respect to a plan under this paragraph for any plan 
                year is the sum of--
                          ``(i) $700, times the number of participants 
                      in the plan, plus
                          ``(ii) 4 percent of the funding target 
                      (determined without regard to this paragraph) of 
                      the plan for the plan year.
            ``(2) Target normal cost of at-risk plans.--In the case of a 
        plan which is in at-risk status for a plan year, the target 
        normal cost of the plan for such plan year shall be equal to the 
        sum of--
                    ``(A) the present value of all benefits which are 
                expected to accrue or be earned under the plan during 
                the plan year, determined using the additional actuarial 
                assumptions described in paragraph (1)(B), plus
                    ``(B) in the case of a plan which also has been in 
                at-risk status for at least 2 of the 4 preceding plan 
                years, a loading factor equal to 4 percent of the target 
                normal cost (determined without regard to this 
                paragraph) of the plan for the plan year.
            ``(3) Minimum amount.--In no event shall--
                    ``(A) the at-risk funding target be less than the 
                funding target, as determined without regard to this 
                subsection, or
                    ``(B) the at-risk target normal cost be less than 
                the target normal cost, as determined without regard to 
                this subsection.
            ``(4) Determination of at-risk status.--For purposes of this 
        subsection--
                    ``(A) In general.--A plan is in at-risk status for a 
                plan year if--
                          ``(i) the funding target attainment percentage 
                      for the preceding plan year (determined under this 
                      section without regard to this subsection) is less 
                      than 80 percent, and
                          ``(ii) the funding target attainment 
                      percentage for the preceding plan year (determined 
                      under this section by using the additional 
                      actuarial assumptions described in paragraph 
                      (1)(B) in computing the funding target) is less 
                      than 70 percent.
                    ``(B) Transition rule.--
                In the case of plan years 
                beginning in 2008, 2009, and 2010, subparagraph (A)(i) 
                shall be applied by substituting the following 
                percentages for `80 percent':
                          ``(i) 65 percent in the case of 2008.
                          ``(ii) 70 percent in the case of 2009.
                          ``(iii) 75 percent in the case of 2010.
                In the case of plan years beginning in 2008, the funding 
                target attainment percentage for the preceding plan year 
                under subparagraph (A)(ii) may be determined using such 
                methods of estimation as the Secretary of the Treasury 
                may provide.
                    ``(C) Special rule for employees offered early 
                retirement in 2006.--
                          ``(i) In general.--For purposes of 
                      subparagraph (A)(ii), the additional actuarial 
                      assumptions described
                      in paragraph (1)(B) shall not be taken into 
                      account with respect to any employee if--
                                    ``(I) such employee is employed by a 
                                specified automobile manufacturer,
                                    ``(II) such 
                                employee is offered a substantial amount 
                                of additional cash compensation, 
                                substantially enhanced retirement 
                                benefits under the plan, or materially 
                                reduced employment duties on the 
                                condition that by a specified date (not 
                                later than December 31, 2010) the 
                                employee retires (as defined under the 
                                terms of the plan),
                                    ``(III) such 
                                offer is made during 2006 and pursuant 
                                to a bona fide retirement incentive 
                                program and requires, by the terms of 
                                the offer, that such offer can be 
                                accepted not later than a specified date 
                                (not later than December 31, 2006), and
                                    ``(IV) such employee does not elect 
                                to accept such offer before the 
                                specified date on which the offer 
                                expires.
                          ``(ii) Specified automobile manufacturer.--For 
                      purposes of clause (i), the term `specified 
                      automobile manufacturer' means--
                                    ``(I) any manufacturer of 
                                automobiles, and
                                    ``(II) any manufacturer of 
                                automobile parts which supplies such 
                                parts directly to a manufacturer of 
                                automobiles and which, after a 
                                transaction or series of transactions 
                                ending in 1999, ceased to be a member of 
                                a controlled group which included such 
                                manufacturer of automobiles.
            ``(5) Transition between applicable funding targets and 
        between applicable target normal costs.--
                    ``(A) In general.--In any case in which a plan which 
                is in at-risk status for a plan year has been in such 
                status for a consecutive period of fewer than 5 plan 
                years, the applicable amount of the funding target and 
                of the target normal cost shall be, in lieu of the 
                amount determined without regard to this paragraph, the 
                sum of--
                          ``(i) the amount determined under this section 
                      without regard to this subsection, plus
                          ``(ii) the transition percentage for such plan 
                      year of the excess of the amount determined under 
                      this subsection (without regard to this paragraph) 
                      over the amount determined under this section 
                      without regard to this subsection.
                    ``(B) Transition percentage.--For purposes of 
                subparagraph (A), the transition percentage shall be 
                determined in accordance with the following table:

            ``If the consecuti..........................................
    of
              years (includingThe transition............................
    year)
            the plan is in at-percentage 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 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
 required installment:
                                    The due date is:
  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 of the Treasury.
            ``(4) Liquidity requirement in connection with quarterly 
        contributions.--
                    ``(A) In general.--A plan to which this paragraph 
                applies shall be treated as failing to pay the full 
                amount of any required installment under paragraph (3) 
                to the extent that the value of the liquid assets paid 
                in such installment is less than the liquidity shortfall 
                (whether or not such liquidity shortfall exceeds the 
                amount of such installment required to be paid but for 
                this paragraph).
                    ``(B) Plans to which paragraph applies.--This 
                paragraph shall apply to a plan (other than a plan 
                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 of the Treasury that such 
                                excess is the result of nonrecurring 
                                circumstances, the base amount with 
                                respect to such quarter shall be 
                                determined without regard to amounts 
                                related to those nonrecurring 
                                circumstances.
                          ``(iii) Disbursements from the plan.--The term 
                      `disbursements from the plan' means all 
                      disbursements from the trust, including purchases 
                      of annuities, payments of single sums and other 
                      benefits, and administrative expenses.
                          ``(iv) Adjusted disbursements.--The term 
                      `adjusted disbursements' means disbursements from 
                      the plan reduced by the product of--
                                    ``(I) the plan's funding target 
                                attainment percentage for the plan year, 
                                and
                                    ``(II) the sum of the purchases of 
                                annuities, payments of single sums, and 
                                such other disbursements as the 
                                Secretary of the Treasury shall provide 
                                in regulations.
                          ``(v) Liquid assets.--The term `liquid assets' 
                      means cash, marketable securities, and such other
                      assets as specified by the Secretary of the 
                      Treasury in regulations.
                          ``(vi) Quarter.--The term `quarter' means, 
                      with respect to any required installment, the 3-
                      month period preceding the month in which the due 
                      date for such installment occurs.
                    ``(F) Regulations.--The Secretary of the Treasury 
                may prescribe such regulations as are necessary to carry 
                out this paragraph.

    ``(k) Imposition of Lien Where Failure to Make Required 
Contributions.--
            ``(1) In general.--In the case of a plan to which this 
        subsection applies (as provided under paragraph (2)), if--
                    ``(A) any person fails to make a contribution 
                payment required by section 302 and this section before 
                the due date for such payment, and
                    ``(B) the unpaid balance of such payment (including 
                interest), when added to the aggregate unpaid balance of 
                all preceding such payments for which payment was not 
                made before the due date (including interest), exceeds 
                $1,000,000,
        then there shall be a lien in favor of the plan in the amount 
        determined under paragraph (3) upon all property and rights to 
        property, whether real or personal, belonging to such person and 
        any other person who is a member of the same controlled group of 
        which such person is a member.
            ``(2) Plans to which subsection applies.--This subsection 
        shall apply to a single-employer plan covered under section 4021 
        for any plan year for which the funding target attainment 
        percentage (as defined in subsection (d)(2)) of such plan is 
        less than 100 percent.
            ``(3) Amount of lien.--For purposes of paragraph (1), the 
        amount of the lien shall be equal to the aggregate unpaid 
        balance of contribution payments required under this section and 
        section 302 for which payment has not been made before the due 
        date.
            ``(4) Notice of failure; lien.--
                    ``(A) Notice of failure.--
                A person committing a failure 
                described in paragraph (1) shall notify the Pension 
                Benefit Guaranty Corporation of such failure within 10 
                days of the due date for the required contribution 
                payment.
                    ``(B) Period of lien.--The lien imposed by paragraph 
                (1) shall arise on the due date for the required 
                contribution payment and shall continue until the last 
                day of the first plan year in which the plan ceases to 
                be described in paragraph (1)(B). Such lien shall 
                continue to run without regard to whether such plan 
                continues to be described in paragraph (2) during the 
                period referred to in the preceding sentence.
                    ``(C) Certain rules to apply.--Any amount with 
                respect to which a lien is imposed under paragraph (1) 
                shall be treated as taxes due and owing the United 
                States and rules similar to the rules of subsections 
                (c), (d), and (e) of section 4068 shall apply with 
                respect to a lien imposed by subsection (a) and the 
                amount with respect to such lien.
            ``(5) Enforcement.--Any lien created under paragraph (1) may 
        be perfected and enforced only by the Pension Benefit Guaranty 
        Corporation, or at the direction of the Pension Benefit Guaranty 
        Corporation, by the contributing sponsor (or any member of the 
        controlled group of the contributing sponsor).
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) Contribution payment.--The term `contribution 
                payment' means, in connection with a plan, a 
                contribution payment required to be made to the plan, 
                including any required installment under paragraphs (3) 
                and (4) of subsection (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 303.
                    ``(C) Controlled group.--The term `controlled group' 
                means any group treated as a single employer under 
                subsections (b), (c), (m), and (o) of section 414 of the 
                Internal Revenue Code of 1986.

    ``(l) Qualified Transfers to Health Benefit Accounts.--In the case 
of a qualified transfer (as defined in section 420 of the Internal 
Revenue Code of 1986), any assets so transferred shall not, for purposes 
of this section, be treated as assets in the plan.''.
    (b) Clerical Amendment.--The table of sections in section 1 of such 
Act (as amended by section 101) is amended by inserting after the item 
relating to section 302 the following new item:

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

    (c) Effective Date.--The amendments made 
by this section shall apply with respect to plan years beginning after 
2007.

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

    (a) Funding-Based Limits on Benefits and Benefit Accruals Under 
Single-Employer Plans.--Section 206 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1056) is amended by adding at the end 
the following new subsection:
    ``(g) Funding-Based Limits on Benefits and Benefit Accruals Under 
Single-Employer Plans.--
            ``(1) Funding-based limitation on shutdown benefits and 
        other unpredictable contingent event benefits under single-
        employer plans.--
                    ``(A) In general.--If a participant of a defined 
                benefit plan which is a single-employer plan is entitled 
                to an unpredictable contingent event benefit payable 
                with respect to any event occurring during any plan 
                year, the plan shall provide that such benefit may not 
                be provided if the adjusted funding target attainment 
                percentage for such plan year--
                          ``(i) is less than 60 percent, or
                          ``(ii) would be less than 60 percent taking 
                      into account such occurrence.
                    ``(B) Exemption.--Subparagraph (A) shall cease to apply with respect to any plan 
                year, effective as of the first day of the plan year, 
                upon payment by the plan
                sponsor of a contribution (in addition to any minimum 
                required contribution under section 303) equal to--
                          ``(i) in the case of subparagraph (A)(i), the 
                      amount of the increase in the funding target of 
                      the plan (under section 303) for the plan year 
                      attributable to the occurrence referred to in 
                      subparagraph (A), and
                          ``(ii) in the case of subparagraph (A)(ii), 
                      the amount sufficient to result in a funding 
                      target attainment percentage of 60 percent.
                    ``(C) Unpredictable contingent event.--For purposes 
                of this paragraph, the term `unpredictable contingent 
                event benefit' means any benefit payable solely by 
                reason of--
                          ``(i) a plant shutdown (or similar event, as 
                      determined by the Secretary of the Treasury), or
                          ``(ii) an event other than the attainment of 
                      any age, performance of any service, receipt or 
                      derivation of any compensation, or occurrence of 
                      death or disability.
            ``(2) Limitations on plan amendments increasing liability 
        for benefits.--
                    ``(A) In general.--No amendment to a defined benefit 
                plan which is a single-employer plan which has the 
                effect of increasing liabilities of the plan by reason 
                of increases in benefits, establishment of new benefits, 
                changing the rate of benefit accrual, or changing the 
                rate at which benefits become nonforfeitable may take 
                effect during any plan year if the adjusted funding 
                target attainment percentage for such plan year is--
                          ``(i) less than 80 percent, or
                          ``(ii) would be less than 80 percent taking 
                      into account such amendment.
                    ``(B) Exemption.--Subparagraph (A) shall cease to apply with respect to any plan 
                year, effective as of the first day of the plan year (or 
                if later, the effective date of the amendment), upon 
                payment by the plan sponsor of a contribution (in 
                addition to any minimum required contribution under 
                section 303) equal to--
                          ``(i) in the case of subparagraph (A)(i), the 
                      amount of the increase in the funding target of 
                      the plan (under section 303) for the plan year 
                      attributable to the amendment, and
                          ``(ii) in the case of subparagraph (A)(ii), 
                      the amount sufficient to result in an adjusted 
                      funding target attainment percentage of 80 
                      percent.
                    ``(C) Exception for certain benefit increases.--
                Subparagraph (A) shall not apply to any amendment which 
                provides for an increase in benefits under a formula 
                which is not based on a participant's compensation, but 
                only if the rate of such increase is not in excess of 
                the contemporaneous rate of increase in average wages of 
                participants covered by the amendment.
            ``(3) Limitations on accelerated benefit distributions.--
                    ``(A) Funding percentage less than 60 percent.--A 
                defined benefit plan which is a single-employer plan 
                shall provide that, in any case in which the plan's 
                adjusted
                funding target attainment percentage for a plan year is 
                less than 60 percent, the plan may not pay any 
                prohibited payment after the valuation date for the plan 
                year.
                    ``(B) Bankruptcy.--
                A defined benefit plan which is 
                a single-employer plan shall provide that, during any 
                period in which the plan sponsor is a debtor in a case 
                under title 11, United States Code, or similar Federal 
                or State law, the plan may not pay any prohibited 
                payment. The preceding sentence shall not apply on or 
                after the date on which the enrolled actuary of the plan 
                certifies that the adjusted funding target attainment 
                percentage of such plan is not less than 100 percent.
                    ``(C) Limited payment if percentage at least 60 
                percent but less than 80 percent.--
                          ``(i) In general.--A defined benefit plan 
                      which is a single-employer plan shall provide 
                      that, in any case in which the plan's adjusted 
                      funding target attainment percentage for a plan 
                      year is 60 percent or greater but less than 80 
                      percent, the plan may not pay any prohibited 
                      payment after the valuation date for the plan year 
                      to the extent the amount of the payment exceeds 
                      the lesser of--
                                    ``(I) 50 percent of the amount of 
                                the payment which could be made without 
                                regard to this subsection, or
                                    ``(II) the present value (determined 
                                under guidance prescribed by the Pension 
                                Benefit Guaranty Corporation, using the 
                                interest and mortality assumptions under 
                                section 205(g)) of the maximum guarantee 
                                with respect to the participant under 
                                section 4022.
                          ``(ii) One-time application.--
                                    ``(I) In general.--The plan shall 
                                also provide that only 1 prohibited 
                                payment meeting the requirements of 
                                clause (i) may be made with respect to 
                                any participant during any period of 
                                consecutive plan years to which the 
                                limitations under either subparagraph 
                                (A) or (B) or this subparagraph applies.
                                    ``(II) Treatment of beneficiaries.--
                                For purposes of this clause, a 
                                participant and any beneficiary on his 
                                behalf (including an alternate payee, as 
                                defined in section 206(d)(3)(K)) shall 
                                be treated as 1 participant. If the 
                                accrued benefit of a participant is 
                                allocated to such an alternate payee and 
                                1 or more other persons, the amount 
                                under clause (i) shall be allocated 
                                among such persons in the same manner as 
                                the accrued benefit is allocated unless 
                                the qualified domestic relations order 
                                (as defined in section 206(d)(3)(B)(i)) 
                                provides otherwise.
                    ``(D) Exception.--This paragraph shall not apply to 
                any plan for any plan year if the terms of such plan (as 
                in effect for the period beginning on September 1, 2005, 
                and ending with such plan year) provide for no benefit 
                accruals with respect to any participant during such 
                period.
                    ``(E) Prohibited payment.--For purpose of this 
                paragraph, the term `prohibited payment' means--
                          ``(i) any payment, in excess of the monthly 
                      amount paid under a single life annuity (plus any 
                      social security supplements described in the last 
                      sentence of section 204(b)(1)(G)), to a 
                      participant or beneficiary whose annuity starting 
                      date (as defined in section 205(h)(2)) occurs 
                      during any period a limitation under subparagraph 
                      (A) or (B) is in effect,
                          ``(ii) any payment for the purchase of an 
                      irrevocable commitment from an insurer to pay 
                      benefits, and
                          ``(iii) any other 
                      payment specified by the Secretary of the Treasury 
                      by regulations.
            ``(4) Limitation on benefit accruals for plans with severe 
        funding shortfalls.--
                    ``(A) In general.--A defined benefit plan which is a 
                single-employer plan shall provide that, in any case in 
                which the plan's adjusted funding target attainment 
                percentage for a plan year is less than 60 percent, 
                benefit accruals under the plan shall cease as of the 
                valuation date for the plan year.
                    ``(B) Exemption.--Subparagraph (A) shall cease to apply with respect to any plan 
                year, effective as of the first day of the plan year, 
                upon payment by the plan sponsor of a contribution (in 
                addition to any minimum required contribution under 
                section 303) equal to the amount sufficient to result in 
                an adjusted funding target attainment percentage of 60 
                percent.
            ``(5) Rules relating to contributions required to avoid 
        benefit limitations.--
                    ``(A) Security may be provided.--
                          ``(i) In general.--For purposes of this 
                      subsection, the adjusted funding target attainment 
                      percentage shall be determined by treating as an 
                      asset of the plan any security provided by a plan 
                      sponsor in a form meeting the requirements of 
                      clause (ii).
                          ``(ii) Form of security.--The security 
                      required under clause (i) shall consist of--
                                    ``(I) a bond issued by a corporate 
                                surety company that is an acceptable 
                                surety for purposes of section 412 of 
                                this Act,
                                    ``(II) cash, or United States 
                                obligations which mature in 3 years or 
                                less, held in escrow by a bank or 
                                similar financial institution, or
                                    ``(III) such other form of security 
                                as is satisfactory to the Secretary of 
                                the Treasury and the parties involved.
                          ``(iii) Enforcement.--Any security provided 
                      under clause (i) may be perfected and enforced at 
                      any time after the earlier of--
                                    ``(I) the date on which the plan 
                                terminates,
                                    ``(II) if there is a failure to make 
                                a payment of the minimum required 
                                contribution for any plan year beginning 
                                after the security is provided, the due 
                                date for the payment under section 
                                303(j), or
                                    ``(III) if the adjusted funding 
                                target attainment percentage is less 
                                than 60 percent for a consecutive period 
                                of 7 years, the valuation date for the 
                                last year in the period.
                          ``(iv) Release of security.--The security 
                      shall be released (and any amounts thereunder 
                      shall be refunded together with any interest 
                      accrued thereon) at such time as the Secretary of 
                      the Treasury may prescribe in regulations, 
                      including regulations for partial releases of the 
                      security by reason of increases in the funding 
                      target attainment percentage.
                    ``(B) Prefunding balance or funding standard 
                carryover balance may not be used.--No prefunding 
                balance or funding standard carryover balance under 
                section 303(f) may be used under paragraph (1), (2), or 
                (4) to satisfy any payment an employer may make under 
                any such paragraph to avoid or terminate the application 
                of any limitation under such paragraph.
                    ``(C) Deemed reduction of funding balances.--
                          ``(i) In general.--Subject to clause (iii), in 
                      any case in which a benefit limitation under 
                      paragraph (1), (2), (3), or (4) would (but for 
                      this subparagraph and determined without regard to 
                      paragraph (1)(B), (2)(B), or (4)(B)) apply to such 
                      plan for the plan year, the plan sponsor of such 
                      plan shall be treated for purposes of this Act as 
                      having made an election under section 303(f) to 
                      reduce the prefunding balance or funding standard 
                      carryover balance by such amount as is necessary 
                      for such benefit limitation to not apply to the 
                      plan for such plan year.
                          ``(ii) Exception for insufficient funding 
                      balances.--Clause (i) shall not apply with respect 
                      to a benefit limitation for any plan year if the 
                      application of clause (i) would not result in the 
                      benefit limitation not applying for such plan 
                      year.
                          ``(iii) Restrictions of certain rules to 
                      collectively bargained plans.--
                      With respect to any 
                      benefit limitation under paragraph (1), (2), or 
                      (4), clause (i) shall only apply in the case of a 
                      plan maintained pursuant to 1 or more collective 
                      bargaining agreements between employee 
                      representatives and 1 or more employers.
            ``(6) New plans.--Paragraphs (1), (2), and (4) shall not 
        apply to a plan for the first 5 plan years of the plan. For 
        purposes of this paragraph, the reference in this paragraph to a 
        plan shall include a reference to any predecessor plan.
            ``(7) Presumed underfunding for purposes of benefit 
        limitations.--
                    ``(A) Presumption 
                of continued underfunding.--In 
                any case in which a benefit limitation under paragraph 
                (1), (2), (3), or (4) has been applied to a plan with 
                respect to the plan year preceding the current plan 
                year, the adjusted funding target attainment percentage 
                of the plan for the current plan year shall be presumed 
                to be equal to the adjusted funding target attainment 
                percentage of the plan for the preceding plan year until 
                the enrolled actuary of the plan certifies the actual 
                adjusted funding
                target attainment percentage of the plan for the current 
                plan year.
                    ``(B) Presumption of underfunding after 10th 
                month.--In any case in which no certification of the 
                adjusted funding target attainment percentage for the 
                current plan year is made with respect to the plan 
                before the first day of the 10th month of such year, for 
                purposes of paragraphs (1), (2), (3), and (4), such 
                first day shall be deemed, for purposes of such 
                paragraph, to be the valuation date of the plan for the 
                current plan year and the plan's adjusted funding target 
                attainment percentage shall be conclusively presumed to 
                be less than 60 percent as of such first day.
                    ``(C) Presumption of underfunding after 4th month 
                for nearly underfunded plans.--In any case in which--
                          ``(i) a benefit limitation under paragraph 
                      (1), (2), (3), or (4) did not apply to a plan with 
                      respect to the plan year preceding the current 
                      plan year, but the adjusted funding target 
                      attainment percentage of the plan for such 
                      preceding plan year was not more than 10 
                      percentage points greater than the percentage 
                      which would have caused such paragraph to apply to 
                      the plan with respect to such preceding plan year, 
                      and
                          ``(ii) as of the first day of the 4th month of 
                      the current plan year, the enrolled actuary of the 
                      plan has not certified the actual adjusted funding 
                      target attainment percentage of the plan for the 
                      current plan year,
                until the enrolled actuary so certifies, such first day 
                shall be deemed, for purposes of such paragraph, to be 
                the valuation date of the plan for the current plan year 
                and the adjusted funding target attainment percentage of 
                the plan as of such first day shall, for purposes of 
                such paragraph, be presumed to be equal to 10 percentage 
                points less than the adjusted funding target attainment 
                percentage of the plan for such preceding plan year.
            ``(8) Treatment of plan as of close of prohibited or 
        cessation period.--For purposes of applying this part--
                    ``(A) Operation of plan 
                after period.--Unless the plan provides otherwise, 
                payments and accruals will resume effective as of the 
                day following the close of the period for which any 
                limitation of payment or accrual of benefits under 
                paragraph (3) or (4) applies.
                    ``(B) Treatment of affected benefits.--Nothing in 
                this paragraph shall be construed as affecting the 
                plan's treatment of benefits which would have been paid 
                or accrued but for this subsection.
            ``(9) Terms relating to funding target attainment 
        percentage.--For purposes of this subsection--
                    ``(A) In general.--The term `funding target 
                attainment percentage' has the same meaning given such 
                term by section 303(d)(2).
                    ``(B) Adjusted funding target attainment 
                percentage.--The term `adjusted funding target 
                attainment
                percentage' means the funding target attainment 
                percentage which is determined under subparagraph (A) by 
                increasing each of the amounts under subparagraphs (A) 
                and (B) of section 303(d)(2) by the aggregate amount of 
                purchases of annuities for employees other than highly 
                compensated employees (as defined in section 414(q) of 
                the Internal Revenue Code of 1986) which were made by 
                the plan during the preceding 2 plan years.
                    ``(C) Application to plans which are fully funded 
                without regard to reductions for funding balances.--
                          ``(i) In general.--In the case of a plan for 
                      any plan year, if the funding target attainment 
                      percentage is 100 percent or more (determined 
                      without regard to this subparagraph and without 
                      regard to the reduction in the value of assets 
                      under section 303(f)(4)), the funding target 
                      attainment percentage for purposes of 
                      subparagraphs (A) and (B) shall be determined 
                      without regard to such reduction.
                          ``(ii) Transition rule.--Clause (i) shall be 
                      applied to plan years beginning after 2007 and 
                      before 2011 by substituting for `100 percent' the 
                      applicable percentage 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 (ii) shall not 
                      apply with respect to any plan year after 2008 
                      unless the funding target attainment percentage 
                      (determined without regard to this subparagraph) 
                      of the plan for each preceding plan year after 
                      2007 was not less than the applicable percentage 
                      with respect to such preceding plan year 
                      determined under clause (ii).
            ``(10) Special rule for 2008.--For purposes of this 
        subsection, in the case of plan years beginning in 2008, the 
        funding target attainment percentage for the preceding plan year 
        may be determined using such methods of estimation as the 
        Secretary of the Treasury may provide.''.

    (b) Notice Requirement.--
            (1) In general.--Section 101 of such Act (29 U.S.C. 1021) is 
        amended--
                    (A) by redesignating subsection (j) as subsection 
                (k); and
                    (B) by inserting after subsection (i) the following 
                new subsection:

    ``(j) Notice of Funding-Based Limitation on Certain Forms of 
Distribution.--The plan administrator of a single-
employer plan shall provide a written notice to plan participants and 
beneficiaries within 30 days--
            ``(1) after the plan has become subject to a restriction 
        described in paragraph (1) or (3) of section 206(g)),
            ``(2) in the case of a plan to which section 206(g)(4) 
        applies, after the valuation date for the plan year described in 
        section 206(g)(4)(B) for which the plan's adjusted funding 
        target attainment percentage for the plan year is less than 60 
        percent
        (or, if earlier, the date such percentage is deemed to be less 
        than 60 percent under section 206(g)(7)), and
            ``(3) at such other time as may be determined by the 
        Secretary of the Treasury.

The notice required to be provided under this subsection shall be in 
writing, except that such notice may be in electronic or other form to 
the extent that such form is reasonably accessible to the recipient.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``section 302(b)(7)(F)(iv)'' 
        and inserting ``section 101(j) or 302(b)(7)(F)(iv)''.

    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2007.
            (2) Collective bargaining exception.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified before January 1, 2008, the amendments made 
        by this section shall not apply to plan years beginning before 
        the earlier of--
                    (A) the later of--
                          (i) the date on which the last collective 
                      bargaining agreement relating to the plan 
                      terminates (determined without regard to any 
                      extension thereof agreed to after the date of the 
                      enactment of this Act), or
                          (ii) the first day of the first plan year to 
                      which the amendments made by this subsection would 
                      (but for this subparagraph) apply, or
                    (B) January 1, 2010.
        For purposes of subparagraph (A)(i), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by this section shall not be treated as a termination of 
        such collective bargaining agreement.

SEC. 104. SPECIAL RULES FOR MULTIPLE EMPLOYER 
            PLANS OF CERTAIN COOPERATIVES.

    (a) General Rule.--Except as provided in this section, if a plan in 
existence on July 26, 2005, was an eligible cooperative plan for its 
plan year which includes such date, the amendments made by this subtitle 
and subtitle B shall not apply to plan years beginning before the 
earlier of--
            (1) the first plan year for which the plan ceases to be an 
        eligible cooperative plan, or
            (2) January 1, 2017.

    (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee 
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the 
Internal Revenue Code of 1986 (as in effect before the amendments made 
by this subtitle and subtitle B) to an eligible cooperative plan for 
plan years beginning after December 31, 2007, and before the first plan 
year to which such amendments apply, the third segment rate determined 
under section 303(h)(2)(C)(iii) of such Act and section 
430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be 
used in lieu of the interest rate otherwise used.
    (c) Eligible Cooperative Plan Defined.--For purposes of this 
section, a plan shall be treated as an eligible cooperative
plan for a plan year if the plan is maintained by more than 1 employer 
and at least 85 percent of the employers are--
            (1) rural cooperatives (as defined in section 401(k)(7)(B) 
        of such Code without regard to clause (iv) thereof), or
            (2) organizations which are--
                    (A) cooperative organizations described in section 
                1381(a) of such Code which are more than 50-percent 
                owned by agricultural producers or by cooperatives owned 
                by agricultural producers, or
                    (B) more than 50-percent owned, or controlled by, 
                one or more cooperative organizations described in 
                subparagraph (A).

A plan shall also be treated as an eligible cooperative plan for any 
plan year for which it is described in section 210(a) of the Employee 
Retirement Income Security Act of 1974 and is maintained by a rural 
telephone cooperative association described in section 3(40)(B)(v) of 
such Act.

SEC. 105. TEMPORARY RELIEF FOR CERTAIN PBGC 
            SETTLEMENT PLANS.

    (a) General Rule.--Except as provided in this section, if a plan in 
existence on July 26, 2005, was a PBGC settlement plan as of such date, 
the amendments made by this subtitle and subtitle B shall not apply to 
plan years beginning before January 1, 2014.
    (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee 
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the 
Internal Revenue Code of 1986 (as in effect before the amendments made 
by this subtitle and subtitle B), to a PBGC settlement plan for plan 
years beginning after December 31, 2007, and before January 1, 2014, the 
third segment rate determined under section 303(h)(2)(C)(iii) of such 
Act and section 430(h)(2)(C)(iii) of such Code (as added by such 
amendments) shall be used in lieu of the interest rate otherwise used.
    (c) PBGC Settlement Plan.--For purposes of this section, the term 
``PBGC settlement plan'' means a defined benefit plan (other than a 
multiemployer plan) to which section 302 of such Act and section 412 of 
such Code apply and--
            (1) which was sponsored by an employer which was in 
        bankruptcy, giving rise to a claim by the Pension Benefit 
        Guaranty Corporation of not greater than $150,000,000, and the 
        sponsorship of which was assumed by another employer that was 
        not a member of the same controlled group as the bankrupt 
        sponsor and the claim of the Pension Benefit Guaranty 
        Corporation was settled or withdrawn in connection with the 
        assumption of the sponsorship, or
            (2) which, by agreement with the Pension Benefit Guaranty 
        Corporation, was spun off from a plan subsequently terminated by 
        such Corporation under section 4042 of the Employee Retirement 
        Income Security Act of 1974.

SEC. 106. SPECIAL RULES FOR PLANS OF CERTAIN 
            GOVERNMENT CONTRACTORS.

    (a) General Rule.--Except as provided in this section, if a plan is 
an eligible government contractor plan, this subtitle and subtitle B 
shall not apply to plan years beginning before the earliest of--
            (1) the first plan year for which the plan ceases to be an 
        eligible government contractor plan,
            (2) the effective date of the Cost Accounting Standards 
        Pension Harmonization Rule, or
            (3) January 1, 2011.

    (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee 
Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the 
Internal Revenue Code of 1986 (as in effect before the amendments made 
by this subtitle and subtitle B) to an eligible government contractor 
plan for plan years beginning after December 31, 2007, and before the 
first plan year to which such amendments apply, the third segment rate 
determined under section 303(h)(2)(C)(iii) of such Act and section 
430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be 
used in lieu of the interest rate otherwise used.
    (c) Eligible Government Contractor Plan Defined.--For purposes of 
this section, a plan shall be treated as an eligible government 
contractor plan if it is maintained by a corporation or a member of the 
same affiliated group (as defined by section 1504(a) of the Internal 
Revenue Code of 1986), whose primary source of revenue is derived from 
business performed under contracts with the United States that are 
subject to the Federal Acquisition Regulations (chapter 1 of title 48, 
CFR) and that are also subject to the Defense Federal Acquisition 
Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue 
derived from such business in the previous fiscal year exceeded 
$5,000,000,000, and whose pension plan costs that are assignable under 
those contracts are subject to sections 412 and 413 of the Cost 
Accounting Standards (48 CFR 9904.412 and 9904.413).
    (d) Cost Accounting Standards Pension Harmonization Rule.--The Cost 
Accounting Standards Board shall review and revise 
sections 412 and 413 of the Cost Accounting Standards (48 CFR 9904.412 
and 9904.413) to harmonize the minimum required contribution under the 
Employee Retirement Income Security Act of 1974 of eligible government 
contractor plans and government reimbursable pension plan costs not 
later than January 1, 2010. Any final rule adopted by the Cost 
Accounting Standards Board shall be deemed the Cost Accounting Standards 
Pension Harmonization Rule.

SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Miscellaneous Amendments to Title I.--Subtitle B of title I of 
such Act (29 U.S.C. 1021 et seq.) is amended--
            (1) in section 101(d)(3), by striking 
        ``section 302(e)'' and inserting ``section 303(j)'';
            (2) in section 103(d)(8)(B), by striking ``the requirements of section 302(c)(3)'' and 
        inserting ``the applicable requirements of sections 303(h) and 
        304(c)(3)'';
            (3) in section 103(d), by striking paragraph (11) and 
        inserting the following:
            ``(11) If the current value of the assets of the plan is 
        less than 70 percent of--
                    ``(A) in the case of a single-employer plan, the 
                funding target (as defined in section 303(d)(1)) of the 
                plan, or
                    ``(B) in the case of a multiemployer plan, the 
                current liability (as defined in section 304(c)(6)(D)) 
                under the plan,
        the percentage which such value is of the amount described in 
        subparagraph (A) or (B).'';
            (4) in section 203(a)(3)(C), by striking ``section 302(c)(8)'' and inserting ``section 
        302(d)(2)'';
            (5) in section 204(g)(1), by striking 
        ``section 302(c)(8)'' and inserting ``section 302(d)(2)'';
            (6) in section 204(i)(2)(B), by striking ``section 
        302(c)(8)'' and inserting ``section 302(d)(2)'';
            (7) in section 204(i)(3), by striking ``funded current 
        liability percentage (within the meaning of section 302(d)(8) of 
        this Act)'' and inserting ``funding target attainment percentage 
        (as defined in section 303(d)(2))'';
            (8) in section 204(i)(4), by striking ``section 
        302(c)(11)(A), without regard to section 302(c)(11)(B)'' and 
        inserting ``section 302(b)(1), without regard to section 
        302(b)(2)'';
            (9) in section 206(e)(1), by striking 
        ``section 302(d)'' and inserting ``section 303(j)(4)'', and by 
        striking ``section 302(e)(5)'' and inserting ``section 
        303(j)(4)(E)(i)'';
            (10) in section 206(e)(3), by striking ``section 302(e) by 
        reason of paragraph (5)(A) thereof'' and inserting ``section 
        303(j)(3) by reason of section 303(j)(4)(A)''; and
            (11) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by striking ``American Jobs 
        Creation Act of 2004'' and inserting ``Pension Protection Act of 
        2006''.

    (b) Miscellaneous Amendments to Title IV.--Title IV of such Act is 
amended--
            (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by 
        striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by 
        striking ``412(c)(11)(A)'' and inserting ``412(b)(1)'', by 
        striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by 
        striking ``412(c)(11)(B)'' and inserting ``412(b)(2)'';
            (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) 
        and (B)'', and by striking ``412(n)(1)(A) and (B)'' and 
        inserting ``430(k)(1)(A) and (B)'';
            (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by 
        striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A) 
        and (B)'', and by striking ``412(n)(1)(A) and (B)'' and 
        inserting ``430(k)(1)(A) and (B)'';
            (4) in section 4062(c) (29 U.S.C. 1362(c)), by striking 
        paragraphs (1), (2), and (3) and inserting the following:
            ``(1) the sum of the shortfall amortization charge (within 
        the meaning of section 303(c)(1) of this Act and 430(d)(1) of 
        the Internal Revenue Code of 1986) with respect to the plan (if 
        any) for the plan year in which the termination date occurs, 
        plus the aggregate total of shortfall amortization installments 
        (if any) determined for succeeding plan years under section 
        303(c)(2) of this Act and section 430(d)(2) of such Code (which, 
        for purposes of this subparagraph, shall include any increase in 
        such sum which would result if all applications for waivers of 
        the minimum funding standard under section 302(c) of this Act 
        and section 412(c) of such Code which are pending with respect 
        to such plan were denied and if no additional contributions 
        (other than those already made by the termination date) were 
        made for the plan year in which the termination date occurs or 
        for any previous plan year), and
            ``(2) the sum of the waiver amortization charge (within the 
        meaning of section 303(e)(1) of this Act and 430(e)(1) of the 
        Internal Revenue Code of 1986) with respect to the plan
        (if any) for the plan year in which the termination date occurs, 
        plus the aggregate total of waiver amortization installments (if 
        any) determined for succeeding plan years under section 
        303(e)(2) of this Act and section 430(e)(2) of such Code,'';
            (5) in section 4071 (29 U.S.C. 1371), by striking 
        ``302(f)(4)'' and inserting ``303(k)(4)'';
            (6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by 
        striking ``302(a)'' and inserting ``304(a)'', and, in clause 
        (i), by striking ``302(a)'' and inserting ``304(a)'';
            (7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by 
        striking ``303(a)'' and inserting ``302(c)'';
            (8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by 
        striking ``303(c)'' and inserting ``302(c)(3)''; and
            (9) in section 4243(g) (29 U.S.C. 1423(g)), by striking 
        ``302(c)(3)'' and inserting ``304(c)(3)''.

    (c) Amendments to Reorganization Plan 
No. 4 of 1978.--Section 106(b)(ii) of Reorganization Plan No. 4 of 1978 
(ratified and affirmed as law by Public Law 98-532 (98 Stat. 2705)) is 
amended by striking ``302(c)(8)'' and inserting ``302(d)(2)'', by 
striking ``304(a) and (b)(2)(A)'' and inserting ``304(d)(1), (d)(2), and 
(e)(2)(A)'', and by striking ``412(c)(8), (e), and (f)(2)(A)'' and 
inserting ``412(c)(2) and 431(d)(1), (d)(2), and (e)(2)(A)''.

    (d) Repeal of Expired Authority for Temporary Variances.--Section 
207 of such Act (29 U.S.C. 1057) is repealed.
    (e) Effective Date.--The amendments made 
by this section shall apply to plan years beginning after 2007.

         Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 111. MINIMUM FUNDING STANDARDS.

    (a) New Minimum Funding Standards.--Section 412 of the Internal 
Revenue Code of 1986 (relating to minimum funding 
standards) is amended to read as follows:

``SEC. 412. MINIMUM FUNDING STANDARDS.

    ``(a) Requirement to Meet Minimum Funding Standard.--
            ``(1) In general.--A plan to which this section 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 
                not a multiemployer 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 430 for 
                the plan for the plan year,
                    ``(B) in the case of a money purchase plan which is 
                not a multiemployer 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 431 as of the end of the plan year.

    ``(b) Liability for Contributions.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of any contribution required by this section (including 
        any required installments under paragraphs (3) and (4) of 
        section 430(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.--
                    ``(A) In general.--If--
                          ``(i) an employer is (or in the case of a 
                      multiemployer plan, 10 percent or more of the 
                      number of employers contributing to or under the 
                      plan is) unable to satisfy the minimum funding 
                      standard for a plan year without temporary 
                      substantial business hardship (substantial 
                      business hardship in the case of a multiemployer 
                      plan), and
                          ``(ii) application of the standard would be 
                      adverse to the interests of plan participants in 
                      the aggregate,
                the Secretary 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 shall not waive the minimum 
                funding standard with respect to a plan for more than 3 
                of any 15 (5 of any 15 in the case of a multiemployer 
                plan) consecutive plan years
                    ``(B) Effects of waiver.--If a waiver is granted 
                under subparagraph (A) for any plan year--
                          ``(i) in the case of a defined benefit plan 
                      which is not a multiemployer plan, the minimum 
                      required contribution under section 430 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 430(e), and
                          ``(ii) in the case of a multiemployer plan, 
                      the funding standard account shall be credited 
                      under section 431(b)(3)(C) with the amount of the 
                      waived funding deficiency and such amount shall be 
                      amortized as required under section 431(b)(2)(C).
                    ``(C) Waiver of amortized portion not allowed.--The 
                Secretary may not waive under subparagraph (A) any 
                portion of the minimum funding standard under subsection 
                (a) for a plan year which is attributable to any waived 
                funding deficiency for any preceding plan year.
            ``(2) Determination of business hardship.--For purposes of 
        this subsection, the factors taken into account in determining 
        temporary substantial business hardship (substantial business 
        hardship in the case of a multiemployer plan) shall include (but 
        shall not be limited to) whether or not--
                    ``(A) the employer is operating at an economic loss,
                    ``(B) there is substantial unemployment or 
                underemployment in the trade or business and in the 
                industry concerned,
                    ``(C) the sales and profits of the industry 
                concerned are depressed or declining, and
                    ``(D) it is reasonable to expect that the plan will 
                be continued only if the waiver is granted.
            ``(3) Waived funding deficiency.--For purposes of this 
        section and part III of this subchapter, 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 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 may require an 
                      employer maintaining a defined benefit plan which 
                      is a single-employer plan (within the meaning of 
                      section 4001(a)(15) of the Employee Retirement 
                      Income Security Act of 1974) 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) of the Employee Retirement 
                      Income Security Act of 1974), or a member of such 
                      sponsor's controlled group (within the meaning of 
                      section 4001(a)(14) of such Act).
                    ``(B) Consultation with the pension benefit guaranty 
                corporation.--Except as provided in subparagraph (C), 
                the Secretary 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) of the Employee Retirement 
                                Income Security Act of 1974) 
                                representing participants in the plan 
                                which are submitted in writing to the 
                                Secretary in connection with such 
                                application.
                Information provided to the Corporation under this 
                subparagraph shall be considered tax return information 
                and subject to the safeguarding and reporting 
                requirements of section 6103(p).
                    ``(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 (within the 
                                meaning of section 4971(c)(4)) 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 
                                430(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.
            ``(5) Special rules for single-employer plans.--
                    ``(A) Application must be submitted before date 2\1/
                2\ months after close of year.--In 
                the case of a defined benefit plan 
                which is not a multiemployer 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 not later than the 15th day 
                of the 3rd month beginning after the close of such plan 
                year.
                    ``(B) Special rule if employer is member of 
                controlled group.--In the case of a defined benefit plan 
                which is not a multiemployer 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 may provide that an analysis of a trade or 
                business or industry of a member need not be conducted 
                if the Secretary 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 shall, before 
                granting a waiver under this subsection, require each 
                applicant to provide evidence satisfactory to the 
                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) of the 
                Employee Retirement Income Security Act of 1974). Such 
                notice shall include a description of the extent to 
                which the plan is funded for benefits which are 
                guaranteed under title IV of the Employee Retirement 
                Income Security Act of 1974 and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary 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 431(d) is in effect with respect to the 
                plan, or if a plan amendment described in subsection 
                (d)(2) has been made at any time in the preceding 12 
                months (24 months in the case of a multiemployer plan). 
                If a plan is amended in violation of the preceding 
                sentence, any such waiver, or extension of time, shall 
                not apply to any plan year ending on or after the date 
                on which such amendment is adopted.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any plan amendment which--
                          ``(i) the Secretary 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.

    ``(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.
            ``(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 notifying him of such amendment and the Secretary has 
        approved such amendment, or within 90 days after the date on 
        which such notice was filed, failed to disapprove such 
        amendment. No amendment described in this subsection shall be 
        approved by the Secretary unless the Secretary determines that 
        such amendment is necessary because of a temporary substantial 
        business hardship (as determined under subsection (c)(2)) or a 
        substantial business hardship (as so determined) in the case of 
        a multiemployer plan and that a waiver under subsection
        (c) (or, in the case of a multiemployer plan, any extension of 
        the amortization period under section 431(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.

    ``(e) Plans to Which Section Applies.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (4), this section applies to a plan if, for any plan year 
        beginning on or after the effective date of this section for 
        such plan under the Employee Retirement Income Security Act of 
        1974--
                    ``(A) such plan included a trust which qualified (or 
                was determined by the Secretary to have qualified) under 
                section 401(a), or
                    ``(B) such plan satisfied (or was determined by the 
                Secretary to have satisfied) the requirements of section 
                403(a).
            ``(2) Exceptions.--This section shall not apply to--
                    ``(A) any profit-sharing or stock bonus plan,
                    ``(B) any insurance contract plan described in 
                paragraph (3),
                    ``(C) any governmental plan (within the meaning of 
                section 414(d)),
                    ``(D) any church plan (within the meaning of section 
                414(e)) with respect to which the election provided by 
                section 410(d) has not been made,
                    ``(E) any plan which has not, at any time after 
                September 2, 1974, provided for employer contributions, 
                or
                    ``(F) any plan established and maintained by a 
                society, order, or association described in section 
                501(c)(8) or (9), if no part of the contributions to or 
                under such plan are made by employers of participants in 
                such plan.
        No plan described in subparagraph (C), (D), or (F) shall be 
        treated as a qualified plan for purposes of section 401(a) 
        unless such plan meets the requirements of section 401(a)(7) as 
        in effect on September 1, 1974.
            ``(3) Certain insurance contract plans.--A plan is described 
        in this paragraph if--
                    ``(A) the plan is funded exclusively by the purchase 
                of individual insurance contracts,
                    ``(B) such contracts provide for level annual 
                premium payments to be paid extending not later than the 
                retirement age for each individual participating in the 
                plan, and commencing with the date the individual became 
                a participant in the plan (or, in the case of an 
                increase in benefits, commencing at the time such 
                increase becomes effective),
                    ``(C) benefits provided by the plan are equal to the 
                benefits provided under each contract at normal 
                retirement age under the plan and are guaranteed by an 
                insurance carrier (licensed under the laws of a State to 
                do business with the plan) to the extent premiums have 
                been paid,
                    ``(D) premiums payable for the plan year, and all 
                prior plan years, under such contracts have been paid 
                before lapse or there is reinstatement of the policy,
                    ``(E) no rights under such contracts have been 
                subject to a security interest at any time during the 
                plan year, and
                    ``(F) no policy loans are outstanding at any time 
                during the plan year.
        A plan funded exclusively by the purchase of group insurance 
        contracts which is determined under regulations prescribed by 
        the Secretary to have the same characteristics as contracts 
        described in the preceding sentence shall be treated as a plan 
        described in this paragraph.
            ``(4) Certain terminated 
        multiemployer plans.--This section applies with respect to a 
        terminated multiemployer plan to which section 4021 of the 
        Employee Retirement Income Security Act of 1974 applies until 
        the last day of the plan year in which the plan terminates 
        (within the meaning of section 4041A(a)(2) of such Act).''.

    (b) Effective Date.--The amendments made 
by this section shall apply to plan years beginning after December 31, 
2007.

SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION 
            PLANS.

    (a) In General.--Subchapter D of chapter 1 of the Internal Revenue 
Code of 1986 (relating to deferred compensation, etc.) is amended by 
adding at the end the following new part:

   ``PART III--MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED 
                          BENEFIT PENSION PLANS

``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). 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 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 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 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 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). 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 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 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) such 
                                employee is offered a substantial amount 
                                of additional cash compensation, 
                                substantially enhanced retirement 
                                benefits under the plan, or materially 
                                reduced employment duties on the 
                                condition that by a specified date (not 
                                later than December 31, 2010) the 
                                employee retires (as defined under the 
                                terms of the plan),
                                    ``(III) such 
                                offer is made during 2006 and pursuant 
                                to a bona fide retirement incentive 
                                program and requires, by the terms of 
                                the offer, that such offer can be 
                                accepted not later than a specified date 
                                (not later than December 31, 2006), and
                                    ``(IV) such employee does not elect 
                                to accept such offer before the 
                                specified date on which the offer 
                                expires.
                          ``(ii) Specified automobile manufacturer.--For 
                      purposes of clause (i), the term `specified 
                      automobile manufacturer' means--
                                    ``(I) any manufacturer of 
                                automobiles, and
                                    ``(II) any manufacturer of 
                                automobile parts which supplies such 
                                parts directly to a manufacturer of 
                                automobiles and which, after a 
                                transaction or series of transactions 
                                ending in 1999, ceased to be a member of 
                                a controlled group which included such 
                                manufacturer of automobiles.
            ``(5) Transition between applicable funding targets and 
        between applicable target normal costs.--
                    ``(A) In general.--In any case in which a plan which 
                is in at-risk status for a plan year has been in such 
                status for a consecutive period of fewer than 5 plan 
                years, the applicable amount of the funding target and 
                of the target normal cost shall be, in lieu of the 
                amount determined without regard to this paragraph, the 
                sum of--
                          ``(i) the amount determined under this section 
                      without regard to this subsection, plus
                          ``(ii) the transition percentage for such plan 
                      year of the excess of the amount determined under 
                      this subsection (without regard to this paragraph) 
                      over the amount determined under this section 
                      without regard to this subsection.
                    ``(B) Transition percentage.--For purposes of 
                subparagraph (A), the transition percentage shall be 
                determined in accordance with the following table:

            ``If the 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 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) 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 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 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.''.
    (b) Effective Date.--The amendments made 
by this section shall apply with respect to plan years beginning after 
December 31, 2007.

SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

    (a) Prohibition of Shutdown Benefits and Other Unpredictable 
Contingent Event Benefits Under Single-Employer Plans.--
            (1) In general.--Part III of subchapter D of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to deferred compensation, etc.) is amended--
                    (A) by striking the heading and inserting the 
                following:

  ``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT 
                               LIMITATIONS

        ``subpart a. minimum funding standards for pension plans.

      ``subpart b. benefit limitations under single-employer plans.

        ``Subpart A--Minimum Funding Standards for Pension Plans

``Sec. 430. Minimum funding standards for single-employer defined 
           benefit pension plans.'',

                and
                    (B) by adding at the end the following new subpart:
      ``Subpart B--Benefit Limitations Under Single-Employer Plans

``Sec. 436. Funding-based limitation on shutdown benefits and other 
           unpredictable contingent event benefits under single-employer 
           plans.

``SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND 
            BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER PLANS.

    ``(a) General Rule.--For purposes of section 401(a)(29), a defined 
benefit plan which is a single-employer plan shall be treated as meeting 
the requirements of this section if the plan meets the requirements of 
subsections (b), (c), (d), and (e).
    ``(b) Funding-Based Limitation on Shutdown Benefits and Other 
Unpredictable Contingent Event Benefits Under Single-Employer Plans.--
            ``(1) In general.--If a participant of a defined benefit 
        plan which is a single-employer plan is entitled to an 
        unpredictable contingent event benefit payable with respect to 
        any event occurring during any plan year, the plan shall provide 
        that such benefit may not be provided if the adjusted funding 
        target attainment percentage for such plan year--
                    ``(A) is less than 60 percent, or
                    ``(B) would be less than 60 percent taking into 
                account such occurrence.
            ``(2) Exemption.--Paragraph (1) shall cease to apply with respect to any plan year, 
        effective as of the first day of the plan year, upon payment by 
        the plan sponsor of a contribution (in addition to any minimum 
        required contribution under section 303) equal to--
                    ``(A) in the case of paragraph (1)(A), the amount of 
                the increase in the funding target of the plan (under 
                section 430) for the plan year attributable to the 
                occurrence referred to in paragraph (1), and
                    ``(B) in the case of paragraph (1)(B), the amount 
                sufficient to result in a funding target attainment 
                percentage of 60 percent.
            ``(3) Unpredictable contingent event.--For purposes of this 
        subsection, the term `unpredictable contingent event benefit' 
        means any benefit payable solely by reason of--
                    ``(A) a plant shutdown (or similar event, as 
                determined by the Secretary), or
                    ``(B) any event other than the attainment of any 
                age, performance of any service, receipt or derivation 
                of any compensation, or occurrence of death or 
                disability.

    ``(c) Limitations on Plan Amendments Increasing Liability for 
Benefits.--
            ``(1) In general.--No amendment to a defined benefit plan 
        which is a single-employer plan which has the effect of 
        increasing liabilities of the plan by reason of increases in 
        benefits, establishment of new benefits, changing the rate of 
        benefit accrual, or changing the rate at which benefits become 
        nonforfeitable may take effect during any plan year if the 
        adjusted funding target attainment percentage for such plan year 
        is--
                    ``(A) less than 80 percent, or
                    ``(B) would be less than 80 percent taking into 
                account such amendment.
            ``(2) Exemption.--Paragraph (1) 
        shall cease to apply with respect to any plan year, effective as 
        of the first day of the plan year (or if later, the effective 
        date of the amendment), upon payment by the plan sponsor of a 
        contribution (in addition to any minimum required contribution 
        under section 430) equal to--
                    ``(A) in the case of paragraph (1)(A), the amount of 
                the increase in the funding target of the plan (under 
                section 430) for the plan year attributable to the 
                amendment, and
                    ``(B) in the case of paragraph (1)(B), the amount 
                sufficient to result in an adjusted funding target 
                attainment percentage of 80 percent.
            ``(3) Exception for certain benefit increases.--Paragraph 
        (1) shall not apply to any amendment which provides for an 
        increase in benefits under a formula which is not based on a 
        participant's compensation, but only if the rate of such 
        increase is not in excess of the contemporaneous rate of 
        increase in average wages of participants covered by the 
        amendment.

    ``(d) Limitations on Accelerated Benefit Distributions.--
            ``(1) Funding percentage less than 60 percent.--A defined 
        benefit plan which is a single-employer plan shall provide that, 
        in any case in which the plan's adjusted funding target 
        attainment percentage for a plan year is less than 60 percent, 
        the plan may not pay any prohibited payment after the valuation 
        date for the plan year.
            ``(2) Bankruptcy.--A defined benefit plan which is a single-
        employer plan shall provide that, during any period in which the 
        plan sponsor is a debtor in a case under title 11, United States 
        Code, or similar Federal or State law, the plan may not pay any 
        prohibited payment. The preceding 
        sentence shall not apply on or after the date on which the 
        enrolled actuary of the plan certifies that the adjusted funding 
        target attainment percentage of such plan is not less than 100 
        percent.
            ``(3) Limited payment if percentage at least 60 percent but 
        less than 80 percent.--
                    ``(A) In general.--A defined benefit plan which is a 
                single-employer plan shall provide that, in any case in 
                which the plan's adjusted funding target attainment 
                percentage for a plan year is 60 percent or greater but 
                less than 80 percent, the plan may not pay any 
                prohibited payment after the valuation date for the plan 
                year to the extent the amount of the payment exceeds the 
                lesser of--
                          ``(i) 50 percent of the amount of the payment 
                      which could be made without regard to this 
                      section, or
                          ``(ii) the present value (determined under 
                      guidance prescribed by the Pension Benefit 
                      Guaranty Corporation, using the interest and 
                      mortality assumptions under section 417(e)) of the 
                      maximum guarantee with respect to the participant 
                      under section 4022 of the Employee Retirement 
                      Income Security Act of 1974.
                    ``(B) One-time application.--
                          ``(i) In general.--The plan shall also provide 
                      that only 1 prohibited payment meeting the 
                      requirements of subparagraph (A) may be made with 
                      respect to any participant during any period of 
                      consecutive plan
                      years to which the limitations under either 
                      paragraph (1) or (2) or this paragraph applies.
                          ``(ii) Treatment of beneficiaries.--For 
                      purposes of this subparagraph, a participant and 
                      any beneficiary on his behalf (including an 
                      alternate payee, as defined in section 414(p)(8)) 
                      shall be treated as 1 participant. If the accrued 
                      benefit of a participant is allocated to such an 
                      alternate payee and 1 or more other persons, the 
                      amount under subparagraph (A) shall be allocated 
                      among such persons in the same manner as the 
                      accrued benefit is allocated unless the qualified 
                      domestic relations order (as defined in section 
                      414(p)(1)(A)) provides otherwise.
            ``(4) Exception.--This subsection shall not apply to any 
        plan for any plan year if the terms of such plan (as in effect 
        for the period beginning on September 1, 2005, and ending with 
        such plan year) provide for no benefit accruals with respect to 
        any participant during such period.
            ``(5) Prohibited payment.--For purpose of this subsection, 
        the term `prohibited payment' means--
                    ``(A) any payment, in excess of the monthly amount 
                paid under a single life annuity (plus any social 
                security supplements described in the last sentence of 
                section 411(a)(9)), to a participant or beneficiary 
                whose annuity starting date (as defined in section 
                417(f)(2)) occurs during any period a limitation under 
                paragraph (1) or (2) is in effect,
                    ``(B) any payment for the purchase of an irrevocable 
                commitment from an insurer to pay benefits, and
                    ``(C) any other payment specified by the Secretary 
                by regulations.

    ``(e) Limitation on Benefit Accruals for 
Plans With Severe Funding Shortfalls.--
            ``(1) In general.--A defined benefit plan which is a single-
        employer plan shall provide that, in any case in which the 
        plan's adjusted funding target attainment percentage for a plan 
        year is less than 60 percent, benefit accruals under the plan 
        shall cease as of the valuation date for the plan year.
            ``(2) Exemption.--Paragraph (1) shall cease to apply with 
        respect to any plan year, effective as of the first day of the 
        plan year, upon payment by the plan sponsor of a contribution 
        (in addition to any minimum required contribution under section 
        430) equal to the amount sufficient to result in an adjusted 
        funding target attainment percentage of 60 percent.

    ``(f) Rules Relating to Contributions Required to Avoid Benefit 
Limitations.--
            ``(1) Security may be provided.--
                    ``(A) In general.--For purposes of this section, the 
                adjusted funding target attainment percentage shall be 
                determined by treating as an asset of the plan any 
                security provided by a plan sponsor in a form meeting 
                the requirements of subparagraph (B).
                    ``(B) Form of security.--The security required under 
                subparagraph (A) shall consist of--
                          ``(i) a bond issued by a corporate surety 
                      company that is an acceptable surety for purposes 
                      of section
                      412 of the Employee Retirement Income Security Act 
                      of 1974,
                          ``(ii) cash, or United States obligations 
                      which mature in 3 years or less, held in escrow by 
                      a bank or similar financial institution, or
                          ``(iii) such other form of security as is 
                      satisfactory to the Secretary and the parties 
                      involved.
                    ``(C) Enforcement.--Any security provided under 
                subparagraph (A) may be perfected and enforced at any 
                time after the earlier of--
                          ``(i) the date on which the plan terminates,
                          ``(ii) if there is a failure to make a payment 
                      of the minimum required contribution for any plan 
                      year beginning after the security is provided, the 
                      due date for the payment under section 430(j), or
                          ``(iii) if the adjusted funding target 
                      attainment percentage is less than 60 percent for 
                      a consecutive period of 7 years, the valuation 
                      date for the last year in the period.
                    ``(D) Release of security.--
                The security shall be released 
                (and any amounts thereunder shall be refunded together 
                with any interest accrued thereon) at such time as the 
                Secretary may prescribe in regulations, including 
                regulations for partial releases of the security by 
                reason of increases in the funding target attainment 
                percentage.
            ``(2) Prefunding balance or funding standard carryover 
        balance may not be used.--No prefunding balance under section 
        430(f) or funding standard carryover balance may be used under 
        subsection (b), (c), or (e) to satisfy any payment an employer 
        may make under any such subsection to avoid or terminate the 
        application of any limitation under such subsection.
            ``(3) Deemed reduction of funding balances.--
                    ``(A) In general.--Subject to subparagraph (C), in 
                any case in which a benefit limitation under subsection 
                (b), (c), (d), or (e) would (but for this subparagraph 
                and determined without regard to subsection (b)(2), 
                (c)(2), or (e)(2)) apply to such plan for the plan year, 
                the plan sponsor of such plan shall be treated for 
                purposes of this title as having made an election under 
                section 430(f) to reduce the prefunding balance or 
                funding standard carryover balance by such amount as is 
                necessary for such benefit limitation to not apply to 
                the plan for such plan year.
                    ``(B) Exception for insufficient funding balances.--
                Subparagraph (A) shall not apply with respect to a 
                benefit limitation for any plan year if the application 
                of subparagraph (A) would not result in the benefit 
                limitation not applying for such plan year.
                    ``(C) Restrictions of certain rules to collectively 
                bargained plans.--With respect to any benefit limitation 
                under subsection (b), (c), or (e), subparagraph (A) 
                shall only apply in the case of a plan maintained 
                pursuant to 1 or more collective bargaining agreements 
                between employee representatives and 1 or more 
                employers.

    ``(g) New Plans.--Subsections (b), (c), and (e) shall not apply to a 
plan for the first 5 plan years of the plan. For purposes
of this subsection, the reference in this subsection to a plan shall 
include a reference to any predecessor plan.
    ``(h) Presumed Underfunding for Purposes of 
Benefit Limitations.--
            ``(1) Presumption of continued underfunding.--In any case in 
        which a benefit limitation under subsection (b), (c), (d), or 
        (e) has been applied to a plan with respect to the plan year 
        preceding the current plan year, the adjusted funding target 
        attainment percentage of the plan for the current plan year 
        shall be presumed to be equal to the adjusted funding target 
        attainment percentage of the plan for the preceding plan year 
        until the enrolled actuary of the plan certifies the actual 
        adjusted funding target attainment percentage of the plan for 
        the current plan year.
            ``(2) Presumption of underfunding after 10th month.--In any 
        case in which no certification of the adjusted funding target 
        attainment percentage for the current plan year is made with 
        respect to the plan before the first day of the 10th month of 
        such year, for purposes of subsections (b), (c), (d), and (e), 
        such first day shall be deemed, for purposes of such subsection, 
        to be the valuation date of the plan for the current plan year 
        and the plan's adjusted funding target attainment percentage 
        shall be conclusively presumed to be less than 60 percent as of 
        such first day.
            ``(3) Presumption of underfunding after 4th month for nearly 
        underfunded plans.--In any case in which--
                    ``(A) a benefit limitation under subsection (b), 
                (c), (d), or (e) did not apply to a plan with respect to 
                the plan year preceding the current plan year, but the 
                adjusted funding target attainment percentage of the 
                plan for such preceding plan year was not more than 10 
                percentage points greater than the percentage which 
                would have caused such subsection to apply to the plan 
                with respect to such preceding plan year, and
                    ``(B) as of the first day of the 4th month of the 
                current plan year, the enrolled actuary of the plan has 
                not certified the actual adjusted funding target 
                attainment percentage of the plan for the current plan 
                year,
        until the enrolled actuary so certifies, such first day shall be 
        deemed, for purposes of such subsection, to be the valuation 
        date of the plan for the current plan year and the adjusted 
        funding target attainment percentage of the plan as of such 
        first day shall, for purposes of such subsection, be presumed to 
        be equal to 10 percentage points less than the adjusted funding 
        target attainment percentage of the plan for such preceding plan 
        year.

    ``(i) Treatment of Plan as of Close of Prohibited or Cessation 
Period.--For purposes of applying this title--
            ``(1) Operation of plan after 
        period.--Unless the plan provides otherwise, payments and 
        accruals will resume effective as of the day following the close 
        of the period for which any limitation of payment or accrual of 
        benefits under subsection (d) or (e) applies.
            ``(2) Treatment of affected benefits.--Nothing in this 
        subsection shall be construed as affecting the plan's treatment 
        of benefits which would have been paid or accrued but for this 
        section.
    ``(j) Terms Relating to Funding Target Attainment Percentage.--For 
purposes of this section--
            ``(1) In general.--The term `funding target attainment 
        percentage' has the same meaning given such term by section 
        430(d)(2).
            ``(2) Adjusted funding target attainment percentage.--The 
        term `adjusted funding target attainment percentage' means the 
        funding target attainment percentage which is determined under 
        paragraph (1) by increasing each of the amounts under 
        subparagraphs (A) and (B) of section 430(d)(2) by the aggregate 
        amount of purchases of annuities for employees other than highly 
        compensated employees (as defined in section 414(q)) which were 
        made by the plan during the preceding 2 plan years.
            ``(3) Application to plans which are fully funded without 
        regard to reductions for funding balances.--
                    ``(A) In general.--In the case of a plan for any 
                plan year, if the funding target attainment percentage 
                is 100 percent or more (determined without regard to 
                this paragraph and without regard to the reduction in 
                the value of assets under section 430(f)(4)(A)), the 
                funding target attainment percentage for purposes of 
                paragraph (1) shall be determined without regard to such 
                reduction.
                    ``(B) Transition rule.--
                Subparagraph (A) shall be applied to plan years 
                beginning after 2007 and before 2011 by substituting for 
                `100 percent' the applicable percentage determined in 
                accordance with the following table:

          ``In the case of a pThe applicable............................
            beginning in calenpercentage is.............................
                    2008..........................................   92 
                    2009..........................................   94 
                    2010..........................................   96.

                    ``(C) Limitation.--Subparagraph (B) shall not apply 
                with respect to any plan year after 2008 unless the 
                funding target attainment percentage (determined without 
                regard to this paragraph) of the plan for each preceding 
                plan year after 2007 was not less than the applicable 
                percentage with respect to such preceding plan year 
                determined under subparagraph (B).

    ``(k) Special Rule for 2008.--For purposes of this section, in the 
case of plan years beginning in 2008, the funding target attainment 
percentage for the preceding plan year may be determined using such 
methods of estimation as the Secretary may provide.''.
            (2) Clerical amendment.--The table of parts for subchapter D 
        of chapter 1 of the Internal Revenue Code of 1986 is 
        amended by adding at the end the 
        following new item:

  ``Part III--Rules Relating to Minimum Funding Standards and Benefit 
                             Limitations''.

    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2007.
            (2) Collective bargaining exception.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified before January 1, 2008, the amendments
        made by this section shall not apply to plan years beginning 
        before the earlier of--
                    (A) the later of--
                          (i) the date on which the last collective 
                      bargaining agreement relating to the plan 
                      terminates (determined without regard to any 
                      extension thereof agreed to after the date of the 
                      enactment of this Act), or
                          (ii) the first day of the first plan year to 
                      which the amendments made by this subsection would 
                      (but for this subparagraph) apply, or
                    (B) January 1, 2010.
        For purposes of subparagraph (A)(i), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by this section shall not be treated as a termination of 
        such collective bargaining agreement.

SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Amendments Related to Qualification Requirements.--
            (1) Section 401(a)(29) of the Internal Revenue Code of 1986 
        is amended to read as follows:
            ``(29) Benefit limitations on plans in at-risk status.--In 
        the case of a defined benefit plan (other than a multiemployer 
        plan) to which the requirements of section 412 apply, the trust 
        of which the plan is a part shall not constitute a qualified 
        trust under this subsection unless the plan meets the 
        requirements of section 436.''.
            (2) Section 401(a)(32) of such Code is amended--
                    (A) in subparagraph (A), by striking ``412(m)(5)'' 
                each place it appears and inserting ``section 
                430(j)(4)'', and
                    (B) in subparagraph (C), by striking ``section 
                412(m)'' and inserting ``section 430(j)''.
            (3) Section 401(a)(33) of such Code is amended--
                    (A) in subparagraph (B)(i), by striking ``funded 
                current liability percentage (within the meaning of 
                section 412(l)(8))'' and inserting ``funding target 
                attainment percentage (as defined in section 
                430(d)(2))'',
                    (B) in subparagraph (B)(iii), by striking 
                ``subsection 412(c)(8)'' and inserting ``section 
                412(c)(2)'', and
                    (C) in subparagraph (D), by striking ``section 
                412(c)(11) (without regard to subparagraph (B) 
                thereof)'' and inserting ``section 412(b)(2) (without 
                regard to subparagraph (B) thereof)''.

    (b) Vesting Rules.--Section 411 of such Code is amended--
            (1) by striking ``section 412(c)(8)'' in subsection 
        (a)(3)(C) and inserting ``section 412(c)(2)'',
            (2) in subsection (b)(1)(F)--
                    (A) by striking ``paragraphs (2) and (3) of section 
                412(i)'' in clause (ii) and inserting ``subparagraphs 
                (B) and (C) of section 412(e)(3)'', and
                    (B) by striking ``paragraphs (4), (5), and (6) of 
                section 412(i)'' and inserting ``subparagraphs (D), (E), 
                and (F) of section 412(e)(3)'', and
            (3) by striking ``section 412(c)(8)'' in subsection 
        (d)(6)(A) and inserting ``section 412(e)(2)''.

    (c) Mergers and Consolidations of Plans.--Subclause (I) of section 
414(l)(2)(B)(i) of such Code is amended to read as follows:
                                    ``(I) the amount determined under 
                                section 431(c)(6)(A)(i) in the case of a 
                                multiemployer plan (and the sum of the 
                                funding shortfall and target normal cost 
                                determined under section 430 in the case 
                                of any other plan), over''.

    (d) Transfer of Excess Pension Assets to Retiree Health Accounts.--
            (1) Section 420(e)(2) of such Code is 
        amended to read as follows:
            ``(2) Excess pension assets.--The term `excess pension 
        assets' means the excess (if any) of--
                    ``(A) the lesser of--
                          ``(i) the fair market value of the plan's 
                      assets (reduced by the prefunding balance and 
                      funding standard carryover balance determined 
                      under section 430(f)), or
                          ``(ii) the value of plan assets as determined 
                      under section 430(g)(3) after reduction under 
                      section 430(f), over
                    ``(B) 125 percent of the sum of the funding 
                shortfall and the target normal cost determined under 
                section 430 for such plan year.''.
            (2) Section 420(e)(4) of such Code is amended to read as 
        follows:
            ``(4) Coordination with section 430.--In the case of a 
        qualified transfer, any assets so transferred shall not, for 
        purposes of this section and section 430, be treated as assets 
        in the plan.''.

    (e) Excise Taxes.--
            (1) In general.--Subsections (a) and (b) of section 4971 of 
        such Code are amended to read as follows:

    ``(a) Initial Tax.--If at any time during any taxable year an 
employer maintains a plan to which section 412 applies, there is hereby 
imposed for the taxable year a tax equal to--
            ``(1) in the case of a single-employer plan, 10 percent of 
        the aggregate unpaid minimum required contributions for all plan 
        years remaining unpaid as of the end of any plan year ending 
        with or within the taxable year, and
            ``(2) in the case of a multiemployer plan, 5 percent of the 
        accumulated funding deficiency determined under section 431 as 
        of the end of any plan year ending with or within the taxable 
        year.

    ``(b) Additional Tax.--If--
            ``(1) a tax is imposed under subsection (a)(1) on any unpaid 
        required minimum contribution and such amount remains unpaid as 
        of the close of the taxable period, or
            ``(2) a tax is imposed under subsection (a)(2) on any 
        accumulated funding deficiency and the accumulated funding 
        deficiency is not corrected within the taxable period,

there is hereby imposed a tax equal to 100 percent of the unpaid minimum 
required contribution or accumulated funding deficiency, whichever is 
applicable, to the extent not so paid or corrected.''.
            (2) Section 4971(c) of such Code is amended--
                    (A) by striking ``the last two sentences of section 
                412(a)'' in paragraph (1) and inserting ``section 431'', 
                and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Unpaid minimum required contribution.--
                    ``(A) In general.--The term `unpaid minimum required 
                contribution' means, with respect to any plan year, any 
                minimum required contribution under section 430 for the 
                plan year which is not paid on or before the due date 
                (as determined under section 430(j)(1)) for the plan 
                year.
                    ``(B) Ordering rule.--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 430 for the 
                plan year.''.
            (3) Section 4971(e)(1) of such Code 
        is amended by striking ``section 412(b)(3)(A)'' and inserting 
        ``section 412(a)(1)(A)''.
            (4) Section 4971(f)(1) of such Code is amended--
                    (A) by striking ``section 412(m)(5)'' and inserting 
                ``section 430(j)(4)'', and
                    (B) by striking ``section 412(m)'' and inserting 
                ``section 430(j)''.
            (5) Section 4972(c)(7) of such Code is amended by striking 
        ``except to the extent that such contributions exceed the full-
        funding limitation (as defined in section 412(c)(7), determined 
        without regard to subparagraph (A)(i)(I) thereof)'' and 
        inserting ``except, in the case of a multiemployer plan, to the 
        extent that such contributions exceed the full-funding 
        limitation (as defined in section 431(c)(6))''.

    (f) Reporting Requirements.--Section 6059(b) of such Code is 
amended--
            (1) by striking ``the accumulated funding deficiency (as 
        defined in section 412(a))'' in paragraph (2) and inserting 
        ``the minimum required contribution determined under section 
        430, or the accumulated funding deficiency determined under 
        section 431,'', and
            (2) by striking paragraph (3)(B) and inserting:
                    ``(B) the requirements for reasonable actuarial 
                assumptions under section 430(h)(1) or 431(c)(3), 
                whichever are applicable, have been complied with.''.

SEC. 115. MODIFICATION OF TRANSITION RULE TO 
            PENSION FUNDING REQUIREMENTS.

    (a) In General.--In the case of a plan that--
            (1) was not required to pay a variable rate premium for the 
        plan year beginning in 1996,
            (2) has not, in any plan year beginning after 1995, merged 
        with another plan (other than a plan sponsored by an employer 
        that was in 1996 within the controlled group of the plan 
        sponsor), and
            (3) is sponsored by a company that is engaged primarily in 
        the interurban or interstate passenger bus service,

the rules described in subsection (b) shall apply for any plan year 
beginning after 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 by striking ``and 2005'' and inserting ``, 2005, 2006, 
        and 2007''.
            (2) Effective date.--The  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 amendment 
        made by paragraph (1) shall take effect on December 31, 2007, 
        and shall apply to plan years beginning after such date.

SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED COMPENSATION 
            PLANS BY EMPLOYERS MAINTAINING UNDERFUNDED OR TERMINATED 
            SINGLE-EMPLOYER PLANS.

    (a) Amendments of Internal Revenue Code.--Subsection (b) of section 
409A of the Internal Revenue Code of 1986 
(providing rules relating to funding) is amended by redesignating 
paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by 
inserting after paragraph (2) the following new paragraph:
            ``(3) Treatment of employer's defined benefit plan during 
        restricted period.--
                    ``(A) In general.--If--
                          ``(i) during any restricted period with 
                      respect to a single-employer defined benefit plan, 
                      assets are set
                      aside or reserved (directly or indirectly) in a 
                      trust (or other arrangement as determined by the 
                      Secretary) or transferred to such a trust or other 
                      arrangement for purposes of paying deferred 
                      compensation of an applicable covered employee 
                      under a nonqualified deferred compensation plan of 
                      the plan sponsor or member of a controlled group 
                      which includes the plan sponsor, or
                          ``(ii) a nonqualified deferred compensation 
                      plan of the plan sponsor or member of a controlled 
                      group which includes the plan sponsor provides 
                      that assets will become restricted to the 
                      provision of benefits under the plan in connection 
                      with such restricted period (or other similar 
                      financial measure determined by the Secretary) 
                      with respect to the defined benefit plan, or 
                      assets are so restricted,
                such assets shall, for purposes of section 83, be 
                treated as property transferred in connection with the 
                performance of services whether or not such assets are 
                available to satisfy claims of general creditors. Clause 
                (i) shall not apply with respect to any assets which are 
                so set aside before the restricted period with respect 
                to the defined benefit plan.
                    ``(B) Restricted period.--For purposes of this 
                section, the term `restricted period' means, with 
                respect to any plan described in subparagraph (A)--
                          ``(i) any period during which the plan is in 
                      at-risk status (as defined in section 430(i));
                          ``(ii) any period the plan sponsor is a debtor 
                      in a case under title 11, United States Code, or 
                      similar Federal or State law, and
                          ``(iii) the 12-month period beginning on the 
                      date which is 6 months before the termination date 
                      of the plan if, as of the termination date, the 
                      plan is not sufficient for benefit liabilities 
                      (within the meaning of section 4041 of the 
                      Employee Retirement Income Security Act of 1974).
                    ``(C) Special rule for payment of taxes on deferred 
                compensation included in income.--If an employer 
                provides directly or indirectly for the payment of any 
                Federal, State, or local income taxes with respect to 
                any compensation required to be included in gross income 
                by reason of this paragraph--
                          ``(i) interest shall be imposed under 
                      subsection (a)(1)(B)(i)(I) on the amount of such 
                      payment in the same manner as if such payment was 
                      part of the deferred compensation to which it 
                      relates,
                          ``(ii) such payment shall be taken into 
                      account in determining the amount of the 
                      additional tax under subsection (a)(1)(B)(i)(II) 
                      in the same manner as if such payment was part of 
                      the deferred compensation to which it relates, and
                          ``(iii) no deduction shall be allowed under 
                      this title with respect to such payment.
                    ``(D) Other definitions.--For purposes of this sec- 
                tion--
                          ``(i) Applicable covered employee.--The term 
                      `applicable covered employee' means any--
                                    ``(I) covered employee of a plan 
                                sponsor,
                                    ``(II) covered employee of a member 
                                of a controlled group which includes the 
                                plan sponsor, and
                                    ``(III) former employee who was a 
                                covered employee at the time of 
                                termination of employment with the plan 
                                sponsor or a member of a controlled 
                                group which includes the plan sponsor.
                          ``(ii) Covered employee.--The term `covered 
                      employee' means an individual described in section 
                      162(m)(3) or an individual subject to the 
                      requirements of section 16(a) of the Securities 
                      Exchange Act of 1934.''.

    (b) Conforming Amendments.--Paragraphs (4) and (5) of section 
409A(b) of such Code, as redesignated by subsection (a) of this 
subsection, are each amended by striking ``paragraph (1) or (2)'' each 
place it appears and inserting ``paragraph (1), (2), or (3)''.
    (c) Effective Date.--The amendments made 
by this section shall apply to transfers or other reservation of assets 
after the date of the enactment of this Act.

  TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND 
                           RELATED PROVISIONS

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

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

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by this Act) is 
amended by inserting after section 303 the following new section:


           ``MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS


    ``Sec. 304. (a) In General.--For purposes of 
section 302, the accumulated funding deficiency of a multiemployer plan 
for any plan year is--
            ``(1) except as provided in paragraph (2), the amount, 
        determined as of the end of the plan year, equal to the excess 
        (if any) of the total charges to the funding standard account of 
        the plan for all plan years (beginning with the first plan year 
        for which this part applies to the plan) over the total credits 
        to such account for such years, and
            ``(2) if the multiemployer plan is in reorganization for any 
        plan year, the accumulated funding deficiency of the plan 
        determined under section 4243.

    ``(b) Funding Standard Account.--
            ``(1) Account required.--Each multiemployer plan to which 
        this part applies shall establish and maintain a funding
        standard account. Such account shall be credited and charged 
        solely as provided in this section.
            ``(2) Charges to account.--For a plan year, the funding 
        standard account shall be charged with the sum of--
                    ``(A) the normal cost of the plan for the plan year,
                    ``(B) the amounts necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) in the case of a plan which comes into 
                      existence on or after January 1, 2008, the 
                      unfunded past service liability under the plan on 
                      the first day of the first plan year to which this 
                      section applies, over a period of 15 plan years,
                          ``(ii) separately, with respect to each plan 
                      year, the net increase (if any) in unfunded past 
                      service liability under the plan arising from plan 
                      amendments adopted in such year, over a period of 
                      15 plan years,
                          ``(iii) separately, with respect to each plan 
                      year, the net experience loss (if any) under the 
                      plan, over a period of 15 plan years, and
                          ``(iv) separately, with respect to each plan 
                      year, the net loss (if any) resulting from changes 
                      in actuarial assumptions used under the plan, over 
                      a period of 15 plan years,
                    ``(C) the amount necessary to amortize each waived 
                funding deficiency (within the meaning of section 
                302(c)(3)) for each prior plan year in equal annual 
                installments (until fully amortized) over a period of 15 
                plan years,
                    ``(D) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 5 plan years any amount credited to the 
                funding standard account under section 302(b)(3)(D) (as 
                in effect on the day before the date of the enactment of 
                the Pension Protection Act of 2006), and
                    ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of section 302(c)(7)(A)(i)(I) (as in effect 
                on the day before the date of the enactment of the 
                Pension Protection Act of 2006).
            ``(3) Credits to account.--For a plan year, the funding 
        standard account shall be credited with the sum of--
                    ``(A) the amount considered contributed by the 
                employer to or under the plan for the plan year,
                    ``(B) the amount necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) separately, with respect to each plan 
                      year, the net decrease (if any) in unfunded past 
                      service liability under the plan arising from plan 
                      amendments adopted in such year, over a period of 
                      15 plan years,
                          ``(ii) separately, with respect to each plan 
                      year, the net experience gain (if any) under the 
                      plan, over a period of 15 plan years, and
                          ``(iii) separately, with respect to each plan 
                      year, the net gain (if any) resulting from changes 
                      in actuarial assumptions used under the plan, over 
                      a period of 15 plan years,
                    ``(C) the amount of the waived funding deficiency 
                (within the meaning of section 302(c)(3)) for the plan 
                year, and
                    ``(D) in the case of a plan year for which the 
                accumulated funding deficiency is determined under the 
                funding standard account if such plan year follows a 
                plan year for which such deficiency was determined under 
                the alternative minimum funding standard under section 
                305 (as in effect on the day before the date of the 
                enactment of the Pension Protection Act of 2006), the 
                excess (if any) of any debit balance in the funding 
                standard account (determined without regard to this 
                subparagraph) over any debit balance in the alternative 
                minimum funding standard account.
            ``(4) Special rule for amounts first amortized in plan years 
        before 2008.--In the case of any amount amortized under section 
        302(b) (as in effect on the day before the date of the enactment 
        of the Pension Protection Act of 2006) over any period beginning 
        with a plan year beginning before 2008, in lieu of the 
        amortization described in paragraphs (2)(B) and (3)(B), such 
        amount shall continue to be amortized under such section as so 
        in effect.
            ``(5) Combining and offsetting amounts to be amortized.--
        Under regulations prescribed by the 
        Secretary of the Treasury, amounts required to be amortized 
        under paragraph (2) or paragraph (3), as the case may be--
                    ``(A) may be combined into one amount under such 
                paragraph to be amortized over a period determined on 
                the basis of the remaining amortization period for all 
                items entering into such combined amount, and
                    ``(B) may be offset against amounts required to be 
                amortized under the other such paragraph, with the 
                resulting amount to be amortized over a period 
                determined on the basis of the remaining amortization 
                periods for all items entering into whichever of the two 
                amounts being offset is the greater.
            ``(6) Interest.--The funding standard 
        account (and items therein) shall be charged or credited (as 
        determined under regulations prescribed by the Secretary of the 
        Treasury) with interest at the appropriate rate consistent with 
        the rate or rates of interest used under the plan to determine 
        costs.
            ``(7) Special rules relating to charges and credits to 
        funding standard account.--For purposes of this part--
                    ``(A) Withdrawal liability.--Any amount received by 
                a multiemployer plan in payment of all or part of an 
                employer's withdrawal liability under part 1 of subtitle 
                E of title IV shall be considered an amount contributed 
                by the employer to or under the plan. The Secretary of 
                the Treasury may prescribe by regulation additional 
                charges and credits to a multiemployer plan's funding 
                standard account to the extent necessary to prevent 
                withdrawal liability payments from being unduly 
                reflected as advance funding for plan liabilities.
                    ``(B) Adjustments when a multiemployer plan leaves 
                reorganization.--If a multiemployer plan is not in 
                reorganization in the plan year but was in 
                reorganization in the immediately preceding plan year, 
                any balance in
                the funding standard account at the close of such 
                immediately preceding plan year--
                          ``(i) shall be eliminated by an offsetting 
                      credit or charge (as the case may be), but
                          ``(ii) shall be taken into account in 
                      subsequent plan years by being amortized in equal 
                      annual installments (until fully amortized) over 
                      30 plan years.
                The preceding sentence shall not apply to the extent of 
                any accumulated funding deficiency under section 4243(a) 
                as of the end of the last plan year that the plan was in 
                reorganization.
                    ``(C) Plan payments to supplemental program or 
                withdrawal liability payment fund.--Any amount paid by a 
                plan during a plan year to the Pension Benefit Guaranty 
                Corporation pursuant to section 4222 of this Act or to a 
                fund exempt under section 501(c)(22) of the Internal 
                Revenue Code of 1986 pursuant to section 4223 of this 
                Act shall reduce the amount of contributions considered 
                received by the plan for the plan year.
                    ``(D) Interim withdrawal 
                liability payments.--Any amount paid by an employer 
                pending a final determination of the employer's 
                withdrawal liability under part 1 of subtitle E of title 
                IV and subsequently refunded to the employer by the plan 
                shall be charged to the funding standard account in 
                accordance with regulations prescribed by the Secretary 
                of the Treasury.
                    ``(E) Election for deferral of charge for portion of 
                net experience loss.--If an election is in effect under 
                section 302(b)(7)(F) (as in effect on the day before the 
                date of the enactment of the Pension Protection Act of 
                2006) for any plan year, the funding standard account 
                shall be charged in the plan year to which the portion 
                of the net experience loss deferred by such election was 
                deferred with the amount so deferred (and paragraph 
                (2)(B)(iii) shall not apply to the amount so charged).
                    ``(F) Financial assistance.--Any amount of any 
                financial assistance from the Pension Benefit Guaranty 
                Corporation to any plan, and any repayment of such 
                amount, shall be taken into account under this section 
                and section 302 in such manner as is determined by the 
                Secretary of the Treasury.
                    ``(G) Short-term benefits.--To the extent that any 
                plan amendment increases the unfunded past service 
                liability under the plan by reason of an increase in 
                benefits which are not payable as a life annuity but are 
                payable under the terms of the plan for a period that 
                does not exceed 14 years from the effective date of the 
                amendment, paragraph (2)(B)(ii) shall be applied 
                separately with respect to such increase in unfunded 
                past service liability by substituting the number of 
                years of the period during which such benefits are 
                payable for `15'.

    ``(c) Additional Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this part, normal costs, accrued liability, past 
        service liabilities, and experience gains and losses shall be 
        determined under the funding method used to determine costs 
        under the plan.
            ``(2) Valuation of assets.--
                    ``(A) In general.--
                For purposes of this part, the 
                value of the plan's assets shall be determined on the 
                basis of any reasonable actuarial method of valuation 
                which takes into account fair market value and which is 
                permitted under regulations prescribed by the Secretary 
                of the Treasury.
                    ``(B) Election with respect to bonds.--The value of 
                a bond or other evidence of indebtedness which is not in 
                default as to principal or interest may, at the election 
                of the plan administrator, be determined on an amortized 
                basis running from initial cost at purchase to par value 
                at maturity or earliest call 
                date. Any election 
                under this subparagraph shall be made at such time and 
                in such manner as the Secretary of the Treasury shall by 
                regulations provide, shall apply to all such evidences 
                of indebtedness, and may be revoked only with the 
                consent of such Secretary.
            ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates of 
        interest, and other factors under the plan shall be determined 
        on the basis of actuarial assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(4) Treatment of certain changes as experience gain or 
        loss.--For purposes of this section, if--
                    ``(A) a change in benefits under the Social Security 
                Act or in other retirement benefits created under 
                Federal or State law, or
                    ``(B) a change in the definition of the term `wages' 
                under section 3121 of the Internal Revenue Code of 1986, 
                or a change in the amount of such wages taken into 
                account under regulations prescribed for purposes of 
                section 401(a)(5) of such Code,
        results in an increase or decrease in accrued liability under a 
        plan, such increase or decrease shall be treated as an 
        experience loss or gain.
            ``(5) Full funding.--If, as of the close of a plan year, a 
        plan would (without regard to this paragraph) have an 
        accumulated funding deficiency in excess of the full funding 
        limitation--
                    ``(A) the funding standard account shall be credited 
                with the amount of such excess, and
                    ``(B) all amounts described in subparagraphs (B), 
                (C), and (D) of subsection (b) (2) and subparagraph (B) 
                of subsection (b)(3) which are required to be amortized 
                shall be considered fully amortized for purposes of such 
                subparagraphs.
            ``(6) Full-funding limitation.--
                    ``(A) In general.--For purposes of paragraph (5), 
                the term `full-funding limitation' means the excess (if 
                any) of--
                          ``(i) the accrued liability (including normal 
                      cost) under the plan (determined under the entry 
                      age normal funding method if such accrued 
                      liability cannot be
                      directly calculated under the funding method used 
                      for the plan), over
                          ``(ii) the lesser of--
                                    ``(I) the fair market value of the 
                                plan's assets, or
                                    ``(II) the value of such assets 
                                determined under paragraph (2).
                    ``(B) Minimum amount.--
                          ``(i) In general.--In no event shall the full-
                      funding limitation determined under subparagraph 
                      (A) be less than the excess (if any) of--
                                    ``(I) 90 percent of the current 
                                liability of the plan (including the 
                                expected increase in current liability 
                                due to benefits accruing during the plan 
                                year), over
                                    ``(II) the value of the plan's 
                                assets determined under paragraph (2).
                          ``(ii) Assets.--For purposes of clause (i), 
                      assets shall not be reduced by any credit balance 
                      in the funding standard account.
                    ``(C) Full funding limitation.--For purposes of this 
                paragraph, unless otherwise provided by the plan, the 
                accrued liability under a multiemployer plan shall not 
                include benefits which are not nonforfeitable under the 
                plan after the termination of the plan (taking into 
                consideration section 411(d)(3) of the Internal Revenue 
                Code of 1986).
                    ``(D) Current liability.--For purposes of this para- 
                graph--
                          ``(i) In general.--The term `current 
                      liability' means all liabilities to employees and 
                      their beneficiaries under the plan.
                          ``(ii) Treatment of unpredictable contingent 
                      event benefits.--For purposes of clause (i), any 
                      benefit contingent on an event other than--
                                    ``(I) age, service, compensation, 
                                death, or disability, or
                                    ``(II) an event which is reasonably 
                                and reliably predictable (as determined 
                                by the Secretary of the Treasury),
                      shall not be taken into account until the event on 
                      which the benefit is contingent occurs.
                          ``(iii) Interest rate used.--The rate of 
                      interest used to determine current liability under 
                      this paragraph shall be the rate of interest 
                      determined under subparagraph (E).
                          ``(iv) Mortality tables.--
                                    ``(I) Commissioners' standard 
                                table.--In the case of plan years 
                                beginning before the first plan year to 
                                which the first tables prescribed under 
                                subclause (II) apply, the mortality 
                                table used in determining current 
                                liability under this paragraph shall be 
                                the table prescribed by the Secretary of 
                                the Treasury which is based on the 
                                prevailing commissioners' standard table 
                                (described in section 807(d)(5)(A) of 
                                the Internal Revenue Code of 1986)
                                used to determine reserves for group 
                                annuity contracts issued on January 1, 
                                1993.
                                    ``(II) Secretarial authority.--The 
                                Secretary of the Treasury may by 
                                regulation prescribe for plan years 
                                beginning after December 31, 1999, 
                                mortality tables to be used in 
                                determining current liability under this 
                                subsection. Such tables shall be based 
                                upon the actual experience of pension 
                                plans and projected trends in such 
                                experience. In prescribing such tables, 
                                such Secretary shall take into account 
                                results of available independent studies 
                                of mortality of individuals covered by 
                                pension plans.
                          ``(v) Separate mortality tables for the 
                      disabled.--Notwithstanding clause (iv)--
                                    ``(I) In general.--The Secretary of 
                                the Treasury shall establish mortality 
                                tables which may be used (in lieu of the 
                                tables under clause (iv)) to determine 
                                current liability under this subsection 
                                for individuals who are entitled to 
                                benefits under the plan on account of 
                                disability. Such Secretary shall 
                                establish separate tables for 
                                individuals whose disabilities occur in 
                                plan years beginning before January 1, 
                                1995, and for individuals whose 
                                disabilities occur in plan years 
                                beginning on or after such date.
                                    ``(II) 
                                Special rule 
                                for disabilities occurring after 1994.--
                                In the case of disabilities occurring in 
                                plan years beginning after December 31, 
                                1994, the tables under subclause (I) 
                                shall apply only with respect to 
                                individuals described in such subclause 
                                who are disabled within the meaning of 
                                title II of the Social Security Act and 
                                the regulations thereunder.
                          ``(vi) Periodic review.--
                      The Secretary of the 
                      Treasury shall periodically (at least every 5 
                      years) review any tables in effect under this 
                      subparagraph and shall, to the extent such 
                      Secretary determines necessary, by regulation 
                      update the tables to reflect the actual experience 
                      of pension plans and projected trends in such 
                      experience.
                    ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current liability for 
                purposes of this paragraph--
                          ``(i) In general.--If any rate of interest 
                      used under the plan under subsection (b)(6) to 
                      determine cost is not within the permissible 
                      range, the plan shall establish a new rate of 
                      interest within the permissible range.
                          ``(ii) Permissible range.--For purposes of 
                      this subparagraph--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the term 
                                `permissible range' means a rate of 
                                interest which is not more than 5 
                                percent above, and not more than 10 
                                percent below, the weighted average of 
                                the rates of interest on 30-year 
                                Treasury securities during the 4-year 
                                period
                                ending on the last day before the 
                                beginning of the plan year.
                                    ``(II) Secretarial authority.--If 
                                the Secretary of the Treasury finds that 
                                the lowest rate of interest permissible 
                                under subclause (I) is unreasonably 
                                high, such Secretary may prescribe a 
                                lower rate of interest, except that such 
                                rate may not be less than 80 percent of 
                                the average rate determined under such 
                                subclause.
                          ``(iii) Assumptions.--Notwithstanding 
                      paragraph (3)(A), the interest rate used under the 
                      plan shall be--
                                    ``(I) determined without taking into 
                                account the experience of the plan and 
                                reasonable expectations, but
                                    ``(II) consistent with the 
                                assumptions which reflect the purchase 
                                rates which would be used by insurance 
                                companies to satisfy the liabilities 
                                under the plan.
            ``(7) Annual valuation.--
                    ``(A) In general.--
                For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not less 
                frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary of the Treasury.
                    ``(B) Valuation date.--
                          ``(i) Current year.--Except 
                      as provided in clause (ii), 
                      the valuation referred to in subparagraph (A) 
                      shall be made as of a date within the plan year to 
                      which the valuation refers or within one month 
                      prior to the beginning of such year.
                          ``(ii) Use of prior year valuation.--The 
                      valuation referred to in subparagraph (A) may be 
                      made as of a date within the plan year prior to 
                      the year to which the valuation refers if, as of 
                      such date, the value of the assets of the plan are 
                      not less than 100 percent of the plan's current 
                      liability (as defined in paragraph (6)(D) without 
                      regard to clause (iv) thereof).
                          ``(iii) Adjustments.--Information under clause 
                      (ii) shall, in accordance with regulations, be 
                      actuarially adjusted to reflect significant 
                      differences in participants.
                          ``(iv) Limitation.--A change in funding method 
                      to use a prior year valuation, as provided in 
                      clause (ii), may not be made unless as of the 
                      valuation date within the prior plan year, the 
                      value of the assets of the plan are not less than 
                      125 percent of the plan's current liability (as 
                      defined in paragraph (6)(D) without regard to 
                      clause (iv) thereof).
            ``(8) Time when certain contributions deemed made.--For 
        purposes of this section, any contributions for a plan year made 
        by an employer after the last day of such plan year, but not 
        later than two and one-half months after such day, shall be 
        deemed to have been made on such last day. For purposes of this 
        subparagraph, such two and one-half month
        period may be extended for not more than 
        six months under regulations prescribed by the Secretary of the 
        Treasury.

    ``(d) Extension of Amortization Periods for Multiemployer Plans.--
            ``(1) Automatic extension upon application by certain 
        plans.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan--
                          ``(i) submits to the Secretary of the Treasury 
                      an application for an extension of the period of 
                      years required to amortize any unfunded liability 
                      described in any clause of subsection (b)(2)(B) or 
                      described in subsection (b)(4), and
                          ``(ii) includes with the application a 
                      certification by the plan's actuary described in 
                      subparagraph (B),
                the Secretary of the Treasury shall extend the 
                amortization period for the period of time (not in 
                excess of 5 years) specified in the application. Such 
                extension shall be in addition to any extension under 
                paragraph (2).
                    ``(B) Criteria.--A certification with respect to a 
                multiemployer plan is described in this subparagraph if 
                the plan's actuary certifies that, based on reasonable 
                assump- tions--
                          ``(i) absent the extension under subparagraph 
                      (A), the plan would have an accumulated funding 
                      deficiency in the current plan year or any of the 
                      9 succeeding plan years,
                          ``(ii) the plan sponsor has adopted a plan to 
                      improve the plan's funding status,
                          ``(iii) the plan is projected to have 
                      sufficient assets to timely pay expected benefits 
                      and anticipated expenditures over the amortization 
                      period as extended, and
                          ``(iv) the 
                      notice required under 
                      paragraph (3)(A) has been provided.
                    ``(C) Termination.--The preceding provisions of this 
                paragraph shall not apply with respect to any 
                application submitted after December 31, 2014.
            ``(2) Alternative extension.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan submits to the Secretary of the 
                Treasury an application for an extension of the period 
                of years required to amortize any unfunded liability 
                described in any clause of subsection (b)(2)(B) or 
                described in subsection (b)(4), the Secretary of the 
                Treasury may extend the amortization period for a period 
                of time (not in excess of 10 years reduced by the number 
                of years of any extension under paragraph (1) with 
                respect to such unfunded liability) if the Secretary of 
                the Treasury makes the determination described in 
                subparagraph (B). Such extension shall be in addition to 
                any extension under paragraph (1).
                    ``(B) Determination.--The Secretary of the Treasury 
                may grant an extension under subparagraph (A) if such 
                Secretary determines that--
                          ``(i) such extension would carry out the 
                      purposes of this Act and would provide adequate 
                      protection for
                      participants under the plan and their 
                      beneficiaries, and
                          ``(ii) the failure to permit such extension 
                      would--
                                    ``(I) result in a substantial risk 
                                to the voluntary continuation of the 
                                plan, or a substantial curtailment of 
                                pension benefit levels or employee 
                                compensation, and
                                    ``(II) be adverse to the interests 
                                of plan participants in the aggregate.
                    ``(C) Action 
                by secretary of the 
                treasury.--The Secretary of the Treasury shall act upon 
                any application for an extension under this paragraph 
                within 180 days of the submission of such application. 
                If such Secretary rejects the application for an 
                extension under this paragraph, such Secretary shall 
                provide notice to the plan detailing the specific 
                reasons for the rejection, including references to the 
                criteria set forth above.
            ``(3) Advance notice.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall, before granting an extension 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 extension to each affected party (as defined in 
                section 4001(a)(21)) with respect to the affected plan. 
                Such notice shall include a description of the extent to 
                which the plan is funded for benefits which are 
                guaranteed under title IV and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary of the Treasury shall consider any relevant 
                information provided by a person to whom notice was 
                given under paragraph (1).''.

    (b) Shortfall Funding Method.--
            (1) In general.--A multiemployer plan meeting the criteria 
        of paragraph (2) may adopt, use, or cease using, the shortfall 
        funding method and such adoption, use, or cessation of use of 
        such method, shall be deemed approved by the Secretary of the 
        Treasury under section 302(d)(1) of the Employee Retirement 
        Income Security Act of 1974 and section 412(d)(1) of the 
        Internal Revenue Code of 1986.
            (2) Criteria.--A multiemployer pension plan meets the 
        criteria of this clause if--
                    (A) the plan has not used the shortfall funding 
                method during the 5-year period ending on the day before 
                the date the plan is to use the method under paragraph 
                (1); and
                    (B) the plan is not operating under an amortization 
                period extension under section 304(d) of such Act and 
                did not operate under such an extension during such 5-
                year period.
            (3) Shortfall funding method defined.--For purposes of this 
        subsection, the term ``shortfall funding method'' means the 
        shortfall funding method described in Treasury Regulations 
        section 1.412(c)(1)-2 (26 CFR 1.412(c)(1)-2).
            (4) Benefit restrictions to apply.--The benefit restrictions 
        under section 302(c)(7) of such Act and section 412(c)(7) of 
        such Code shall apply during any period a multiemployer
        plan is on the shortfall funding method pursuant to this 
        subsection.
            (5) Use of shortfall method not to preclude other options.--
        Nothing in this subsection shall be construed to affect a 
        multiemployer plan's ability to adopt the shortfall funding 
        method with the Secretary's permission under otherwise 
        applicable regulations or to affect a multiemployer plan's right 
        to change funding methods, with or without the Secretary's 
        consent, as provided in applicable rules and regulations.

    (c) Conforming Amendments.--
            (1) Section 301 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1081) is amended by striking subsection 
        (d).
            (2) The table of contents in section 1 of such Act (as 
        amended by this Act) is amended by inserting after the item 
        relating to section 303 the following new item:

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

    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after 2007.
            (2) Special rule for certain amortization extensions.--If 
        the Secretary of the Treasury grants an 
        extension under section 304 of the Employee Retirement Income 
        Security Act of 1974 and section 412(e) of the Internal Revenue 
        Code of 1986 with respect to any application filed with the 
        Secretary of the Treasury on or before June 30, 2005, the 
        extension (and any modification thereof) shall be applied and 
        administered under the rules of such sections as in effect 
        before the enactment of this Act, including the use of the rate 
        of interest determined under section 6621(b) of such Code.

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

    (a) In General.--Part 3 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as amended by the preceding 
provisions of this Act) is amended by inserting after section 304 the 
following new section:


``ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED STATUS 
                           OR CRITICAL STATUS


    ``Sec. 305. (a) General Rule.--For purposes 
of this part, in the case of a multiemployer plan in effect on July 16, 
2006--
            ``(1) if the plan is in endangered status--
                    ``(A) the plan sponsor shall adopt and implement a 
                funding improvement plan in accordance with the 
                requirements of subsection (c), and
                    ``(B) the requirements of 
                subsection (d) shall apply during the funding plan 
                adoption period and the funding improvement period, and
            ``(2) if the plan is in critical status--
                    ``(A) the plan sponsor shall adopt and implement a 
                rehabilitation plan in accordance with the requirements 
                of subsection (e), and
                    ``(B) the requirements of 
                subsection (f) shall apply during the rehabilitation 
                plan adoption period and the rehabilitation period.
    ``(b) Determination of Endangered and Critical Status.--For purposes 
of this section--
            ``(1) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by the plan 
        actuary under paragraph (3), the plan is not in critical status 
        for the plan year and, as of the beginning of the plan year, 
        either--
                    ``(A) the plan's funded percentage for such plan 
                year is less than 80 percent, or
                    ``(B) the plan has an accumulated funding deficiency 
                for such plan year, or is projected to have such an 
                accumulated funding deficiency for any of the 6 
                succeeding plan years, taking into account any extension 
                of amortization periods under section 304(d).
        For purposes of this section, a plan shall be treated as in 
        seriously endangered status for a plan year if the plan is 
        described in both subparagraphs (A) and (B).
            ``(2) Critical status.--A multiemployer plan is in critical 
        status for a plan year if, as determined by the plan actuary 
        under paragraph (3), the plan is described in 1 or more of the 
        following subparagraphs as of the beginning of the plan year:
                    ``(A) A plan is described in this subparagraph if--
                          ``(i) the funded percentage of the plan is 
                      less than 65 percent, and
                          ``(ii) the sum of--
                                    ``(I) the fair market value of plan 
                                assets, plus
                                    ``(II) the present value of the 
                                reasonably anticipated employer 
                                contributions for the current plan year 
                                and each of the 6 succeeding plan years, 
                                assuming that the terms of all 
                                collective bargaining agreements 
                                pursuant to which the plan is maintained 
                                for the current plan year continue in 
                                effect for succeeding plan years,
                      is less than the present value of all 
                      nonforfeitable benefits projected to be payable 
                      under the plan during the current plan year and 
                      each of the 6 succeeding plan years (plus 
                      administrative expenses for such plan years).
                    ``(B) A plan is described in this subparagraph if--
                          ``(i) the plan has an accumulated funding 
                      deficiency for the current plan year, not taking 
                      into account any extension of amortization periods 
                      under section 304(d), or
                          ``(ii) the plan is projected to have an 
                      accumulated funding deficiency for any of the 3 
                      succeeding plan years (4 succeeding plan years if 
                      the funded percentage of the plan is 65 percent or 
                      less), not taking into account any extension of 
                      amortization periods under section 304(d).
                    ``(C) A plan is described in this subparagraph if--
                          ``(i)(I) the plan's normal cost for the 
                      current plan year, plus interest (determined at 
                      the rate used for determining costs under the 
                      plan) for the current plan year on the amount of 
                      unfunded benefit liabilities under the plan as of 
                      the last date of the preceding plan year, exceeds
                          ``(II) the present value of the reasonably 
                      anticipated employer and employee contributions 
                      for the current plan year,
                          ``(ii) the present value, as of the beginning 
                      of the current plan year, of nonforfeitable 
                      benefits of inactive participants is greater than 
                      the present value of nonforfeitable benefits of 
                      active participants, and
                          ``(iii) the plan has an accumulated funding 
                      deficiency for the current plan year, or is 
                      projected to have such a deficiency for any of the 
                      4 succeeding plan years, not taking into account 
                      any extension of amortization periods under 
                      section 304(d).
                    ``(D) A plan is described in this subparagraph if 
                the sum of--
                          ``(i) the fair market value of plan assets, 
                      plus
                          ``(ii) the present value of the reasonably 
                      anticipated employer contributions for the current 
                      plan year and each of the 4 succeeding plan years, 
                      assuming that the terms of all collective 
                      bargaining agreements pursuant to which the plan 
                      is maintained for the current plan year continue 
                      in effect for succeeding plan years,
                is less than the present value of all benefits projected 
                to be payable under the plan during the current plan 
                year and each of the 4 succeeding plan years (plus 
                administrative expenses for such plan years).
            ``(3) Annual certification by plan actuary.--
                    ``(A) In general.--Not later 
                than the 90th day of each plan year of a multiemployer 
                plan, the plan actuary shall certify to the Secretary of 
                the Treasury and to the plan sponsor--
                          ``(i) whether or not the plan is in endangered 
                      status for such plan year and whether or not the 
                      plan is or will be in critical status for such 
                      plan year, and
                          ``(ii) in the case of a plan which is in a 
                      funding improvement or rehabilitation period, 
                      whether or not the plan is making the scheduled 
                      progress in meeting the requirements of its 
                      funding improvement or rehabilitation plan.
                    ``(B) Actuarial projections of assets and 
                liabilities.--
                          ``(i) In general.--In making the 
                      determinations and projections under this 
                      subsection, the plan actuary shall make 
                      projections required for the current and 
                      succeeding plan years of the current value of the 
                      assets of the plan and the present value of all 
                      liabilities to participants and beneficiaries 
                      under the plan for the current plan year as of the 
                      beginning of such year. The actuary's projections 
                      shall be based on reasonable actuarial estimates, 
                      assumptions, and methods that, except as provided 
                      in clause (iii), offer the actuary's best estimate 
                      of anticipated experience under the plan. The 
                      projected present value of liabilities as of the 
                      beginning of such year shall be determined based 
                      on the most recent of either--
                                    ``(I) the actuarial statement 
                                required under section 103(d) with 
                                respect to the most recently filed 
                                annual report, or
                                    ``(II) the actuarial valuation for 
                                the preceding plan year.
                          ``(ii) Determinations of future 
                      contributions.--Any actuarial projection of plan 
                      assets shall assume--
                                    ``(I) reasonably anticipated 
                                employer contributions for the current 
                                and succeeding plan years, assuming that 
                                the terms of the one or more collective 
                                bargaining agreements pursuant to which 
                                the plan is maintained for the current 
                                plan year continue in effect for 
                                succeeding plan years, or
                                    ``(II) that employer contributions 
                                for the most recent plan year will 
                                continue indefinitely, but only if the 
                                plan actuary determines there have been 
                                no significant demographic changes that 
                                would make such assumption unreasonable.
                          ``(iii) Projected industry activity.--Any 
                      projection of activity in the industry or 
                      industries covered by the plan, including future 
                      covered employment and contribution levels, shall 
                      be based on information provided by the plan 
                      sponsor, which shall act reasonably and in good 
                      faith.
                    ``(C) Penalty for failure to secure timely actuarial 
                certification.--Any failure of the 
                plan's actuary to certify the plan's status under this 
                subsection by the date specified in subparagraph (A) 
                shall be treated for purposes of section 502(c)(2) as a 
                failure or refusal by the plan administrator to file the 
                annual report required to be filed with the Secretary 
                under section 101(b)(4).
                    ``(D) Notice.--
                          ``(i) In general.--In any 
                      case in which it is certified under subparagraph 
                      (A) that a multiemployer plan is or will be in 
                      endangered or critical status for a plan year, the 
                      plan sponsor shall, not later than 30 days after 
                      the date of the certification, provide 
                      notification of the endangered or critical status 
                      to the participants and beneficiaries, the 
                      bargaining parties, the Pension Benefit Guaranty 
                      Corporation, and the Secretary.
                          ``(ii) Plans in critical status.--If it is 
                      certified under subparagraph (A) that a 
                      multiemployer plan is or will be in critical 
                      status, the plan sponsor shall include in the 
                      notice under clause (i) an explanation of the 
                      possibility that--
                                    ``(I) adjustable benefits (as 
                                defined in subsection (e)(8)) may be 
                                reduced, and
                                    ``(II) such reductions may apply to 
                                participants and beneficiaries whose 
                                benefit commencement date is on or after 
                                the date such notice is provided for the 
                                first plan year in which the plan is in 
                                critical status.
                          ``(iii) Model notice.--The Secretary shall 
                      prescribe a model notice that a multiemployer plan 
                      may use to satisfy the requirements under clause 
                      (ii).
    ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer 
Plans in Endangered Status.--
            ``(1) In general.--In any case in which 
        a multiemployer plan is in endangered status for a plan year, 
        the plan sponsor, in accordance with this subsection--
                    ``(A) shall adopt a funding improvement plan not 
                later than 240 days following the required date for the 
                actuarial certification of endangered status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                funding improvement plan--
                          ``(i) shall provide to the bargaining parties 
                      1 or more schedules showing revised benefit 
                      structures, revised contribution structures, or 
                      both, which, if adopted, may reasonably be 
                      expected to enable the multiemployer plan to meet 
                      the applicable benchmarks in accordance with the 
                      funding improvement plan, including--
                                    ``(I) one proposal for reductions in 
                                the amount of future benefit accruals 
                                necessary to achieve the applicable 
                                benchmarks, assuming no amendments 
                                increasing contributions under the plan 
                                (other than amendments increasing 
                                contributions necessary to achieve the 
                                applicable benchmarks after amendments 
                                have reduced future benefit accruals to 
                                the maximum extent permitted by law), 
                                and
                                    ``(II) one proposal for increases in 
                                contributions under the plan necessary 
                                to achieve the applicable benchmarks, 
                                assuming no amendments reducing future 
                                benefit accruals under the plan, and
                          ``(ii) may, if the plan sponsor deems 
                      appropriate, prepare and provide the bargaining 
                      parties with additional information relating to 
                      contribution rates or benefit reductions, 
                      alternative schedules, or other information 
                      relevant to achieving the applicable benchmarks in 
                      accordance with the funding improvement plan.
                For purposes of this section, the term `applicable 
                benchmarks' means the requirements applicable to the 
                multiemployer plan under paragraph (3) (as modified by 
                paragraph (5)).
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a funding 
        plan adoption period or funding improvement period by reason of 
        the plan being in endangered status for a preceding plan year. 
        For purposes of this section, such preceding plan year shall be 
        the initial determination year with respect to the funding 
        improvement plan to which it relates.
            ``(3) Funding improvement plan.--For purposes of this 
        section--
                    ``(A) In general.--A funding improvement plan is a 
                plan which consists of the actions, including options or 
                a range of options to be proposed to the bargaining 
                parties, formulated to provide, based on reasonably 
                anticipated experience and reasonable actuarial 
                assumptions, for the attainment by the plan during the 
                funding improvement period of the following 
                requirements:
                          ``(i) Increase in plan's funding percentage.--
                      The plan's funded percentage as of the close of 
                      the funding improvement period equals or exceeds a 
                      percentage equal to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 33 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I).
                          ``(ii) Avoidance of accumulated funding 
                      deficiencies.--No accumulated funding deficiency 
                      for any plan year during the funding improvement 
                      period (taking into account any extension of 
                      amortization periods under section 304(d)).
                    ``(B) Seriously endangered 
                plans.--In the case of a plan in seriously endangered 
                status, except as provided in paragraph (5), 
                subparagraph (A)(i)(II) shall be applied by substituting 
                `20 percent' for `33 percent'.
            ``(4) Funding improvement period.--For purposes of this 
        section--
                    ``(A) In general.--The funding improvement period 
                for any funding improvement plan adopted pursuant to 
                this subsection is the 10-year period beginning on the 
                first day of the first plan year of the multiemployer 
                plan beginning after the earlier of--
                          ``(i) the second anniversary of the date of 
                      the adoption of the funding improvement plan, or
                          ``(ii) the expiration of the collective 
                      bargaining agreements in effect on the due date 
                      for the actuarial certification of endangered 
                      status for the initial determination year under 
                      subsection (b)(3)(A) and covering, as of such due 
                      date, at least 75 percent of the active 
                      participants in such multiemployer plan.
                    ``(B) Seriously endangered 
                plans.--In the case of a plan in seriously endangered 
                status, except as provided in paragraph (5), 
                subparagraph (A) shall be applied by substituting `15-
                year period' for `10-year period'.
                    ``(C) Coordination with changes in status.--
                          ``(i) Plans no longer in endangered status.--
                      If the plan's actuary certifies under subsection 
                      (b)(3)(A) for a plan year in any funding plan 
                      adoption period or funding improvement period that 
                      the plan is no longer in endangered status and is 
                      not in critical status, the funding plan adoption 
                      period or funding improvement period, whichever is 
                      applicable, shall end as of the close of the 
                      preceding plan year.
                          ``(ii) Plans in critical status.--If the 
                      plan's actuary certifies under subsection 
                      (b)(3)(A) for a plan year in any funding plan 
                      adoption period or funding improvement period that 
                      the plan is in critical status, the funding plan 
                      adoption period or funding improvement period, 
                      whichever is applicable, shall end as of the close 
                      of the plan year preceding the first plan year in 
                      the rehabilitation period with respect to such 
                      status.
                    ``(D) Plans in endangered status at end of period.--
                If the plan's actuary certifies under subsection 
                (b)(3)(A) for the first plan year following the close of 
                the
                period described in subparagraph (A) that the plan is in 
                endangered status, the provisions of this subsection and 
                subsection (d) shall be applied as if such first plan 
                year were an initial determination year, except that the 
                plan may not be amended in a manner inconsistent with 
                the funding improvement plan in effect for the preceding 
                plan year until a new funding improvement plan is 
                adopted.
            ``(5) Special rules for seriously endangered plans more than 
        70 percent funded.--
                    ``(A) In general.--If the funded percentage of a 
                plan in seriously endangered status was more than 70 
                percent as of the beginning of the initial determination 
                year--
                          
                      ``(i) paragraphs
                       (3)(B) and (4)(B) shall apply only if the plan's 
                      actuary certifies, within 30 days after the 
                      certification under subsection (b)(3)(A) for the 
                      initial determination year, that, based on the 
                      terms of the plan and the collective bargaining 
                      agreements in effect at the time of such 
                      certification, the plan is not projected to meet 
                      the requirements of paragraph (3)(A) (without 
                      regard to paragraphs (3)(B) and (4)(B)), and
                          ``(ii) if there is a certification under 
                      clause (i), the plan may, in formulating its 
                      funding improvement plan, only take into account 
                      the rules of paragraph (3)(B) and (4)(B) for plan 
                      years in the funding improvement period beginning 
                      on or before the date on which the last of the 
                      collective bargaining agreements described in 
                      paragraph (4)(A)(ii) expires.
                    ``(B) Special rule after expiration of agreements.--
                Notwithstanding subparagraph (A)(ii), if, for any plan 
                year ending after the date described in subparagraph 
                (A)(ii), the plan actuary certifies (at the time of the 
                annual certification under subsection (b)(3)(A) for such 
                plan year) that, based on the terms of the plan and 
                collective bargaining agreements in effect at the time 
                of that annual certification, the plan is not projected 
                to be able to meet the requirements of paragraph (3)(A) 
                (without regard to paragraphs (3)(B) and (4)(B)), 
                paragraphs (3)(B) and (4)(B) shall continue to apply for 
                such year.
            ``(6) Updates to funding improvement plan and schedules.--
                    ``(A) Funding improvement plan.--The plan sponsor 
                shall annually update the funding improvement plan and 
                shall file the update with the plan's annual report 
                under section 104.
                    ``(B) Schedules.--The plan sponsor shall annually 
                update any schedule of contribution rates provided under 
                this subsection to reflect the experience of the plan.
                    ``(C) Duration of schedule.--A schedule of 
                contribution rates provided by the plan sponsor and 
                relied upon by bargaining parties in negotiating a 
                collective bargaining agreement shall remain in effect 
                for the duration of that collective bargaining 
                agreement.
            ``(7) Imposition of default schedule where failure to adopt 
        funding improvement plan.--
                    ``(A) In general.--If--
                          ``(i) a collective bargaining agreement 
                      providing for contributions under a multiemployer 
                      plan that was in effect at the time the plan 
                      entered endangered status expires, and
                          ``(ii) after receiving one or more schedules 
                      from the plan sponsor under paragraph (1)(B), the 
                      bargaining parties with respect to such agreement 
                      fail to agree on changes to contribution or 
                      benefit schedules necessary to meet the applicable 
                      benchmarks in accordance with the funding 
                      improvement plan,
                the plan sponsor shall implement the schedule described 
                in paragraph (1)(B)(i)(I) beginning on the date 
                specified in subparagraph (B).
                    ``(B) Date of implementation.--The date specified in 
                this subparagraph is the earlier of the date--
                          ``(i) on which the Secretary certifies that 
                      the parties are at an impasse, or
                          ``(ii) which is 180 days after the date on 
                      which the collective bargaining agreement 
                      described in subparagraph (A) expires.
            ``(8) Funding plan adoption period.--For purposes of this 
        section, the term `funding plan adoption period' means the 
        period beginning on the date of the certification under 
        subsection (b)(3)(A) for the initial determination year and 
        ending on the day before the first day of the funding 
        improvement period.

    ``(d) Rules for Operation of Plan During Adoption and Improvement 
Periods.--
            ``(1) Special rules for plan adoption period.--During the 
        funding plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation,
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 of the 
                Internal Revenue Code of 1986 or to comply with other 
                applicable law, and
                    ``(C) in the case of a plan in seriously endangered 
                status, the plan sponsor shall take all reasonable 
                actions which are consistent with the terms of the plan 
                and applicable law and which are expected, based on 
                reasonable assumptions, to achieve--
                          ``(i) an increase in the plan's funded 
                      percentage, and
                          ``(ii) postponement of an accumulated funding 
                      deficiency for at least 1 additional plan year.
        Actions under subparagraph (C) include applications for 
        extensions of amortization periods under section 304(d), use of 
        the shortfall funding method in making funding standard account 
        computations, amendments to the plan's benefit structure, 
        reductions in future benefit accruals, and other reasonable 
        actions consistent with the terms of the plan and applicable 
        law.
            ``(2) Compliance with funding improvement plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a funding improvement plan 
                so as to be inconsistent with the funding improvement 
                plan.
                    ``(B) No reduction in contributions.--A plan sponsor 
                may not during any funding improvement period accept a 
                collective bargaining agreement or participation 
                agreement with respect to the multiemployer plan that 
                provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation.
                    ``(C) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                funding improvement plan so as to increase benefits, 
                including future benefit accruals, unless the plan 
                actuary certifies that the benefit increase is 
                consistent with the funding improvement plan and is paid 
                for out of contributions not required by the funding 
                improvement plan to meet the applicable benchmark in 
                accordance with the schedule contemplated in the funding 
                improvement plan.

    ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in 
Critical Status.--
            ``(1) In general.--In any case in which 
        a multiemployer plan is in critical status for a plan year, the 
        plan sponsor, in accordance with this subsection--
                    ``(A) shall adopt a rehabilitation plan not later 
                than 240 days following the required date for the 
                actuarial certification of critical status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                rehabilitation plan--
                          ``(i) shall provide to the bargaining parties 
                      1 or more schedules showing revised benefit 
                      structures, revised contribution structures, or 
                      both, which, if adopted, may reasonably be 
                      expected to enable the multiemployer plan to 
                      emerge from critical status in accordance with the 
                      rehabilitation plan, and
                          ``(ii) may, if the plan sponsor deems 
                      appropriate, prepare and provide the bargaining 
                      parties with additional information relating to 
                      contribution rates or benefit reductions, 
                      alternative schedules, or other information 
                      relevant to emerging from critical status in 
                      accordance with the rehabilitation plan.
        The schedule or schedules described in subparagraph (B)(i) shall 
        reflect reductions in future benefit accruals and adjustable
        benefits, and increases in contributions, that the plan sponsor 
        determines are reasonably necessary to emerge from critical 
        status. One schedule shall be designated as the default schedule 
        and such schedule shall assume that there are no increases in 
        contributions under the plan other than the increases necessary 
        to emerge from critical status after future benefit accruals and 
        other benefits (other than benefits the reduction or elimination 
        of which are not permitted under section 204(g)) have been 
        reduced to the maximum extent permitted by law.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a 
        rehabilitation plan adoption period or rehabilitation period by 
        reason of the plan being in critical status for a preceding plan 
        year. For purposes of this section, such preceding plan year 
        shall be the initial critical year with respect to the 
        rehabilitation plan to which it relates.
            ``(3) Rehabilitation plan.--For purposes of this section--
                    ``(A) In general.--A rehabilitation plan is a plan 
                which consists of--
                          ``(i) actions, including options or a range of 
                      options to be proposed to the bargaining parties, 
                      formulated, based on reasonably anticipated 
                      experience and reasonable actuarial assumptions, 
                      to enable the plan to cease to be in critical 
                      status by the end of the rehabilitation period and 
                      may include reductions in plan expenditures 
                      (including plan mergers and consolidations), 
                      reductions in future benefit accruals or increases 
                      in contributions, if agreed to by the bargaining 
                      parties, or any combination of such actions, or
                          ``(ii) if the plan sponsor determines that, 
                      based on reasonable actuarial assumptions and upon 
                      exhaustion of all reasonable measures, the plan 
                      can not reasonably be expected to emerge from 
                      critical status by the end of the rehabilitation 
                      period, reasonable measures to emerge from 
                      critical status at a later time or to forestall 
                      possible insolvency (within the meaning of section 
                      4245).
                A rehabilitation plan must provide 
                annual standards for meeting the requirements of such 
                rehabilitation plan. Such plan shall also include the 
                schedules required to be provided under paragraph 
                (1)(B)(i) and if clause (ii) applies, shall set forth 
                the alternatives considered, explain why the plan is not 
                reasonably expected to emerge from critical status by 
                the end of the rehabilitation period, and specify when, 
                if ever, the plan is expected to emerge from critical 
                status in accordance with the rehabilitation plan.
                    ``(B) Updates to rehabilitation plan and 
                schedules.--
                          ``(i) Rehabilitation plan.--The plan sponsor 
                      shall annually update the rehabilitation plan and 
                      shall file the update with the plan's annual 
                      report under section 104.
                          ``(ii) Schedules.--The plan sponsor shall 
                      annually update any schedule of contribution rates 
                      provided under this subsection to reflect the 
                      experience of the plan.
                          ``(iii) Duration of schedule.--A schedule of 
                      contribution rates provided by the plan sponsor 
                      and relied upon by bargaining parties in 
                      negotiating a collective bargaining agreement 
                      shall remain in effect for the duration of that 
                      collective bargaining agreement.
                    ``(C) Imposition of default schedule where failure 
                to adopt rehabilitation plan.--
                          ``(i) In general.--If--
                                    ``(I) a collective bargaining 
                                agreement providing for contributions 
                                under a multiemployer plan that was in 
                                effect at the time the plan entered 
                                critical status expires, and
                                    ``(II) after receiving one or more 
                                schedules from the plan sponsor under 
                                paragraph (1)(B), the bargaining parties 
                                with respect to such agreement fail to 
                                adopt a contribution or benefit 
                                schedules with terms consistent with the 
                                rehabilitation plan and the schedule 
                                from the plan sponsor under paragraph 
                                (1)(B)(i),
                      the plan sponsor shall implement the default 
                      schedule described in the last sentence of 
                      paragraph (1) beginning on the date specified in 
                      clause (ii).
                          ``(ii) Date of implementation.--The date 
                      specified in this clause is the earlier of the 
                      date--
                                    ``(I) on which the Secretary 
                                certifies that the parties are at an 
                                impasse, or
                                    ``(II) which is 180 days after the 
                                date on which the collective bargaining 
                                agreement described in clause (i) 
                                expires.
            ``(4) Rehabilitation period.--For purposes of this sec- 
        tion--
                    ``(A) In general.--The rehabilitation period for a 
                plan in critical status is the 10-year period beginning 
                on the first day of the first plan year of the 
                multiemployer plan following the earlier of--
                          ``(i) the second anniversary of the date of 
                      the adoption of the rehabilitation plan, or
                          ``(ii) the expiration of the collective 
                      bargaining agreements in effect on the date of the 
                      due date for the actuarial certification of 
                      critical status for the initial critical year 
                      under subsection (a)(1) and covering, as of such 
                      date at least 75 percent of the active 
                      participants in such multiemployer plan.
                If a plan emerges from critical status as provided under 
                subparagraph (B) before the end of such 10-year period, 
                the rehabilitation period shall end with the plan year 
                preceding the plan year for which the determination 
                under subparagraph (B) is made.
                    ``(B) Emergence.--A plan in critical status shall 
                remain in such status until a plan year for which the 
                plan actuary certifies, in accordance with subsection 
                (b)(3)(A), that the plan is not projected to have an 
                accumulated funding deficiency for the plan year or any 
                of the 9 succeeding plan years, without regard to the 
                use of the shortfall method and taking into account any 
                extension of amortization periods under section 304(d).
            ``(5) Rehabilitation plan adoption period.--For purposes of 
        this section, the term `rehabilitation plan adoption period' 
        means the period beginning on the date of the certification 
        under subsection (b)(3)(A) for the initial critical year and 
        ending on the day before the first day of the rehabilitation 
        period.
            ``(6) Limitation on reduction in rates of future accruals.--
        Any reduction in the rate of future accruals under the default 
        schedule described in paragraph (1)(B)(i) shall not reduce the 
        rate of future accruals below--
                    ``(A) a monthly benefit (payable as a single life 
                annuity commencing at the participant's normal 
                retirement age) equal to 1 percent of the contributions 
                required to be made with respect to a participant, or 
                the equivalent standard accrual rate for a participant 
                or group of participants under the collective bargaining 
                agreements in effect as of the first day of the initial 
                critical year, or
                    ``(B) if lower, the accrual rate under the plan on 
                such first day.
        The equivalent standard accrual rate shall be determined by the 
        plan sponsor based on the standard or average contribution base 
        units which the plan sponsor determines to be representative for 
        active participants and such other factors as the plan sponsor 
        determines to be relevant. Nothing in this paragraph shall be 
        construed as limiting the ability of the plan sponsor to prepare 
        and provide the bargaining parties with alternative schedules to 
        the default schedule that established lower or higher accrual 
        and contribution rates than the rates otherwise described in 
        this paragraph.
            ``(7) Automatic employer surcharge.--
                    ``(A) Imposition of surcharge.--Each employer 
                otherwise obligated to make contributions for the 
                initial critical year shall be obligated to pay to the 
                plan for such year a surcharge equal to 5 percent of the 
                contributions otherwise required under the applicable 
                collective bargaining agreement (or other agreement 
                pursuant to which the employer contributes). For each 
                succeeding plan year in which the plan is in critical 
                status for a consecutive period of years beginning with 
                the initial critical year, the surcharge shall be 10 
                percent of the contributions otherwise so required.
                    ``(B) Enforcement of surcharge.--The surcharges 
                under subparagraph (A) shall be due and payable on the 
                same schedule as the contributions on which the 
                surcharges are based. Any failure to make a surcharge 
                payment shall be treated as a delinquent contribution 
                under section 515 and shall be enforceable as such.
                    ``(C) Surcharge to terminate upon collective 
                bargaining agreement renegotiation.--The surcharge under 
                this paragraph shall cease to be effective with respect 
                to employees covered by a collective bargaining 
                agreement (or other agreement pursuant to which the 
                employer contributes), beginning on the effective date 
                of a collective bargaining agreement (or other such 
                agreement) that includes terms consistent with a 
                schedule presented by the plan sponsor under paragraph 
                (1)(B)(i), as modified under subparagraph (B) of 
                paragraph (3).
                    ``(D) Surcharge not to apply until employer receives 
                notice.--The surcharge under this paragraph shall not 
                apply to an employer until 30 days after the employer 
                has been notified by the plan sponsor that the plan is 
                in critical status and that the surcharge is in effect.
                    ``(E) Surcharge not to generate increased benefit 
                accruals.--Notwithstanding any provision of a plan to 
                the contrary, the amount of any surcharge under this 
                paragraph shall not be the basis for any benefit accrual 
                under the plan.
            ``(8) Benefit adjustments.--
                    ``(A) Adjustable benefits.--
                          ``(i) In general.--Notwithstanding section 
                      204(g), the plan sponsor shall, subject to the 
                      notice requirements in subparagraph (C), make any 
                      reductions to adjustable benefits which the plan 
                      sponsor deems appropriate, based upon the outcome 
                      of collective bargaining over the schedule or 
                      schedules provided under paragraph (1)(B)(i).
                          ``(ii) Exception for retirees.--Except in the 
                      case of adjustable benefits described in clause 
                      (iv)(III), the plan sponsor of a plan in critical 
                      status shall not reduce adjustable benefits of any 
                      participant or beneficiary whose benefit 
                      commencement date is before the date on which the 
                      plan provides notice to the participant or 
                      beneficiary under subsection (b)(3)(D) for the 
                      initial critical year.
                          ``(iii) Plan sponsor flexibility.--The plan 
                      sponsor shall include in the schedules provided to 
                      the bargaining parties an allowance for funding 
                      the benefits of participants with respect to whom 
                      contributions are not currently required to be 
                      made, and shall reduce their benefits to the 
                      extent permitted under this title and considered 
                      appropriate by the plan sponsor based on the 
                      plan's then current overall funding status.
                          ``(iv) Adjustable benefit defined.--For 
                      purposes of this paragraph, the term `adjustable 
                      benefit' means--
                                    ``(I) benefits, rights, and features 
                                under the plan, including post-
                                retirement death benefits, 60-month 
                                guarantees, disability benefits not yet 
                                in pay status, and similar benefits,
                                    ``(II) any early retirement benefit 
                                or retirement-type subsidy (within the 
                                meaning of section 204(g)(2)(A)) and any 
                                benefit payment option (other than the 
                                qualified joint and survivor annuity), 
                                and
                                    ``(III) benefit increases that would 
                                not be eligible for a guarantee under 
                                section 4022A on the first day of 
                                initial critical year because the 
                                increases were adopted (or, if later, 
                                took effect) less than 60 months before 
                                such first day.
                    ``(B) Normal retirement benefits protected.--Except 
                as provided in subparagraph (A)(iv)(III), nothing in 
                this paragraph shall be construed to permit a plan
                to reduce the level of a participant's accrued benefit 
                payable at normal retirement age.
                    ``(C) Notice requirements.--
                          ``(i) In general.--
                      No reduction may be made to 
                      adjustable benefits under subparagraph (A) unless 
                      notice of such reduction has been given at least 
                      30 days before the general effective date of such 
                      reduction for all participants and beneficiaries 
                      to--
                                    ``(I) plan participants and 
                                beneficiaries,
                                    ``(II) each employer who has an 
                                obligation to contribute (within the 
                                meaning of section 4212(a)) under the 
                                plan, and
                                    ``(III) each employee organization 
                                which, for purposes of collective 
                                bargaining, represents plan participants 
                                employed by such an employer.
                          ``(ii) Content of notice.--The notice under 
                      clause (i) shall contain--
                                    ``(I) sufficient information to 
                                enable participants and beneficiaries to 
                                understand the effect of any reduction 
                                on their benefits, including an estimate 
                                (on an annual or monthly basis) of any 
                                affected adjustable benefit that a 
                                participant or beneficiary would 
                                otherwise have been eligible for as of 
                                the general effective date described in 
                                clause (i), and
                                    ``(II) information as to the rights 
                                and remedies of plan participants and 
                                beneficiaries as well as how to contact 
                                the Department of Labor for further 
                                information and assistance where 
                                appropriate.
                          ``(iii) Form and manner.--Any notice under 
                      clause (i)--
                                    ``(I) shall 
                                be provided in a form and manner 
                                prescribed in regulations of the 
                                Secretary,
                                    ``(II) shall be written in a manner 
                                so as to be understood by the average 
                                plan participant, and
                                    ``(III) may be provided in written, 
                                electronic, or other appropriate form to 
                                the extent such form is reasonably 
                                accessible to persons to whom the notice 
                                is required to be provided.
                      The Secretary shall in the 
                      regulations prescribed under subclause (I) 
                      establish a model notice that a plan sponsor may 
                      use to meet the requirements of this subparagraph.
            ``(9) Adjustments disregarded in withdrawal liability 
        determination.--
                    ``(A) Benefit reductions.--Any benefit reductions 
                under this subsection shall be disregarded in 
                determining a plan's unfunded vested benefits for 
                purposes of determining an employer's withdrawal 
                liability under section 4201.
                    ``(B) Surcharges.--Any surcharges under paragraph 
                (7) shall be disregarded in determining an employer's 
                withdrawal liability under section 4211, except for 
                purposes of determining the unfunded vested benefits 
                attributable to an employer under section 4211(c)(4) or 
                a comparable method approved under section 4211(c)(5).
                    ``(C) Simplified calculations.--The Pension Benefit 
                Guaranty Corporation shall prescribe simplified methods 
                for the application of this paragraph in determining 
                withdrawal liability.

    ``(f) Rules for Operation of Plan During Adoption and Rehabilitation 
Period.--
            ``(1) Compliance with rehabilitation plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a rehabilitation plan under 
                subsection (e) so as to be inconsistent with the 
                rehabilitation plan.
                    ``(B) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                rehabilitation plan under subsection (e) so as to 
                increase benefits, including future benefit accruals, 
                unless the plan actuary certifies that such increase is 
                paid for out of additional contributions not 
                contemplated by the rehabilitation plan, and, after 
                taking into account the benefit increase, the 
                multiemployer plan still is reasonably expected to 
                emerge from critical status by the end of the 
                rehabilitation period on the schedule contemplated in 
                the rehabilitation plan.
            ``(2) Restriction on lump sums and similar benefits.--
                    ``(A) In general.--Effective on the date the notice of certification of the 
                plan's critical status for the initial critical year 
                under subsection (b)(3)(D) is sent, and notwithstanding 
                section 204(g), the plan shall not pay--
                          ``(i) any payment, in excess of the monthly 
                      amount paid under a single life annuity (plus any 
                      social security supplements described in the last 
                      sentence of section 204(b)(1)(G)),
                          ``(ii) any payment for the purchase of an 
                      irrevocable commitment from an insurer to pay 
                      benefits, and
                          ``(iii) any other payment specified by the 
                      Secretary of the Treasury by regulations.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a benefit which under section 203(e) may be 
                immediately distributed without the consent of the 
                participant or to any makeup payment in the case of a 
                retroactive annuity starting date or any similar payment 
                of benefits owed with respect to a prior period.
            ``(3) Adjustments disregarded in withdrawal liability 
        determination.--Any benefit reductions under this subsection 
        shall be disregarded in determining a plan's unfunded vested 
        benefits for purposes of determining an employer's withdrawal 
        liability under section 4201.
            ``(4) Special rules for plan adoption period.--During the 
        rehabilitation plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation, and
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 of the 
                Internal Revenue Code of 1986 or to comply with other 
                applicable law.

    ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within 60 
days of the due date for adoption of a funding improvement plan or a 
rehabilitation plan under subsection (e), the plan sponsor of a plan in 
endangered status or a plan in critical status has not agreed on a 
funding improvement plan or rehabilitation plan, then any member of the 
board or group that constitutes the plan sponsor may require that the 
plan sponsor enter into an expedited dispute resolution procedure for 
the development and adoption of a funding improvement plan or 
rehabilitation plan.
    ``(h) Nonbargained Participation.--
            ``(1) Both bargained and nonbargained employee-
        participants.--In the case of an employer that contributes to a 
        multiemployer plan with respect to both employees who are 
        covered by one or more collective bargaining agreements and 
        employees who are not so covered, if the plan is in endangered 
        status or in critical status, benefits of and contributions for 
        the nonbargained employees, including surcharges on those 
        contributions, shall be determined as if those nonbargained 
        employees were covered under the first to expire of the 
        employer's collective bargaining agreements in effect when the 
        plan entered endangered or critical status.
            ``(2) Nonbargained employees only.--In the case of an 
        employer that contributes to a multiemployer plan only with 
        respect to employees who are not covered by a collective 
        bargaining agreement, this section shall be applied as if the 
        employer were the bargaining party, and its participation 
        agreement with the plan were a collective bargaining agreement 
        with a term ending on the first day of the plan year beginning 
        after the employer is provided the schedule or schedules 
        described in subsections (c) and (e).

    ``(i) Definitions; Actuarial Method.--For purposes of this section--
            ``(1) Bargaining party.--The term `bargaining party' means--
                    ``(A)(i) except as provided in clause (ii), an 
                employer who has an obligation to contribute under the 
                plan; or
                    ``(ii) in the case of a plan described under section 
                404(c) of the Internal Revenue Code of 1986, or a 
                continuation of such a plan, the association of 
                employers that is the employer settlor of the plan; and
                    ``(B) an employee organization which, for purposes 
                of collective bargaining, represents plan participants 
                employed by an employer who has an obligation to 
                contribute under the plan.
            ``(2) Funded percentage.--The term `funded percentage' means 
        the percentage equal to a fraction--
                    ``(A) the numerator of which is the value of the 
                plan's assets, as determined under section 304(c)(2), 
                and
                    ``(B) the denominator of which is the accrued 
                liability of the plan, determined using actuarial 
                assumptions described in section 304(c)(3).
            ``(3) Accumulated funding deficiency.--The term `accumulated 
        funding deficiency' has the meaning given such term in section 
        304(a).
            ``(4) Active participant.--The term `active participant' 
        means, in connection with a multiemployer plan, a participant 
        who is in covered service under the plan.
            ``(5) Inactive participant.--The term `inactive participant' 
        means, in connection with a multiemployer plan, a participant, 
        or the beneficiary or alternate payee of a participant, who--
                    ``(A) is not in covered service under the plan, and
                    ``(B) is in pay status under the plan or has a 
                nonforfeitable right to benefits under the plan.
            ``(6) Pay status.--A person is in pay status under a 
        multiemployer plan if--
                    ``(A) at any time during the current plan year, such 
                person is a participant or beneficiary under the plan 
                and is paid an early, late, normal, or disability 
                retirement benefit under the plan (or a death benefit 
                under the plan related to a retirement benefit), or
                    ``(B) to the extent provided in regulations of the 
                Secretary of the Treasury, such person is entitled to 
                such a benefit under the plan.
            ``(7) Obligation to contribute.--The term `obligation to 
        contribute' has the meaning given such term under section 
        4212(a).
            ``(8) Actuarial method.--Notwithstanding any other provision 
        of this section, the actuary's determinations with respect to a 
        plan's normal cost, actuarial accrued liability, and 
        improvements in a plan's funded percentage under this section 
        shall be based upon the unit credit funding method (whether or 
        not that method is used for the plan's actuarial valuation).
            ``(9) Plan sponsor.--In the case of a plan described under 
        section 404(c) of the Internal Revenue Code of 1986, or a 
        continuation of such a plan, the term `plan sponsor' means the 
        bargaining parties described under paragraph (1).
            ``(10) Benefit commencement date.--The term `benefit 
        commencement date' means the annuity starting date (or in the 
        case of a retroactive annuity starting date, the date on which 
        benefit payments begin).''.

    (b) Enforcement.--Section 502 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended--
            (1) in subsection (a)(6) by striking ``(6), or (7)'' and 
        inserting ``(6), (7), or (8)'';
            (2) by redesignating subsection (c)(8) as subsection (c)(9); 
        and
            (3) by inserting after subsection (c)(7) the following new 
        paragraph:
            ``(8) The Secretary may assess against any plan sponsor of a 
        multiemployer plan a civil penalty of not more than $1,100 per 
        day--
                    ``(A) for each violation by such sponsor of the 
                requirement under section 305 to adopt by the deadline 
                established
                in that section a funding improvement plan or 
                rehabilitation plan with respect to a multiemployer 
                which is in endangered or critical status, or
                    ``(B) in the case of a plan in endangered status 
                which is not in seriously endangered status, for failure 
                by the plan to meet the applicable benchmarks under 
                section 305 by the end of the funding improvement period 
                with respect to the plan.''.

    (c) Cause of Action To Compel Adoption or Implementation of Funding 
Improvement or Rehabilitation Plan.--Section 502(a) of the Employee 
Retirement Income Security Act of 1974 is amended 
by striking ``or'' at the end of paragraph (8), by striking the period 
at the end of paragraph (9) and inserting ``; or'' and by adding at the 
end the following:
            ``(10) in the case of a multiemployer plan that has been 
        certified by the actuary to be in endangered or critical status 
        under section 305, if the plan sponsor--
                    ``(A) has not adopted a funding improvement or 
                rehabilitation plan under that section by the deadline 
                established in such section, or
                    ``(B) fails to update or comply with the terms of 
                the funding improvement or rehabilitation plan in 
                accordance with the requirements of such section,
        by an employer that has an obligation to contribute with respect 
        to the multiemployer plan or an employee organization that 
        represents active participants in the multiemployer plan, for an 
        order compelling the plan sponsor to adopt a funding improvement 
        or rehabilitation plan or to update or comply with the terms of 
        the funding improvement or rehabilitation plan in accordance 
        with the requirements of such section and the funding 
        improvement or rehabilitation plan.''.

    (d) No Additional Contributions Required.--Section 302(b) of the 
Employee Retirement Income Security Act of 1974, as amended by this 
Act, is amended by adding at the end the 
following new paragraph:
            ``(3) Multiemployer plans in critical status.--Paragraph (1) 
        shall not apply in the case of a multiemployer plan for any plan 
        year in which the plan is in critical status pursuant to section 
        305. This paragraph shall only apply if the plan adopts a 
        rehabilitation plan in accordance with section 305(e) and 
        complies with the terms of such rehabilitation plan (and any 
        updates or modifications of the plan).''.

    (e) Conforming Amendment.--The table of contents in section 1 of 
such Act (as amended by the preceding provisions of this Act) is amended 
by inserting after the item relating to section 304 the following new 
item:

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

    (f) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to plan years beginning after 2007.
            (2) Special rule for certain notices.--In any case in which 
        a plan's actuary certifies that it is reasonably expected that a 
        multiemployer plan will be in critical status under section 
        305(b)(3) of the Employee Retirement Income Security Act of 
        1974, as added by this section, with respect to the first plan 
        year beginning after 2007, the notice required under
        subparagraph (D) of such section may be provided at any time 
        after the date of enactment, so long as it is provided on or 
        before the last date for providing the notice under such 
        subparagraph.
            (3) Special rule for certain restored benefits.--In the case 
        of a multiemployer plan--
                    (A) with respect to which benefits were reduced 
                pursuant to a plan amendment adopted on or after January 
                1, 2002, and before June 30, 2005, and
                    (B) which, pursuant to the plan document, the trust 
                agreement, or a formal written communication from the 
                plan sponsor to participants provided before June 30, 
                2005, provided for the restoration of such benefits,
        the amendments made by this section shall not apply to such 
        benefit restorations to the extent that any restriction on the 
        providing or accrual of such benefits would otherwise apply by 
        reason of such amendments.

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

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

    (b) Effective Date.--The amendments made 
by this section shall apply with respect to determinations made in plan 
years beginning after 2007.

SEC. 204. WITHDRAWAL LIABILITY REFORMS.

    (a) Update of Rules Relating to Limitations on Withdrawal 
Liability.--
            (1) Increase in limits.--Section 4225(a)(2) of such Act (29 
        U.S.C. 1405(a)(2)) is amended by striking the table contained 
        therein and inserting the following new table:

------------------------------------------------------------------------
 ``If the liquidation or distribution
 value of the employer after the sale           The portion is--
           or exchange is--
------------------------------------------------------------------------
Not more than $5,000,000.............  30 percent of the amount.
More than $5,000,000, but not more     $1,500,000, plus 35 percent of
 than $10,000,000.                      the amount in excess of
                                        $5,000,000.
More than $10,000,000, but not more    $3,250,000, plus 40 percent of
 than $15,000,000.                      the amount in excess of
                                        $10,000,000.
More than $15,000,000, but not more    $5,250,000, plus 45 percent of
 than $17,500,000.                      the amount in excess of
                                        $15,000,000.
More than $17,500,000, but not more    $6,375,000, plus 50 percent of
 than $20,000,000.                      the amount in excess of
                                        $17,500,000.
More than $20,000,000, but not more    $7,625,000, plus 60 percent of
 than $22,500,000.                      the amount in excess of
                                        $20,000,000.
More than $22,500,000, but not more    $9,125,000, plus 70 percent of
 than $25,000,000.                      the amount in excess of
                                        $22,500,000.
More than $25,000,000................  $10,875,000, plus 80 percent of
                                        the amount in excess of
                                        $25,000,000.''.
------------------------------------------------------------------------

            (2) Plans using attributable method.--Section 4225(a)(1)(B) 
        of such Act (29 U.S.C. 1405(a)(1)(B)) is amended to read as 
        follows:
                    ``(B) in the case of a plan using the attributable 
                method of allocating withdrawal liability, the unfunded 
                vested benefits attributable to employees of the 
                employer.''.
            (3) Effective date.--The 
        amendments made by this subsection shall apply to sales 
        occurring on or after January 1, 2007.

    (b) Withdrawal Liability Continues if Work Contracted Out.--
            (1) In general.--Clause (i) of section 4205(b)(2)(A) of such 
        Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ``or to an 
        entity or entities owned or controlled by the employer'' after 
        ``to another location''.
            (2) Effective date.--The 
        amendment made by this subsection shall apply with respect to 
        work transferred on or after the date of the enactment of this 
        Act.

    (c) Application of Rules to Plans Primarily Covering Employees in 
the Building and Construction Industry.--
            (1) In general.--Section 4210(b) of such Act (29 U.S.C. 
        1390(b)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (4) as 
                paragraphs (1) through (3), respectively.
            (2) Fresh start option.--Section 4211(c)(5) of such Act (29 
        U.S.C. 1391(c)(5)) is amended by adding at the end the following 
        new subparagraph:
                    ``(E) Fresh start option.--Notwithstanding paragraph 
                (1), a plan may be amended to provide that the 
                withdrawal liability method described in subsection (b) 
                shall be applied by substituting the plan year which is 
                specified in the amendment and for which the plan has no 
                unfunded vested benefits for the plan year ending before 
                September 26, 1980.''.
            (3) Effective date.--The 
        amendments made by this subsection shall apply with respect to 
        plan withdrawals occurring on or after January 1, 2007.

    (d) Procedures Applicable to Disputes Involving Pension Plan 
Withdrawal Liability.--
            (1) In general.--Section 4221 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1401) is amended by 
        adding at the end the following:

    ``(g) Procedures Applicable to Certain Disputes.--
            ``(1) In general.--If--
                    ``(A) a plan sponsor of a plan determines that--
                          ``(i) a complete or partial withdrawal of an 
                      employer has occurred, or
                          ``(ii) an employer is liable for withdrawal 
                      liability payments with respect to such complete 
                      or partial withdrawal, and
                    ``(B) such determination is based in whole or in 
                part on a finding by the plan sponsor under section 
                4212(c) that a principal purpose of any transaction 
                which occurred after December 31, 1998, and at least 5 
                years (2 years in the case of a small employer) before 
                the date of the complete or partial withdrawal was to 
                evade or avoid withdrawal liability under this subtitle,
        then the person against which the withdrawal liability is 
        assessed based solely on the application of section 4212(c) may 
        elect to use the special rule under paragraph (2) in applying 
        subsection (d) of this section and section 4219(c) to such 
        person.
            ``(2) Special rule.--Notwithstanding subsection (d) and 
        section 4219(c), if an electing person contests the plan 
        sponsor's determination with respect to withdrawal liability 
        payments under paragraph (1) through an arbitration proceeding 
        pursuant to subsection (a), through an action brought in a court 
        of competent jurisdiction for review of such an arbitration 
        decision, or as otherwise permitted by law, the electing person 
        shall not be obligated to make the withdrawal liability payments 
        until a final decision in the arbitration proceeding, or in 
        court, upholds the plan sponsor's determination, but only if the 
        electing person--
                    ``(A) provides notice to the plan sponsor of its 
                election to apply the special rule in this paragraph 
                within 90 days after the plan sponsor notifies the 
                electing person of its liability by reason of the 
                application of section 4212(c); and
                    ``(B) if a final decision in the arbitration 
                proceeding, or in court, of the withdrawal liability 
                dispute has not been rendered within 12 months from the 
                date of such notice, the electing person provides to the 
                plan, effective as of the first day following the 12-
                month period, a bond issued by a corporate surety 
                company that is an acceptable surety for purposes of 
                section 412 of this Act, or an amount held in escrow by 
                a bank or similar financial institution satisfactory to 
                the plan, in an amount equal to the sum of the 
                withdrawal liability payments that would otherwise be 
                due under subsection (d) and section 4219(c) for the 12-
                month period beginning with the first anniversary of 
                such notice. Such bond or escrow shall remain in effect 
                until there is a final decision in the arbitration 
                proceeding, or in court, of the withdrawal liability 
                dispute, at which time such bond or escrow shall be paid 
                to the plan if such final decision upholds the plan 
                sponsor's determination.
            ``(3) Definition of small employer.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `small employer' means 
                any employer which, for the calendar year in which the 
                transaction referred to in paragraph (1)(B) occurred and 
                for each of the 3 preceding years, on average--
                          ``(i) employs not more than 500 employees, and
                          ``(ii) is required to make contributions to 
                      the plan for not more than 250 employees.
                    ``(B) Controlled group.--Any group treated as a 
                single employer under subsection (b)(1) of section 4001, 
                without regard to any transaction that was a basis for 
                the plan's finding under section 4212, shall be treated 
                as a single employer for purposes of this subparagraph.
            ``(4) Additional security pending resolution of dispute.--If 
        a withdrawal liability dispute to which this subsection applies 
        is not concluded by 12 months after the electing person posts 
        the bond or escrow described in paragraph (2), the electing 
        person shall, at the start of each succeeding 12-month period, 
        provide an additional bond or amount held in escrow equal to the 
        sum of the withdrawal liability payments that would otherwise be 
        payable to the plan during that period.
            ``(5) The liability of the party furnishing a bond or escrow 
        under this subsection shall be reduced, upon the payment of the 
        bond or escrow to the plan, by the amount thereof.''.
            (2) Effective date.--The 
        amendments made by this subsection shall apply to any person 
        that receives a notification under section 4219(b)(1) of the 
        Employee Retirement Income Security Act of 1974 on or after the 
        date of enactment of this Act with respect to a transaction that 
        occurred after December 31, 1998.

SEC. 205. PROHIBITION ON RETALIATION AGAINST EMPLOYERS EXERCISING THEIR 
            RIGHTS TO PETITION THE FEDERAL GOVERNMENT.

    Section 510 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1140) is amended by inserting before the last sentence 
thereof the following new sentence: ``In the case of a multiemployer 
plan, it shall be unlawful for the plan sponsor or any other person to 
discriminate against any contributing employer for exercising rights 
under this Act or for giving information or testifying in any inquiry or 
proceeding relating to this Act before Congress.''.

SEC. 206. SPECIAL RULE FOR CERTAIN BENEFITS 
            FUNDED UNDER AN AGREEMENT APPROVED BY THE PENSION BENEFIT 
            GUARANTY CORPORATION.

    In the case of a multiemployer plan that is a party to an agreement 
that was approved by the Pension Benefit Guaranty Corporation prior to 
June 30, 2005, and that--
            (1) increases benefits, and
            (2) provides for special withdrawal liability rules under 
        section 4203(f) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1383),

the amendments made by sections 201, 202, 211, and 212 of this Act shall 
not apply to the benefit increases under any plan amendment adopted 
prior to June 30, 2005, that are funded pursuant to such agreement if 
the plan is funded in compliance with such agreement (and any amendments 
thereto).

         Subtitle B--Amendments to Internal Revenue Code of 1986

SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

    (a) In General.--Subpart A of part III of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (as added by this Act) is amended 
by inserting after section 430 the following new section:

``SEC. 431. MINIMUM FUNDING STANDARDS FOR 
            MULTIEMPLOYER PLANS.

    ``(a) In General.--For purposes of section 412, the accumulated 
funding deficiency of a multiemployer plan for any plan year is--
            ``(1) except as provided in paragraph (2), the amount, 
        determined as of the end of the plan year, equal to the excess 
        (if any) of the total charges to the funding standard account of 
        the plan for all plan years (beginning with the first plan year 
        for which this part applies to the plan) over the total credits 
        to such account for such years, and
            ``(2) if the multiemployer plan is in reorganization for any 
        plan year, the accumulated funding deficiency of the plan 
        determined under section 4243 of the Employee Retirement Income 
        Security Act of 1974.

    ``(b) Funding Standard Account.--
            ``(1) Account required.--Each multiemployer plan to which 
        this part applies shall establish and maintain a funding 
        standard account. Such account shall be credited and charged 
        solely as provided in this section.
            ``(2) Charges to account.--For a plan year, the funding 
        standard account shall be charged with the sum of--
                    ``(A) the normal cost of the plan for the plan year,
                    ``(B) the amounts necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) in the case of a plan which comes into 
                      existence on or after January 1, 2008, the 
                      unfunded past service liability under the plan on 
                      the first day of the first plan year to which this 
                      section applies, over a period of 15 plan years,
                          ``(ii) separately, with respect to each plan 
                      year, the net increase (if any) in unfunded past 
                      service liability under the plan arising from plan 
                      amendments adopted in such year, over a period of 
                      15 plan years,
                          ``(iii) separately, with respect to each plan 
                      year, the net experience loss (if any) under the 
                      plan, over a period of 15 plan years, and
                          ``(iv) separately, with respect to each plan 
                      year, the net loss (if any) resulting from changes 
                      in actuarial assumptions used under the plan, over 
                      a period of 15 plan years,
                    ``(C) the amount necessary to amortize each waived 
                funding deficiency (within the meaning of section 
                412(c)(3)) for each prior plan year in equal annual 
                installments (until fully amortized) over a period of 15 
                plan years,
                    ``(D) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 5 plan
                years any amount credited to the funding standard 
                account under section 412(b)(3)(D) (as in effect on the 
                day before the date of the enactment of the Pension 
                Protection Act of 2006), and
                    ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of section 412(c)(7)(A)(i)(I) (as in effect 
                on the day before the date of the enactment of the 
                Pension Protection Act of 2006).
            ``(3) Credits to account.--For a plan year, the funding 
        standard account shall be credited with the sum of--
                    ``(A) the amount considered contributed by the 
                employer to or under the plan for the plan year,
                    ``(B) the amount necessary to amortize in equal 
                annual installments (until fully amortized)--
                          ``(i) separately, with respect to each plan 
                      year, the net decrease (if any) in unfunded past 
                      service liability under the plan arising from plan 
                      amendments adopted in such year, over a period of 
                      15 plan years,
                          ``(ii) separately, with respect to each plan 
                      year, the net experience gain (if any) under the 
                      plan, over a period of 15 plan years, and
                          ``(iii) separately, with respect to each plan 
                      year, the net gain (if any) resulting from changes 
                      in actuarial assumptions used under the plan, over 
                      a period of 15 plan years,
                    ``(C) the amount of the waived funding deficiency 
                (within the meaning of section 412(c)(3)) for the plan 
                year, and
                    ``(D) in the case of a plan year for which the 
                accumulated funding deficiency is determined under the 
                funding standard account if such plan year follows a 
                plan year for which such deficiency was determined under 
                the alternative minimum funding standard under section 
                412(g) (as in effect on the day before the date of the 
                enactment of the Pension Protection Act of 2006), the 
                excess (if any) of any debit balance in the funding 
                standard account (determined without regard to this 
                subparagraph) over any debit balance in the alternative 
                minimum funding standard account.
            ``(4) Special rule for amounts first amortized in plan years 
        before 2008.--In the case of any amount amortized under section 
        412(b) (as in effect on the day before the date of the enactment 
        of the Pension Protection Act of 2006) over any period beginning 
        with a plan year beginning before 2008 in lieu of the 
        amortization described in paragraphs (2)(B) and (3)(B), such 
        amount shall continue to be amortized under such section as so 
        in effect.
            ``(5) Combining and offsetting amounts to be amortized.--
        Under regulations prescribed by the 
        Secretary, amounts required to be amortized under paragraph (2) 
        or paragraph (3), as the case may be--
                    ``(A) may be combined into one amount under such 
                paragraph to be amortized over a period determined on 
                the basis of the remaining amortization period for all 
                items entering into such combined amount, and
                    ``(B) may be offset against amounts required to be 
                amortized under the other such paragraph, with the 
                resulting amount to be amortized over a period 
                determined on the basis of the remaining amortization 
                periods for all items entering into whichever of the two 
                amounts being offset is the greater.
            ``(6) Interest.--The funding standard account (and items 
        therein) shall be charged or credited (as determined under 
        regulations prescribed by the Secretary of the Treasury) with 
        interest at the appropriate rate consistent with the rate or 
        rates of interest used under the plan to determine costs.
            ``(7) Special rules relating to charges and credits to 
        funding standard account.--For purposes of this part--
                    ``(A) Withdrawal liability.--Any amount received by 
                a multiemployer plan in payment of all or part of an 
                employer's withdrawal liability under part 1 of subtitle 
                E of title IV of the Employee Retirement Income Security 
                Act of 1974 shall be considered an amount contributed by 
                the employer to or under the plan. The Secretary may 
                prescribe by regulation additional charges and credits 
                to a multiemployer plan's funding standard account to 
                the extent necessary to prevent withdrawal liability 
                payments from being unduly reflected as advance funding 
                for plan liabilities.
                    ``(B) Adjustments when a multiemployer plan leaves 
                reorganization.--If a multiemployer plan is not in 
                reorganization in the plan year but was in 
                reorganization in the immediately preceding plan year, 
                any balance in the funding standard account at the close 
                of such immediately preceding plan year--
                          ``(i) shall be eliminated by an offsetting 
                      credit or charge (as the case may be), but
                          ``(ii) shall be taken into account in 
                      subsequent plan years by being amortized in equal 
                      annual installments (until fully amortized) over 
                      30 plan years.
                The preceding sentence shall not apply to the extent of 
                any accumulated funding deficiency under section 4243(a) 
                of such Act as of the end of the last plan year that the 
                plan was in reorganization.
                    ``(C) Plan payments to supplemental program or 
                withdrawal liability payment fund.--Any amount paid by a 
                plan during a plan year to the Pension Benefit Guaranty 
                Corporation pursuant to section 4222 of such Act or to a 
                fund exempt under section 501(c)(22) pursuant to section 
                4223 of such Act shall reduce the amount of 
                contributions considered received by the plan for the 
                plan year.
                    ``(D) Interim withdrawal 
                liability payments.--Any amount paid by an employer 
                pending a final determination of the employer's 
                withdrawal liability under part 1 of subtitle E of title 
                IV of such Act and subsequently refunded to the employer 
                by the plan shall be charged to the funding standard 
                account in accordance with regulations prescribed by the 
                Secretary.
                    ``(E) Election for deferral of charge for portion of 
                net experience loss.--If an election is in effect under 
                section 412(b)(7)(F) (as in effect on the day before the
                date of the enactment of the Pension Protection Act of 
                2006) for any plan year, the funding standard account 
                shall be charged in the plan year to which the portion 
                of the net experience loss deferred by such election was 
                deferred with the amount so deferred (and paragraph 
                (2)(B)(iii) shall not apply to the amount so charged).
                    ``(F) Financial assistance.--Any amount of any 
                financial assistance from the Pension Benefit Guaranty 
                Corporation to any plan, and any repayment of such 
                amount, shall be taken into account under this section 
                and section 412 in such manner as is determined by the 
                Secretary.
                    ``(G) Short-term benefits.--
                To the extent that any plan 
                amendment increases the unfunded past service liability 
                under the plan by reason of an increase in benefits 
                which are not payable as a life annuity but are payable 
                under the terms of the plan for a period that does not 
                exceed 14 years from the effective date of the 
                amendment, paragraph (2)(B)(ii) shall be applied 
                separately with respect to such increase in unfunded 
                past service liability by substituting the number of 
                years of the period during which such benefits are 
                payable for `15'.

    ``(c) Additional Rules.--
            ``(1) Determinations to be made under funding method.--For 
        purposes of this part, normal costs, accrued liability, past 
        service liabilities, and experience gains and losses shall be 
        determined under the funding method used to determine costs 
        under the plan. I22    ``(2) Valuation of assets.--
                    ``(A) In general.--
                For purposes of this part, the 
                value of the plan's assets shall be determined on the 
                basis of any reasonable actuarial method of valuation 
                which takes into account fair market value and which is 
                permitted under regulations prescribed by the Secretary.
                    ``(B) Election with respect to bonds.--
                The value of a 
                bond or other evidence of indebtedness which is not in 
                default as to principal or interest may, at the election 
                of the plan administrator, be determined on an amortized 
                basis running from initial cost at purchase to par value 
                at maturity or earliest call date. Any election under 
                this subparagraph shall be made at such time and in such 
                manner as the Secretary shall by regulations provide, 
                shall apply to all such evidences of indebtedness, and 
                may be revoked only with the consent of the Secretary.
            ``(3) Actuarial assumptions must be reasonable.--For 
        purposes of this section, all costs, liabilities, rates of 
        interest, and other factors under the plan shall be determined 
        on the basis of actuarial assumptions and methods--
                    ``(A) each of which is reasonable (taking into 
                account the experience of the plan and reasonable 
                expectations), and
                    ``(B) which, in combination, offer the actuary's 
                best estimate of anticipated experience under the plan.
            ``(4) Treatment of certain changes as experience gain or 
        loss.--For purposes of this section, if--
                    ``(A) a change in benefits under the Social Security 
                Act or in other retirement benefits created under 
                Federal or State law, or
                    ``(B) a change in the definition of the term `wages' 
                under section 3121, or a change in the amount of such 
                wages taken into account under regulations prescribed 
                for purposes of section 401(a)(5),
        results in an increase or decrease in accrued liability under a 
        plan, such increase or decrease shall be treated as an 
        experience loss or gain.
            ``(5) Full funding.--If, as of the close of a plan year, a 
        plan would (without regard to this paragraph) have an 
        accumulated funding deficiency in excess of the full funding 
        limitation--
                    ``(A) the funding standard account shall be credited 
                with the amount of such excess, and
                    ``(B) all amounts described in subparagraphs (B), 
                (C), and (D) of subsection (b)(2) and subparagraph (B) 
                of subsection (b)(3) which are required to be amortized 
                shall be considered fully amortized for purposes of such 
                subparagraphs.
            ``(6) Full-funding limitation.--
                    ``(A) In general.--For purposes of paragraph (5), 
                the term `full-funding limitation' means the excess (if 
                any) of--
                          ``(i) the accrued liability (including normal 
                      cost) under the plan (determined under the entry 
                      age normal funding method if such accrued 
                      liability cannot be directly calculated under the 
                      funding method used for the plan), over
                          ``(ii) the lesser of--
                                    ``(I) the fair market value of the 
                                plan's assets, or
                                    ``(II) the value of such assets 
                                determined under paragraph (2).
                    ``(B) Minimum amount.--
                          ``(i) In general.--In no event shall the full-
                      funding limitation determined under subparagraph 
                      (A) be less than the excess (if any) of--
                                    ``(I) 90 percent of the current 
                                liability of the plan (including the 
                                expected increase in current liability 
                                due to benefits accruing during the plan 
                                year), over
                                    ``(II) the value of the plan's 
                                assets determined under paragraph (2).
                          ``(ii) Assets.--For purposes of clause (i), 
                      assets shall not be reduced by any credit balance 
                      in the funding standard account.
                    ``(C) Full funding limitation.--For purposes of this 
                paragraph, unless otherwise provided by the plan, the 
                accrued liability under a multiemployer plan shall not 
                include benefits which are not nonforfeitable under the 
                plan after the termination of the plan (taking into 
                consideration section 411(d)(3)).
                    ``(D) Current liability.--For purposes of this para- 
                graph--
                          ``(i) In general.--The term `current 
                      liability' means all liabilities to employees and 
                      their beneficiaries under the plan.
                          ``(ii) Treatment of unpredictable contingent 
                      event benefits.--For purposes of clause (i), any 
                      benefit contingent on an event other than--
                                    ``(I) age, service, compensation, 
                                death, or disability, or
                                    ``(II) an event which is reasonably 
                                and reliably predictable (as determined 
                                by the Secretary),
                      shall not be taken into account until the event on 
                      which the benefit is contingent occurs.
                          ``(iii) Interest rate used.--The rate of 
                      interest used to determine current liability under 
                      this paragraph shall be the rate of interest 
                      determined under subparagraph (E).
                          ``(iv) Mortality tables.--
                                    ``(I) Commissioners' standard 
                                table.--In the case of plan years 
                                beginning before the first plan year to 
                                which the first tables prescribed under 
                                subclause (II) apply, the mortality 
                                table used in determining current 
                                liability under this paragraph shall be 
                                the table prescribed by the Secretary 
                                which is based on the prevailing 
                                commissioners' standard table (described 
                                in section 807(d)(5)(A)) used to 
                                determine reserves for group annuity 
                                contracts issued on January 1, 1993.
                                    ``(II) Secretarial authority.--The 
                                Secretary may by regulation prescribe 
                                for plan years beginning after December 
                                31, 1999, mortality tables to be used in 
                                determining current liability under this 
                                subsection. Such tables shall be based 
                                upon the actual experience of pension 
                                plans and projected trends in such 
                                experience. In prescribing such tables, 
                                the Secretary shall take into account 
                                results of available independent studies 
                                of mortality of individuals covered by 
                                pension plans.
                          ``(v) Separate mortality tables for the 
                      disabled.--Notwithstanding clause (iv)--
                                    ``(I) In general.--The Secretary 
                                shall establish mortality tables which 
                                may be used (in lieu of the tables under 
                                clause (iv)) to determine current 
                                liability under this subsection for 
                                individuals who are entitled to benefits 
                                under the plan on account of disability. 
                                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 <<NOTE: Applicability.>> the case of 
                                disabilities occurring in plan years 
                                beginning after December 31, 1994, the 
                                tables under subclause (I) shall apply 
                                only with respect to individuals 
                                described in such subclause who are 
                                disabled within the meaning of title II 
                                of the Social Security Act and the 
                                regulations thereunder.
                          ``(vi) Periodic review.--
                      The Secretary shall 
                      periodically (at least every 5 years) review any 
                      tables in effect under this subparagraph and 
                      shall, to the
                      extent such Secretary determines necessary, by 
                      regulation update the tables to reflect the actual 
                      experience of pension plans and projected trends 
                      in such experience.
                    ``(E) Required change of interest rate.--For 
                purposes of determining a plan's current liability for 
                purposes of this paragraph--
                          ``(i) In general.--If any rate of interest 
                      used under the plan under subsection (b)(6) to 
                      determine cost is not within the permissible 
                      range, the plan shall establish a new rate of 
                      interest within the permissible range.
                          ``(ii) Permissible range.--For purposes of 
                      this subparagraph--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the term 
                                `permissible range' means a rate of 
                                interest which is not more than 5 
                                percent above, and not more than 10 
                                percent below, the weighted average of 
                                the rates of interest on 30-year 
                                Treasury securities during the 4-year 
                                period ending on the last day before the 
                                beginning of the plan year.
                                    ``(II) Secretarial authority.--If 
                                the Secretary finds that the lowest rate 
                                of interest permissible under subclause 
                                (I) is unreasonably high, the Secretary 
                                may prescribe a lower rate of interest, 
                                except that such rate may not be less 
                                than 80 percent of the average rate 
                                determined under such subclause.
                          ``(iii) Assumptions.--Notwithstanding 
                      paragraph (3)(A), the interest rate used under the 
                      plan shall be--
                                    ``(I) determined without taking into 
                                account the experience of the plan and 
                                reasonable expectations, but
                                    ``(II) consistent with the 
                                assumptions which reflect the purchase 
                                rates which would be used by insurance 
                                companies to satisfy the liabilities 
                                under the plan.
            ``(7) Annual valuation.--
                    ``(A) In general.--
                For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not less 
                frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary.
                    ``(B) Valuation date.--
                          ``(i) Current year.--Except as provided in 
                      clause (ii), the valuation referred to in 
                      subparagraph (A) shall be made as of a date within 
                      the plan year to which the valuation refers or 
                      within one month prior to the beginning of such 
                      year.
                          ``(ii) Use of prior year valuation.--The 
                      valuation referred to in subparagraph (A) may be 
                      made as of a date within the plan year prior to 
                      the year to which the valuation refers if, as of 
                      such date, the value of the assets of the plan are 
                      not less than 100
                      percent of the plan's current liability (as 
                      defined in paragraph (6)(D) without regard to 
                      clause (iv) thereof).
                          ``(iii) Adjustments.--Information under clause 
                      (ii) shall, in accordance with regulations, be 
                      actuarially adjusted to reflect significant 
                      differences in participants.
                          ``(iv) Limitation.--A change in funding method 
                      to use a prior year valuation, as provided in 
                      clause (ii), may not be made unless as of the 
                      valuation date within the prior plan year, the 
                      value of the assets of the plan are not less than 
                      125 percent of the plan's current liability (as 
                      defined in paragraph (6)(D) without regard to 
                      clause (iv) thereof).
            ``(8) Time when certain contributions deemed made.--
        For purposes of this section, any 
        contributions for a plan year made by an employer after the last 
        day of such plan year, but not later than two and one-half 
        months after such day, shall be deemed to have been made on such 
        last day. For purposes of this subparagraph, such two and one-
        half month period may be extended for not more than six months 
        under regulations prescribed by the Secretary.

    ``(d) Extension of Amortization Periods for Multiemployer Plans.--
            ``(1) Automatic extension upon application by certain 
        plans.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan--
                          ``(i) submits to the Secretary an application 
                      for an extension of the period of years required 
                      to amortize any unfunded liability described in 
                      any clause of subsection (b)(2)(B) or described in 
                      subsection (b)(4), and
                          ``(ii) includes with the application a 
                      certification by the plan's actuary described in 
                      subparagraph (B),
                the Secretary shall extend the amortization period for 
                the period of time (not in excess of 5 years) specified 
                in the application. Such extension shall be in addition 
                to any extension under paragraph (2).
                    ``(B) Criteria.--
                A certification with respect to 
                a multiemployer plan is described in this subparagraph 
                if the plan's actuary certifies that, based on 
                reasonable assump- tions--
                          ``(i) absent the extension under subparagraph 
                      (A), the plan would have an accumulated funding 
                      deficiency in the current plan year or any of the 
                      9 succeeding plan years,
                          ``(ii) the plan sponsor has adopted a plan to 
                      improve the plan's funding status,
                          ``(iii) the plan is projected to have 
                      sufficient assets to timely pay expected benefits 
                      and anticipated expenditures over the amortization 
                      period as extended, and
                          ``(iv) the notice required under paragraph 
                      (3)(A) has been provided.
                    ``(C) Termination.--The preceding provisions of this 
                paragraph shall not apply with respect to any 
                application submitted after December 31, 2014.
            ``(2) Alternative extension.--
                    ``(A) In general.--If the plan sponsor of a 
                multiemployer plan submits to the Secretary an 
                application for an extension of the period of years 
                required to amortize any unfunded liability described in 
                any clause of subsection (b)(2)(B) or described in 
                subsection (b)(4), the Secretary may extend the 
                amortization period for a period of time (not in excess 
                of 10 years reduced by the number of years of any 
                extension under paragraph (1) with respect to such 
                unfunded liability) if the Secretary makes the 
                determination described in subparagraph (B). Such 
                extension shall be in addition to any extension under 
                paragraph (1).
                    ``(B) Determination.--The Secretary may grant an 
                extension under subparagraph (A) if the Secretary 
                determines that--
                          ``(i) such extension would carry out the 
                      purposes of this Act and would provide adequate 
                      protection for participants under the plan and 
                      their beneficiaries, and
                          ``(ii) the failure to permit such extension 
                      would--
                                    ``(I) result in a substantial risk 
                                to the voluntary continuation of the 
                                plan, or a substantial curtailment of 
                                pension benefit levels or employee 
                                compensation, and
                                    ``(II) be adverse to the interests 
                                of plan participants in the aggregate.
                    ``(C) Action by secretary.--
                The Secretary shall act upon any 
                application for an extension under this paragraph within 
                180 days of the submission of such application. If the 
                Secretary rejects the application for an extension under 
                this paragraph, the Secretary shall provide notice to 
                the plan detailing the specific reasons for the 
                rejection, including references to the criteria set 
                forth above.
            ``(3) Advance notice.--
                    ``(A) In general.--The Secretary shall, before 
                granting an extension 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 extension to each 
                affected party (as defined in section 4001(a)(21) of the 
                Employee Retirement Income Security Act of 1974) with 
                respect to the affected plan. Such notice shall include 
                a description of the extent to which the plan is funded 
                for benefits which are guaranteed under title IV of such 
                Act and for benefit liabilities.
                    ``(B) Consideration of relevant information.--The 
                Secretary shall consider any relevant information 
                provided by a person to whom notice was given under 
                paragraph (1).''.

    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after 2007.
            (2) Special rule for certain amortization extensions.--
        If the Secretary of the 
        Treasury grants an extension under section 304 of the Employee 
        Retirement Income Security Act of 1974 and section 412(e) of the 
        Internal Revenue Code of 1986 with respect to any application 
        filed with the Secretary of the Treasury on or before June 30, 
        2005, the extension
        (and any modification thereof) shall be applied and administered 
        under the rules of such sections as in effect before the 
        enactment of this Act, including the use of the rate of interest 
        determined under section 6621(b) of such Code.

SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED 
            OR CRITICAL STATUS.

    (a) In General.--Subpart A of part III of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (as amended by this Act) is amended 
by inserting after section 431 the following new section:

``SEC. 432. ADDITIONAL FUNDING RULES FOR 
            MULTIEMPLOYER PLANS IN ENDANGERED STATUS OR CRITICAL STATUS.

    ``(a) General Rule.--For purposes of this part, in the case of a 
multiemployer plan in effect on July 16, 2006--
            ``(1) if the plan is in endangered status--
                    ``(A) the plan sponsor shall adopt and implement a 
                funding improvement plan in accordance with the 
                requirements of subsection (c), and
                    ``(B) the requirements of 
                subsection (d) shall apply during the funding plan 
                adoption period and the funding improvement period, and
            ``(2) if the plan is in critical status--
                    ``(A) the plan sponsor shall adopt and implement a 
                rehabilitation plan in accordance with the requirements 
                of subsection (e), and
                    ``(B) the requirements of 
                subsection (f) shall apply during the rehabilitation 
                plan adoption period and the rehabilitation period.

    ``(b) Determination of Endangered and Critical Status.--For purposes 
of this section--
            ``(1) Endangered status.--A multiemployer plan is in 
        endangered status for a plan year if, as determined by the plan 
        actuary under paragraph (3), the plan is not in critical status 
        for the plan year and, as of the beginning of the plan year, 
        either--
                    ``(A) the plan's funded percentage for such plan 
                year is less than 80 percent, or
                    ``(B) the plan has an accumulated funding deficiency 
                for such plan year, or is projected to have such an 
                accumulated funding deficiency for any of the 6 
                succeeding plan years, taking into account any extension 
                of amortization periods under section 431(d).
        For purposes of this section, a plan shall be treated as in 
        seriously endangered status for a plan year if the plan is 
        described in both subparagraphs (A) and (B).
            ``(2) Critical status.--A multiemployer plan is in critical 
        status for a plan year if, as determined by the plan actuary 
        under paragraph (3), the plan is described in 1 or more of the 
        following subparagraphs as of the beginning of the plan year:
                    ``(A) A plan is described in this subparagraph if--
                          ``(i) the funded percentage of the plan is 
                      less than 65 percent, and
                          ``(ii) the sum of--
                                    ``(I) the fair market value of plan 
                                assets, plus
                                    ``(II) the present value of the 
                                reasonably anticipated employer 
                                contributions for the current plan year 
                                and each of the 6 succeeding plan years, 
                                assuming that the terms of all 
                                collective bargaining agreements 
                                pursuant to which the plan is maintained 
                                for the current plan year continue in 
                                effect for succeeding plan years,
                      is less than the present value of all 
                      nonforfeitable benefits projected to be payable 
                      under the plan during the current plan year and 
                      each of the 6 succeeding plan years (plus 
                      administrative expenses for such plan years).
                    ``(B) A plan is described in this subparagraph if--
                          ``(i) the plan has an accumulated funding 
                      deficiency for the current plan year, not taking 
                      into account any extension of amortization periods 
                      under section 431(d), or
                          ``(ii) the plan is projected to have an 
                      accumulated funding deficiency for any of the 3 
                      succeeding plan years (4 succeeding plan years if 
                      the funded percentage of the plan is 65 percent or 
                      less), not taking into account any extension of 
                      amortization periods under section 431(d).
                    ``(C) A plan is described in this subparagraph if--
                          ``(i)(I) the plan's normal cost for the 
                      current plan year, plus interest (determined at 
                      the rate used for determining costs under the 
                      plan) for the current plan year on the amount of 
                      unfunded benefit liabilities under the plan as of 
                      the last date of the preceding plan year, exceeds
                          ``(II) the present value of the reasonably 
                      anticipated employer and employee contributions 
                      for the current plan year,
                          ``(ii) the present value, as of the beginning 
                      of the current plan year, of nonforfeitable 
                      benefits of inactive participants is greater than 
                      the present value of nonforfeitable benefits of 
                      active participants, and
                          ``(iii) the plan has an accumulated funding 
                      deficiency for the current plan year, or is 
                      projected to have such a deficiency for any of the 
                      4 succeeding plan years, not taking into account 
                      any extension of amortization periods under 
                      section 431(d).
                    ``(D) A plan is described in this subparagraph if 
                the sum of--
                          ``(i) the fair market value of plan assets, 
                      plus
                          ``(ii) the present value of the reasonably 
                      anticipated employer contributions for the current 
                      plan year and each of the 4 succeeding plan years, 
                      assuming that the terms of all collective 
                      bargaining agreements pursuant to which the plan 
                      is maintained for the current plan year continue 
                      in effect for succeeding plan years,
                is less than the present value of all benefits projected 
                to be payable under the plan during the current plan 
                year and each of the 4 succeeding plan years (plus 
                administrative expenses for such plan years).
            ``(3) Annual certification by plan actuary.--
                    ``(A) In general.--Not later 
                than the 90th day of each plan year of a multiemployer 
                plan, the plan actuary shall certify to the Secretary 
                and to the plan sponsor--
                          ``(i) whether or not the plan is in endangered 
                      status for such plan year and whether or not the 
                      plan is or will be in critical status for such 
                      plan year, and
                          ``(ii) in the case of a plan which is in a 
                      funding improvement or rehabilitation period, 
                      whether or not the plan is making the scheduled 
                      progress in meeting the requirements of its 
                      funding improvement or rehabilitation plan.
                    ``(B) Actuarial projections of assets and 
                liabilities.--
                          ``(i) In general.--In making the 
                      determinations and projections under this 
                      subsection, the plan actuary shall make 
                      projections required for the current and 
                      succeeding plan years of the current value of the 
                      assets of the plan and the present value of all 
                      liabilities to participants and beneficiaries 
                      under the plan for the current plan year as of the 
                      beginning of such year. The actuary's projections 
                      shall be based on reasonable actuarial estimates, 
                      assumptions, and methods that, except as provided 
                      in clause (iii), offer the actuary's best estimate 
                      of anticipated experience under the plan. The 
                      projected present value of liabilities as of the 
                      beginning of such year shall be determined based 
                      on the most recent of either--
                                    ``(I) the actuarial statement 
                                required under section 103(d) of the 
                                Employee Retirement Income Security Act 
                                of 1974 with respect to the most 
                                recently filed annual report, or
                                    ``(II) the actuarial valuation for 
                                the preceding plan year.
                          ``(ii) Determinations of future 
                      contributions.--Any actuarial projection of plan 
                      assets shall assume--
                                    ``(I) reasonably anticipated 
                                employer contributions for the current 
                                and succeeding plan years, assuming that 
                                the terms of the one or more collective 
                                bargaining agreements pursuant to which 
                                the plan is maintained for the current 
                                plan year continue in effect for 
                                succeeding plan years, or
                                    ``(II) that employer contributions 
                                for the most recent plan year will 
                                continue indefinitely, but only if the 
                                plan actuary determines there have been 
                                no significant demographic changes that 
                                would make such assumption unreasonable.
                          ``(iii) Projected industry activity.--Any 
                      projection of activity in the industry or 
                      industries covered by the plan, including future 
                      covered employment and contribution levels, shall 
                      be based on information provided by the plan 
                      sponsor, which shall act reasonably and in good 
                      faith.
                    ``(C) Penalty for failure to secure timely actuarial 
                certification.--Any failure of the plan's actuary to 
                certify the plan's status under this subsection by the 
                date specified in subparagraph (A) shall be treated for
                purposes of section 502(c)(2) of the Employee Retirement 
                Income Security Act of 1974 as a failure or refusal by 
                the plan administrator to file the annual report 
                required to be filed with the Secretary under section 
                101(b)(4) of such Act.
                    ``(D) Notice.--
                          ``(i) In general.--In any 
                      case in which it is certified under subparagraph 
                      (A) that a multiemployer plan is or will be in 
                      endangered or critical status for a plan year, the 
                      plan sponsor shall, not later than 30 days after 
                      the date of the certification, provide 
                      notification of the endangered or critical status 
                      to the participants and beneficiaries, the 
                      bargaining parties, the Pension Benefit Guaranty 
                      Corporation, and the Secretary of Labor.
                          ``(ii) Plans in critical status.--If it is 
                      certified under subparagraph (A) that a 
                      multiemployer plan is or will be in critical 
                      status, the plan sponsor shall include in the 
                      notice under clause (i) an explanation of the 
                      possibility that--
                                    ``(I) adjustable benefits (as 
                                defined in subsection (e)(8)) may be 
                                reduced, and
                                    ``(II) such reductions may apply to 
                                participants and beneficiaries whose 
                                benefit commencement date is on or after 
                                the date such notice is provided for the 
                                first plan year in which the plan is in 
                                critical status.
                          ``(iii) Model notice.--The Secretary of Labor 
                      shall prescribe a model notice that a 
                      multiemployer plan may use to satisfy the 
                      requirements under clause (ii).

    ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer 
Plans in Endangered Status.--
            ``(1) In general.--In any case in which 
        a multiemployer plan is in endangered status for a plan year, 
        the plan sponsor, in accordance with this subsection--
                    ``(A) shall adopt a funding improvement plan not 
                later than 240 days following the required date for the 
                actuarial certification of endangered status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                funding improvement plan--
                          ``(i) shall provide to the bargaining parties 
                      1 or more schedules showing revised benefit 
                      structures, revised contribution structures, or 
                      both, which, if adopted, may reasonably be 
                      expected to enable the multiemployer plan to meet 
                      the applicable benchmarks in accordance with the 
                      funding improvement plan, including--
                                    ``(I) one proposal for reductions in 
                                the amount of future benefit accruals 
                                necessary to achieve the applicable 
                                benchmarks, assuming no amendments 
                                increasing contributions under the plan 
                                (other than amendments increasing 
                                contributions necessary to achieve the 
                                applicable benchmarks after amendments 
                                have reduced future benefit accruals to 
                                the maximum extent permitted by law), 
                                and
                                    ``(II) one proposal for increases in 
                                contributions under the plan necessary 
                                to achieve the applicable benchmarks, 
                                assuming no amendments reducing future 
                                benefit accruals under the plan, and
                          ``(ii) may, if the plan sponsor deems 
                      appropriate, prepare and provide the bargaining 
                      parties with additional information relating to 
                      contribution rates or benefit reductions, 
                      alternative schedules, or other information 
                      relevant to achieving the applicable benchmarks in 
                      accordance with the funding improvement plan.
                For purposes of this section, the term `applicable 
                benchmarks' means the requirements applicable to the 
                multiemployer plan under paragraph (3) (as modified by 
                paragraph (5)).
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a funding 
        plan adoption period or funding improvement period by reason of 
        the plan being in endangered status for a preceding plan year. 
        For purposes of this section, such preceding plan year shall be 
        the initial determination year with respect to the funding 
        improvement plan to which it relates.
            ``(3) Funding improvement plan.--For purposes of this 
        section--
                    ``(A) In general.--A funding improvement plan is a 
                plan which consists of the actions, including options or 
                a range of options to be proposed to the bargaining 
                parties, formulated to provide, based on reasonably 
                anticipated experience and reasonable actuarial 
                assumptions, for the attainment by the plan during the 
                funding improvement period of the following 
                requirements:
                          ``(i) Increase in plan's funding percentage.--
                      The plan's funded percentage as of the close of 
                      the funding improvement period equals or exceeds a 
                      percentage equal to the sum of--
                                    ``(I) such percentage as of the 
                                beginning of such period, plus
                                    ``(II) 33 percent of the difference 
                                between 100 percent and the percentage 
                                under subclause (I).
                          ``(ii) Avoidance of accumulated funding 
                      deficiencies.--No accumulated funding deficiency 
                      for any plan year during the funding improvement 
                      period (taking into account any extension of 
                      amortization periods under section 304(d)).
                    ``(B) Seriously endangered plans.--In the case of a 
                plan in seriously endangered status, except as provided 
                in paragraph (5), subparagraph (A)(i)(II) shall be 
                applied by substituting `20 percent' for `33 percent'.
            ``(4) Funding improvement period.--For purposes of this 
        section--
                    ``(A) In general.--The funding improvement period 
                for any funding improvement plan adopted pursuant to 
                this subsection is the 10-year period beginning on the 
                first day of the first plan year of the multiemployer 
                plan beginning after the earlier of--
                          ``(i) the second anniversary of the date of 
                      the adoption of the funding improvement plan, or
                          ``(ii) the 
                      expiration of the collective bargaining agreements 
                      in effect on the due date for the actuarial 
                      certification of endangered status for the initial 
                      determination year under subsection (b)(3)(A) and 
                      covering, as of such due date, at least 75 percent 
                      of the active participants in such multiemployer 
                      plan.
                    ``(B) Seriously endangered 
                plans.--In the case of a plan in seriously endangered 
                status, except as provided in paragraph (5), 
                subparagraph (A) shall be applied by substituting `15-
                year period' for `10-year period'.
                    ``(C) Coordination with 
                changes in status.--
                          ``(i) Plans no longer in endangered status.--
                      If the plan's actuary certifies under subsection 
                      (b)(3)(A) for a plan year in any funding plan 
                      adoption period or funding improvement period that 
                      the plan is no longer in endangered status and is 
                      not in critical status, the funding plan adoption 
                      period or funding improvement period, whichever is 
                      applicable, shall end as of the close of the 
                      preceding plan year.
                          ``(ii) Plans in critical status.--If the 
                      plan's actuary certifies under subsection 
                      (b)(3)(A) for a plan year in any funding plan 
                      adoption period or funding improvement period that 
                      the plan is in critical status, the funding plan 
                      adoption period or funding improvement period, 
                      whichever is applicable, shall end as of the close 
                      of the plan year preceding the first plan year in 
                      the rehabilitation period with respect to such 
                      status.
                    ``(D) Plans in endangered status at end of period.--
                If the plan's actuary certifies under subsection 
                (b)(3)(A) for the first plan year following the close of 
                the period described in subparagraph (A) that the plan 
                is in endangered status, the provisions of this 
                subsection and subsection (d) shall be applied as if 
                such first plan year were an initial determination year, 
                except that the plan may not be amended in a manner 
                inconsistent with the funding improvement plan in effect 
                for the preceding plan year until a new funding 
                improvement plan is adopted.
            ``(5) Special rules for seriously endangered plans more than 
        70 percent funded.--
                    ``(A) In general.--If the funded percentage of a 
                plan in seriously endangered status was more than 70 
                percent as of the beginning of the initial determination 
                year--
                          ``(i) paragraphs (3)(B) and (4)(B) shall apply 
                      only if the plan's actuary certifies, within 30 
                      days after the certification under subsection 
                      (b)(3)(A) for the initial determination year, 
                      that, based on the terms of the plan and the 
                      collective bargaining agreements in effect at the 
                      time of such certification, the plan is not 
                      projected to meet the requirements of paragraph 
                      (3)(A) (without regard to paragraphs (3)(B) and 
                      (4)(B)), and
                          ``(ii) if there is a certification under 
                      clause (i), the plan may, in formulating its 
                      funding improvement plan, only take into account 
                      the rules of paragraph (3)(B) and (4)(B) for plan 
                      years in the funding improvement period beginning 
                      on or before the date on which
                      the last of the collective bargaining agreements 
                      described in paragraph (4)(A)(ii) expires.
                    ``(B) Special rule after expiration of agreements.--
                Notwithstanding subparagraph (A)(ii), if, for any plan 
                year ending after the date described in subparagraph 
                (A)(ii), the plan actuary certifies (at the time of the 
                annual certification under subsection (b)(3)(A) for such 
                plan year) that, based on the terms of the plan and 
                collective bargaining agreements in effect at the time 
                of that annual certification, the plan is not projected 
                to be able to meet the requirements of paragraph (3)(A) 
                (without regard to paragraphs (3)(B) and (4)(B)), 
                paragraphs (3)(B) and (4)(B) shall continue to apply for 
                such year.
            ``(6) Updates to funding improvement plans and schedules.--
                    ``(A) Funding improvement plan.--The plan sponsor 
                shall annually update the funding improvement plan and 
                shall file the update with the plan's annual report 
                under section 104 of the Employee Retirement Income 
                Security Act of 1974.
                    ``(B) Schedules.--The plan sponsor shall annually 
                update any schedule of contribution rates provided under 
                this subsection to reflect the experience of the plan.
                    ``(C) Duration of schedule.--A schedule of 
                contribution rates provided by the plan sponsor and 
                relied upon by bargaining parties in negotiating a 
                collective bargaining agreement shall remain in effect 
                for the duration of that collective bargaining 
                agreement.
            ``(7) Imposition of default schedule where failure to adopt 
        funding improvement plan.--
                    ``(A) In general.--If--
                          ``(i) a collective bargaining agreement 
                      providing for contributions under a multiemployer 
                      plan that was in effect at the time the plan 
                      entered endangered status expires, and
                          ``(ii) after receiving one or more schedules 
                      from the plan sponsor under paragraph (1)(B), the 
                      bargaining parties with respect to such agreement 
                      fail to agree on changes to contribution or 
                      benefit schedules necessary to meet the applicable 
                      benchmarks in accordance with the funding 
                      improvement plan,
                the plan sponsor shall implement the schedule described 
                in paragraph (1)(B)(i)(I) beginning on the date 
                specified in subparagraph (B).
                    ``(B) Date of implementation.--The date specified in 
                this subparagraph is the earlier of the date--
                          ``(i) on which the Secretary of Labor 
                      certifies that the parties are at an impasse, or
                          ``(ii) which is 180 days after the date on 
                      which the collective bargaining agreement 
                      described in subparagraph (A) expires.
            ``(8) Funding plan adoption period.--For purposes of this 
        section, the term `funding plan adoption period' means the 
        period beginning on the date of the certification under 
        subsection (b)(3)(A) for the initial determination year and 
        ending on the day before the first day of the funding 
        improvement period.
    ``(d) Rules for Operation of Plan During Adoption and Improvement 
Periods.--
            ``(1) Special rules for plan adoption period.--During the 
        funding plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation,
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 or to comply 
                with other applicable law, and
                    ``(C) in the case of a plan in seriously endangered 
                status, the plan sponsor shall take all reasonable 
                actions which are consistent with the terms of the plan 
                and applicable law and which are expected, based on 
                reasonable assumptions, to achieve--
                          ``(i) an increase in the plan's funded 
                      percentage, and
                          ``(ii) postponement of an accumulated funding 
                      deficiency for at least 1 additional plan year.
        Actions under subparagraph (C) include applications for 
        extensions of amortization periods under section 431(d), use of 
        the shortfall funding method in making funding standard account 
        computations, amendments to the plan's benefit structure, 
        reductions in future benefit accruals, and other reasonable 
        actions consistent with the terms of the plan and applicable 
        law.
            ``(2) Compliance with funding improvement plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a funding improvement plan 
                so as to be inconsistent with the funding improvement 
                plan.
                    ``(B) No reduction in contributions.--A plan sponsor 
                may not during any funding improvement period accept a 
                collective bargaining agreement or participation 
                agreement with respect to the multiemployer plan that 
                provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation.
                    ``(C) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of
                a funding improvement plan so as to increase benefits, 
                including future benefit accruals, unless the plan 
                actuary certifies that the benefit increase is 
                consistent with the funding improvement plan and is paid 
                for out of contributions not required by the funding 
                improvement plan to meet the applicable benchmark in 
                accordance with the schedule contemplated in the funding 
                improvement plan.

    ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in 
Critical Status.--
            ``(1) In general.--In any case in which 
        a multiemployer plan is in critical status for a plan year, the 
        plan sponsor, in accordance with this subsection--
                    ``(A) shall adopt a rehabilitation plan not later 
                than 240 days following the required date for the 
                actuarial certification of critical status under 
                subsection (b)(3)(A), and
                    ``(B) within 30 days after the adoption of the 
                rehabilitation plan--
                          ``(i) shall provide to the bargaining parties 
                      1 or more schedules showing revised benefit 
                      structures, revised contribution structures, or 
                      both, which, if adopted, may reasonably be 
                      expected to enable the multiemployer plan to 
                      emerge from critical status in accordance with the 
                      rehabilitation plan, and
                          ``(ii) may, if the plan sponsor deems 
                      appropriate, prepare and provide the bargaining 
                      parties with additional information relating to 
                      contribution rates or benefit reductions, 
                      alternative schedules, or other information 
                      relevant to emerging from critical status in 
                      accordance with the rehabilitation plan.
        The schedule or schedules described in subparagraph (B)(i) shall 
        reflect reductions in future benefit accruals and adjustable 
        benefits, and increases in contributions, that the plan sponsor 
        determines are reasonably necessary to emerge from critical 
        status. One schedule shall be designated as the default schedule 
        and such schedule shall assume that there are no increases in 
        contributions under the plan other than the increases necessary 
        to emerge from critical status after future benefit accruals and 
        other benefits (other than benefits the reduction or elimination 
        of which are not permitted under section 411(d)(6)) have been 
        reduced to the maximum extent permitted by law.
            ``(2) Exception for years after process begins.--Paragraph 
        (1) shall not apply to a plan year if such year is in a 
        rehabilitation plan adoption period or rehabilitation period by 
        reason of the plan being in critical status for a preceding plan 
        year. For purposes of this section, such preceding plan year 
        shall be the initial critical year with respect to the 
        rehabilitation plan to which it relates.
            ``(3) Rehabilitation plan.--For purposes of this section--
                    ``(A) In general.--A rehabilitation plan is a plan 
                which consists of--
                          ``(i) actions, including options or a range of 
                      options to be proposed to the bargaining parties, 
                      formulated, based on reasonably anticipated 
                      experience and reasonable actuarial assumptions, 
                      to enable the plan to cease to be in critical 
                      status by the end of the rehabilitation period and 
                      may include reductions in plan expenditures
                      (including plan mergers and consolidations), 
                      reductions in future benefit accruals or increases 
                      in contributions, if agreed to by the bargaining 
                      parties, or any combination of such actions, or
                          ``(ii) if the plan sponsor determines that, 
                      based on reasonable actuarial assumptions and upon 
                      exhaustion of all reasonable measures, the plan 
                      can not reasonably be expected to emerge from 
                      critical status by the end of the rehabilitation 
                      period, reasonable measures to emerge from 
                      critical status at a later time or to forestall 
                      possible insolvency (within the meaning of section 
                      4245 of the Employee Retirement Income Security 
                      Act of 1974).
                A rehabilitation plan must provide annual standards for 
                meeting the requirements of such rehabilitation plan. 
                Such plan shall also include the schedules required to 
                be provided under paragraph (1)(B)(i) and if clause (ii) 
                applies, shall set forth the alternatives considered, 
                explain why the plan is not reasonably expected to 
                emerge from critical status by the end of the 
                rehabilitation period, and specify when, if ever, the 
                plan is expected to emerge from critical status in 
                accordance with the rehabilitation plan.
                    ``(B) Updates to rehabilitation plan and 
                schedules.--
                          ``(i) Rehabilitation plan.--The plan sponsor 
                      shall annually update the rehabilitation plan and 
                      shall file the update with the plan's annual 
                      report under section 104 of the Employee 
                      Retirement Income Security Act of 1974.
                          ``(ii) Schedules.--The plan sponsor shall 
                      annually update any schedule of contribution rates 
                      provided under this subsection to reflect the 
                      experience of the plan.
                          ``(iii) Duration of schedule.--A schedule of 
                      contribution rates provided by the plan sponsor 
                      and relied upon by bargaining parties in 
                      negotiating a collective bargaining agreement 
                      shall remain in effect for the duration of that 
                      collective bargaining agreement.
                    ``(C) Imposition of default schedule where failure 
                to adopt rehabilitation plan.--
                          ``(i) In general.--If--
                                    ``(I) a collective bargaining 
                                agreement providing for contributions 
                                under a multiemployer plan that was in 
                                effect at the time the plan entered 
                                critical status expires, and
                                    ``(II) after receiving one or more 
                                schedules from the plan sponsor under 
                                paragraph (1)(B), the bargaining parties 
                                with respect to such agreement fail to 
                                adopt a contribution or benefit 
                                schedules with terms consistent with the 
                                rehabilitation plan and the schedule 
                                from the plan sponsor under paragraph 
                                (1)(B)(i),
                      the plan sponsor shall implement the default 
                      schedule described in the last sentence of 
                      paragraph (1) beginning on the date specified in 
                      clause (ii).
                          ``(ii) Date of implementation.--The date 
                      specified in this clause is the earlier of the 
                      date--
                                    ``(I) on which the Secretary of 
                                Labor certifies that the parties are at 
                                an impasse, or
                                    ``(II) which is 180 days after the 
                                date on which the collective bargaining 
                                agreement described in clause (i) 
                                expires.
            ``(4) Rehabilitation period.--For purposes of this sec- 
        tion--
                    ``(A) In general.--The rehabilitation period for a 
                plan in critical status is the 10-year period beginning 
                on the first day of the first plan year of the 
                multiemployer plan following the earlier of--
                          ``(i) the second anniversary of the date of 
                      the adoption of the rehabilitation plan, or
                          ``(ii) the expiration of the collective 
                      bargaining agreements in effect on the date of the 
                      due date for the actuarial certification of 
                      critical status for the initial critical year 
                      under subsection (a)(1) and covering, as of such 
                      date at least 75 percent of the active 
                      participants in such multiemployer plan.
                If a plan emerges from critical status as provided under 
                subparagraph (B) before the end of such 10-year period, 
                the rehabilitation period shall end with the plan year 
                preceding the plan year for which the determination 
                under subparagraph (B) is made.
                    ``(B) Emergence.--A plan in critical status shall 
                remain in such status until a plan year for which the 
                plan actuary certifies, in accordance with subsection 
                (b)(3)(A), that the plan is not projected to have an 
                accumulated funding deficiency for the plan year or any 
                of the 9 succeeding plan years, without regard to the 
                use of the shortfall method and taking into account any 
                extension of amortization periods under section 431(d).
            ``(5) Rehabilitation plan adoption period.--For purposes of 
        this section, the term `rehabilitation plan adoption period' 
        means the period beginning on the date of the certification 
        under subsection (b)(3)(A) for the initial critical year and 
        ending on the day before the first day of the rehabilitation 
        period.
            ``(6) Limitation on reduction in rates of future accruals.--
        Any reduction in the rate of future accruals under the default 
        schedule described in paragraph (1)(B)(i) shall not reduce the 
        rate of future accruals below--
                    ``(A) a monthly benefit (payable as a single life 
                annuity commencing at the participant's normal 
                retirement age) equal to 1 percent of the contributions 
                required to be made with respect to a participant, or 
                the equivalent standard accrual rate for a participant 
                or group of participants under the collective bargaining 
                agreements in effect as of the first day of the initial 
                critical year, or
                    ``(B) if lower, the accrual rate under the plan on 
                such first day.
        The equivalent standard accrual rate shall be determined by the 
        plan sponsor based on the standard or average contribution base 
        units which the plan sponsor determines to be representative for 
        active participants and such other factors as the plan sponsor 
        determines to be relevant. Nothing in this paragraph shall be 
        construed as limiting the ability of the plan sponsor to prepare 
        and provide the bargaining parties with alternative
        schedules to the default schedule that established lower or 
        higher accrual and contribution rates than the rates otherwise 
        described in this paragraph.
            ``(7) Automatic employer surcharge.--
                    ``(A) Imposition of surcharge.--Each employer 
                otherwise obligated to make a contribution for the 
                initial critical year shall be obligated to pay to the 
                plan for such year a surcharge equal to 5 percent of the 
                contribution otherwise required under the applicable 
                collective bargaining agreement (or other agreement 
                pursuant to which the employer contributes). For each 
                succeeding plan year in which the plan is in critical 
                status for a consecutive period of years beginning with 
                the initial critical year, the surcharge shall be 10 
                percent of the contribution otherwise so required.
                    ``(B) Enforcement of surcharge.--The surcharges 
                under subparagraph (A) shall be due and payable on the 
                same schedule as the contributions on which the 
                surcharges are based. Any failure to make a surcharge 
                payment shall be treated as a delinquent contribution 
                under section 515 of the Employee Retirement Income 
                Security Act of 1974 and shall be enforceable as such.
                    ``(C) Surcharge to terminate upon collective 
                bargaining agreement renegotiation.--
                The surcharge under this 
                paragraph shall cease to be effective with respect to 
                employees covered by a collective bargaining agreement 
                (or other agreement pursuant to which the employer 
                contributes), beginning on the effective date of a 
                collective bargaining agreement (or other such 
                agreement) that includes terms consistent with a 
                schedule presented by the plan sponsor under paragraph 
                (1)(B)(i), as modified under subparagraph (B) of 
                paragraph (3).
                    ``(D) Surcharge not to apply until employer receives 
                notice.--The surcharge under 
                this paragraph shall not apply to an employer until 30 
                days after the employer has been notified by the plan 
                sponsor that the plan is in critical status and that the 
                surcharge is in effect.
                    ``(E) Surcharge not to generate increased benefit 
                accruals.--Notwithstanding any provision of a plan to 
                the contrary, the amount of any surcharge under this 
                paragraph shall not be the basis for any benefit accrual 
                under the plan.
            ``(8) Benefit adjustments.--
                    ``(A) Adjustable benefits.--
                          ``(i) In general.--Notwithstanding section 
                      204(g), the plan sponsor shall, subject to the 
                      notice requirement under subparagraph (C), make 
                      any reductions to adjustable benefits which the 
                      plan sponsor deems appropriate, based upon the 
                      outcome of collective bargaining over the schedule 
                      or schedules provided under paragraph (1)(B)(i).
                          ``(ii) Exception for retirees.--Except in the 
                      case of adjustable benefits described in clause 
                      (iv)(III), the plan sponsor of a plan in critical 
                      status shall not reduce adjustable benefits of any 
                      participant or beneficiary whose benefit 
                      commencement date is before the date on which the 
                      plan provides notice to the participant
                      or beneficiary under subsection (b)(3)(D) for the 
                      initial critical year.
                          ``(iii) Plan sponsor flexibility.--The plan 
                      sponsor shall include in the schedules provided to 
                      the bargaining parties an allowance for funding 
                      the benefits of participants with respect to whom 
                      contributions are not currently required to be 
                      made, and shall reduce their benefits to the 
                      extent permitted under this title and considered 
                      appropriate by the plan sponsor based on the 
                      plan's then current overall funding status.
                          ``(iv) Adjustable benefit defined.--For 
                      purposes of this paragraph, the term `adjustable 
                      benefit' means--
                                    ``(I) benefits, rights, and features 
                                under the plan, including post-
                                retirement death benefits, 60-month 
                                guarantees, disability benefits not yet 
                                in pay status, and similar benefits,
                                    ``(II) any early retirement benefit 
                                or retirement-type subsidy (within the 
                                meaning of section 411(d)(6)(B)(i)) and 
                                any benefit payment option (other than 
                                the qualified joint and survivor 
                                annuity), and
                                    ``(III) benefit increases that would 
                                not be eligible for a guarantee under 
                                section 4022A of the Employee Retirement 
                                Income Security Act of 1974 on the first 
                                day of initial critical year because the 
                                increases were adopted (or, if later, 
                                took effect) less than 60 months before 
                                such first day.
                    ``(B) Normal retirement benefits protected.--Except 
                as provided in subparagraph (A)(iv)(III), nothing in 
                this paragraph shall be construed to permit a plan to 
                reduce the level of a participant's accrued benefit 
                payable at normal retirement age.
                    ``(C) Notice requirements.--
                          ``(i) In general.--No reduction may be made to 
                      adjustable benefits under subparagraph (A) unless 
                      notice of such reduction has been given at least 
                      30 days before the general effective date of such 
                      reduction for all participants and beneficiaries 
                      to--
                                    ``(I) plan participants and 
                                beneficiaries,
                                    ``(II) each employer who has an 
                                obligation to contribute (within the 
                                meaning of section 4212(a)) under the 
                                plan, and
                                    ``(III) each employee organization 
                                which, for purposes of collective 
                                bargaining, represents plan participants 
                                employed by such an employer.
                          ``(ii) Content of notice.--The notice under 
                      clause (i) shall contain--
                                    ``(I) sufficient information to 
                                enable participants and beneficiaries to 
                                understand the effect of any reduction 
                                on their benefits, including an estimate 
                                (on an annual or monthly basis) of any 
                                affected adjustable benefit that a 
                                participant or beneficiary would 
                                otherwise have been eligible for as of 
                                the general effective date described in 
                                clause (i), and
                                    ``(II) information as to the rights 
                                and remedies of plan participants and 
                                beneficiaries as well as how to contact 
                                the Department of Labor for further 
                                information and assistance where 
                                appropriate.
                          ``(iii) Form and manner.--Any notice under 
                      clause (i)--
                                    ``(I) shall be provided in a form 
                                and manner prescribed in regulations of 
                                the Secretary of Labor,
                                    ``(II) shall be written in a manner 
                                so as to be understood by the average 
                                plan participant, and
                                    ``(III) may be provided in written, 
                                electronic, or other appropriate form to 
                                the extent such form is reasonably 
                                accessible to persons to whom the notice 
                                is required to be provided.
                      The Secretary of Labor shall in the regulations 
                      prescribed under subclause (I) establish a model 
                      notice that a plan sponsor may use to meet the 
                      requirements of this subparagraph.
            ``(9) Adjustments disregarded in withdrawal liability 
        determination.--
                    ``(A) Benefit reductions.--Any benefit reductions 
                under this subsection shall be disregarded in 
                determining a plan's unfunded vested benefits for 
                purposes of determining an employer's withdrawal 
                liability under section 4201 of the Employee Retirement 
                Income Security Act of 1974.
                    ``(B) Surcharges.--Any surcharges under paragraph 
                (7) shall be disregarded in determining an employer's 
                withdrawal liability under section 4211 of such Act, 
                except for purposes of determining the unfunded vested 
                benefits attributable to an employer under section 
                4211(c)(4) of such Act or a comparable method approved 
                under section 4211(c)(5) of such Act.
                    ``(C) Simplified calculations.--
                The Pension Benefit Guaranty 
                Corporation shall prescribe simplified methods for the 
                application of this paragraph in determining withdrawal 
                liability.

    ``(f) Rules for Operation of Plan During Adoption and Rehabilitation 
Period.--
            ``(1) Compliance with rehabilitation plan.--
                    ``(A) In general.--A plan may not be amended after 
                the date of the adoption of a rehabilitation plan under 
                subsection (e) so as to be inconsistent with the 
                rehabilitation plan.
                    ``(B) Special rules for benefit increases.--A plan 
                may not be amended after the date of the adoption of a 
                rehabilitation plan under subsection (e) so as to 
                increase benefits, including future benefit accruals, 
                unless the plan actuary certifies that such increase is 
                paid for out of additional contributions not 
                contemplated by the rehabilitation plan, and, after 
                taking into account the benefit increase, the 
                multiemployer plan still is reasonably expected to 
                emerge from critical status by the end of the 
                rehabilitation period on the schedule contemplated in 
                the rehabilitation plan.
            ``(2) Restriction on lump sums and similar benefits.--
                    ``(A) In general.--Effective on the date the notice of certification of the 
                plan's critical status for the initial critical year 
                under subsection (b)(3)(D) is sent, and notwithstanding 
                section 411(d)(6), the plan shall not pay--
                          ``(i) any payment, in excess of the monthly 
                      amount paid under a single life annuity (plus any 
                      social security supplements described in the last 
                      sentence of section 411(b)(1)(A)),
                          ``(ii) any payment for the purchase of an 
                      irrevocable commitment from an insurer to pay 
                      benefits, and
                          ``(iii) any other payment specified by the 
                      Secretary by regulations.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a benefit which under section 411(a)(11) may be 
                immediately distributed without the consent of the 
                participant or to any makeup payment in the case of a 
                retroactive annuity starting date or any similar payment 
                of benefits owed with respect to a prior period.
            ``(3) Adjustments disregarded in withdrawal liability 
        determination.--Any benefit reductions under this subsection 
        shall be disregarded in determining a plan's unfunded vested 
        benefits for purposes of determining an employer's withdrawal 
        liability under section 4201 of the Employee Retirement Income 
        Security Act of 1974.
            ``(4) Special rules for plan adoption period.--During the 
        rehabilitation plan adoption period--
                    ``(A) the plan sponsor may not accept a collective 
                bargaining agreement or participation agreement with 
                respect to the multiemployer plan that provides for--
                          ``(i) a reduction in the level of 
                      contributions for any participants,
                          ``(ii) a suspension of contributions with 
                      respect to any period of service, or
                          ``(iii) any new direct or indirect exclusion 
                      of younger or newly hired employees from plan 
                      participation, and
                    ``(B) no amendment of the plan which increases the 
                liabilities of the plan by reason of any increase in 
                benefits, any change in the accrual of benefits, or any 
                change in the rate at which benefits become 
                nonforfeitable under the plan may be adopted unless the 
                amendment is required as a condition of qualification 
                under part I of subchapter D of chapter 1 or to comply 
                with other applicable law.

    ``(g) Expedited Resolution of Plan Sponsor Decisions.--
If, within 60 days of the due date for adoption of a 
funding improvement plan or a rehabilitation plan under subsection (e), 
the plan sponsor of a plan in endangered status or a plan in critical 
status has not agreed on a funding improvement plan or rehabilitation 
plan, then any member of the board or group that constitutes the plan 
sponsor may require that the plan sponsor enter into an expedited 
dispute resolution procedure for the development and adoption of a 
funding improvement plan or rehabilitation plan.

    ``(h) Nonbargained Participation.--
            ``(1) Both bargained and nonbargained employee-
        participants.--In the case of an employer that contributes to a 
        multiemployer plan with respect to both employees who are 
        covered by one or more collective bargaining agreements
        and employees who are not so covered, if the plan is in 
        endangered status or in critical status, benefits of and 
        contributions for the nonbargained employees, including 
        surcharges on those contributions, shall be determined as if 
        those nonbargained employees were covered under the first to 
        expire of the employer's collective bargaining agreements in 
        effect when the plan entered endangered or critical status.
            ``(2) Nonbargained employees only.--In the case of an 
        employer that contributes to a multiemployer plan only with 
        respect to employees who are not covered by a collective 
        bargaining agreement, this section shall be applied as if the 
        employer were the bargaining party, and its participation 
        agreement with the plan were a collective bargaining agreement 
        with a term ending on the first day of the plan year beginning 
        after the employer is provided the schedule or schedules 
        described in subsections (c) and (e).

    ``(i) Definitions; Actuarial Method.--For purposes of this section--
            ``(1) Bargaining party.--The term `bargaining party' means--
                    ``(A)(i) except as provided in clause (ii), an 
                employer who has an obligation to contribute under the 
                plan; or
                    ``(ii) in the case of a plan described under section 
                404(c), or a continuation of such a plan, the 
                association of employers that is the employer settlor of 
                the plan; and
                    ``(B) an employee organization which, for purposes 
                of collective bargaining, represents plan participants 
                employed by an employer who has an obligation to 
                contribute under the plan.
            ``(2) Funded percentage.--The term `funded percentage' means 
        the percentage equal to a fraction--
                    ``(A) the numerator of which is the value of the 
                plan's assets, as determined under section 431(c)(2), 
                and
                    ``(B) the denominator of which is the accrued 
                liability of the plan, determined using actuarial 
                assumptions described in section 431(c)(3).
            ``(3) Accumulated funding deficiency.--The term `accumulated 
        funding deficiency' has the meaning given such term in section 
        412(a).
            ``(4) Active participant.--The term `active participant' 
        means, in connection with a multiemployer plan, a participant 
        who is in covered service under the plan.
            ``(5) Inactive participant.--The term `inactive participant' 
        means, in connection with a multiemployer plan, a participant, 
        or the beneficiary or alternate payee of a participant, who--
                    ``(A) is not in covered service under the plan, and
                    ``(B) is in pay status under the plan or has a 
                nonforfeitable right to benefits under the plan.
            ``(6) Pay status.--A person is in pay status under a 
        multiemployer plan if--
                    ``(A) at any time during the current plan year, such 
                person is a participant or beneficiary under the plan 
                and is paid an early, late, normal, or disability 
                retirement benefit under the plan (or a death benefit 
                under the plan related to a retirement benefit), or
                    ``(B) to the extent provided in regulations of the 
                Secretary, such person is entitled to such a benefit 
                under the plan.
            ``(7) Obligation to contribute.--The term `obligation to 
        contribute' has the meaning given such term under section 
        4212(a) of the Employee Retirement Income Security Act of 1974.
            ``(8) Actuarial method.--Notwithstanding any other provision 
        of this section, the actuary's determinations with respect to a 
        plan's normal cost, actuarial accrued liability, and 
        improvements in a plan's funded percentage under this section 
        shall be based upon the unit credit funding method (whether or 
        not that method is used for the plan's actuarial valuation).
            ``(9) Plan sponsor.--In the case of a plan described under 
        section 404(c), or a continuation of such a plan, the term `plan 
        sponsor' means the bargaining parties described under paragraph 
        (1).
            ``(10) Benefit commencement date.--The term `benefit 
        commencement date' means the annuity starting date (or in the 
        case of a retroactive annuity starting date, the date on which 
        benefit payments begin).''

    (b) Excise Taxes on Failures Relating to Multiemployer Plans in 
Endangered or Critical Status.--
            (1) In general.--Section 4971 of the Internal Revenue Code 
        of 1986 is amended by redesignating 
        subsection (g) as subsection (h) and by inserting after 
        subsection (f) the following:

    ``(g) Multiemployer Plans in Endangered or Critical Status.--
            ``(1) In general.--Except as provided in this subsection--
                    ``(A) no tax shall be imposed under this section for 
                a taxable year with respect to a multiemployer plan if, 
                for the plan years ending with or within the taxable 
                year, the plan is in critical status pursuant to section 
                432, and
                    ``(B) any tax imposed under this subsection for a 
                taxable year with respect to a multiemployer plan if, 
                for the plan years ending with or within the taxable 
                year, the plan is in endangered status pursuant to 
                section 432 shall be in addition to any other tax 
                imposed by this section.
            ``(2) Failure to comply with funding improvement or 
        rehabilitation plan.--
                    ``(A) In general.--If any funding improvement plan 
                or rehabilitation plan in effect under section 432 with 
                respect to a multiemployer plan requires an employer to 
                make a contribution to the plan, there is hereby imposed 
                a tax on each failure of the employer to make the 
                required contribution within the time required under 
                such plan.
                    ``(B) Amount of tax.--The amount of the tax imposed 
                by subparagraph (A) shall be equal to the amount of the 
                required contribution the employer failed to make in a 
                timely manner.
                    ``(C) Liability for tax.--The tax imposed by 
                subparagraph (A) shall be paid by the employer 
                responsible for contributing to or under the 
                rehabilitation plan which fails to make the 
                contribution.
            ``(3) Failure to meet requirements for plans in endangered 
        or critical status.--If--
                    ``(A) a plan which is in seriously endangered status 
                fails to meet the applicable benchmarks by the end of 
                the funding improvement period, or
                    ``(B) a plan which is in critical status either--
                          ``(i) fails to meet the requirements of 
                      section 432(e) by the end of the rehabilitation 
                      period, or
                          ``(ii) has received a certification under 
                      section 432(b)(3)(A)(ii) for 3 consecutive plan 
                      years that the plan is not making the scheduled 
                      progress in meeting its requirements under the 
                      rehabilitation plan,
                the plan shall be treated as having an accumulated 
                funding deficiency for purposes of this section for the 
                last plan year in such funding improvement, 
                rehabilitation, or 3-consecutive year period (and each 
                succeeding plan year until such benchmarks or 
                requirements are met) in an amount equal to the greater 
                of the amount of the contributions necessary to meet 
                such benchmarks or requirements or the amount of such 
                accumulated funding deficiency without regard to this 
                paragraph.
            ``(4) Failure to adopt rehabilitation plan.--
                    ``(A) In general.--In the case of a multiemployer 
                plan which is in critical status, there is hereby 
                imposed a tax on the failure of such plan to adopt a 
                rehabilitation plan within the time prescribed under 
                section 432.
                    ``(B) Amount of tax.--The amount of the tax imposed 
                under subparagraph (A) with respect to any plan sponsor 
                for any taxable year shall be the greater of--
                          ``(i) the amount of tax imposed under 
                      subsection (a) for the taxable year (determined 
                      without regard to this subsection), or
                          ``(ii) the amount equal to $1,100 multiplied 
                      by the number of days during the taxable year 
                      which are included in the period beginning on the 
                      first day of the 240-day period described in 
                      section 432(e)(1)(A) and ending on the day on 
                      which the rehabilitation plan is adopted.
                    ``(C) Liability for tax.--
                          ``(i) In general.--The tax imposed by 
                      subparagraph (A) shall be paid by each plan 
                      sponsor.
                          ``(ii) Plan sponsor.--For purposes of clause 
                      (i), the term `plan sponsor' in the case of a 
                      multiemployer plan means the association, 
                      committee, joint board of trustees, or other 
                      similar group of representatives of the parties 
                      who establish or maintain the plan.
            ``(5) Waiver.--In the case of a failure described in 
        paragraph (2) or (3) which is due to reasonable cause and not to 
        willful neglect, the Secretary may waive part or all of the tax 
        imposed by this subsection. For purposes of this paragraph, 
        reasonable cause includes unanticipated and material market 
        fluctuations, the loss of a significant contributing employer, 
        or other factors to the extent that the payment of tax under 
        this subsection with respect to the failure would be excessive 
        or otherwise inequitable relative to the failure involved.
            ``(6) Terms used in section 432.--For purposes of this 
        subsection, any term used in this subsection which is also used 
        in section 432 shall have the meaning given such term by section 
        432.''.
            (2) Controlled groups.--Section 4971(c)(2) of such Code is amended--
                    (A) by striking ``In the case of a plan other than a 
                multiemployer plan, if the'' and inserting ``If an'', 
                and
                    (B) by striking ``or (f)'' and inserting ``(f), or 
                (g)''.

    (c) No Additional Contribution Required.--Section 412(b) of the 
Internal Revenue Code of 1986, as amended by this 
Act, is amended by adding at the end the following new paragraph:
            ``(3) Multiemployer plans in critical status.--Paragraph (1) 
        shall not apply in the case of a multiemployer plan for any plan 
        year in which the plan is in critical status pursuant to section 
        432. This paragraph shall only apply if the plan adopts a 
        rehabilitation plan in accordance with section 432(e) and 
        complies with such rehabilitation plan (and any modifications of 
        the plan).''.

    (d) Clerical Amendment.--The table of sections for subpart A of part 
III of subchapter D of chapter 1 of such Code is amended by adding at 
the end the following new item:

``Sec. 432. Additional funding rules for multiemployer plans in 
           endangered status or critical status.''.

    (e) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply with respect to plan years beginning after 2007.
            (2) Special rule for certain notices.--In any case in which 
        a plan's actuary certifies that it is reasonably expected that a 
        multiemployer plan will be in critical status under section 
        305(b)(3) of the Employee Retirement Income Security Act of 
        1974, as added by this section, with respect to the first plan 
        year beginning after 2007, the notice required under 
        subparagraph (D) of such section may be provided at any time 
        after the date of enactment, so long as it is provided on or 
        before the last date for providing the notice under such 
        subparagraph.
            (3) Special rule for certain restored benefits.--In the case 
        of a multiemployer plan--
                    (A) with respect to which benefits were reduced 
                pursuant to a plan amendment adopted on or after January 
                1, 2002, and before June 30, 2005, and
                    (B) which, pursuant to the plan document, the trust 
                agreement, or a formal written communication from the 
                plan sponsor to participants provided before June 30, 
                2005, provided for the restoration of such benefits,
        the amendments made by this section shall not apply to such 
        benefit restorations to the extent that any restriction on the 
        providing or accrual of such benefits would otherwise apply by 
        reason of such amendments.

SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

    (a) Advance Determination of Impending Insolvency Over 5 Years.--
Section 418E(d)(1) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``3 plan years'' the second place it appears 
        and inserting ``5 plan years''; and
            (2) by adding at the end the following new sentence: ``If 
        the plan sponsor makes such a determination that the plan will 
        be insolvent in any of the next 5 plan years, the plan
        sponsor shall make the comparison under this paragraph at least 
        annually until the plan sponsor makes a determination that the 
        plan will not be insolvent in any of the next 5 plan years.''.

    (b) Effective Date.--The amendments made 
by this section shall apply with respect to the determinations made in 
plan years beginning after 2007.

SEC. 214. EXEMPTION FROM EXCISE TAXES FOR 
            CERTAIN MULTIEMPLOYER PENSION PLANS.

    (a) In General.--Notwithstanding any other provision of law, no tax 
shall be imposed under subsection (a) or (b) of section 4971 of the 
Internal Revenue Code of 1986 with respect to any accumulated funding 
deficiency of a plan described in subsection (b) of this section for any 
taxable year beginning before the earlier of--
            (1) the taxable year in which the plan sponsor adopts a 
        rehabilitation plan under section 305(e) of the Employee 
        Retirement Income Security Act of 1974 and section 432(e) of 
        such Code (as added by this Act); or
            (2) the taxable year that contains January 1, 2009.

    (b) Plan Described.--A plan described under this subsection is a 
multiemployer pension plan--
            (1) with less than 100 participants;
            (2) with respect to which the contributing employers 
        participated in a Federal fishery capacity reduction program;
            (3) with respect to which employers under the plan 
        participated in the Northeast Fisheries Assistance Program; and
            (4) with respect to which the annual normal cost is less 
        than $100,000 and the plan is experiencing a funding deficiency 
        on the date of enactment of this Act.

             Subtitle C--Sunset of Additional Funding Rules

SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES.

    (a) Report.--Not later than December 31, 2011, the Secretary of 
Labor, the Secretary of the Treasury, and the Executive Director of the 
Pension Benefit Guaranty Corporation shall conduct a study of the effect 
of the amendments made by this subtitle on the operation and funding 
status of multiemployer plans and shall report the results of such 
study, including any recommendations for legislation, to the Congress.
    (b) Matters Included in Study.--The study required under subsection 
(a) shall include--
            (1) the effect of funding difficulties, funding rules in 
        effect before the date of the enactment of this Act, and the 
        amendments made by this subtitle on small businesses 
        participating in multiemployer plans,
            (2) the effect on the financial status of small employers 
        of--
                    (A) funding targets set in funding improvement and 
                rehabilitation plans and associated contribution 
                increases,
                    (B) funding deficiencies,
                    (C) excise taxes,
                    (D) withdrawal liability,
                    (E) the possibility of alternative schedules and 
                procedures for financially troubled employers, and
                    (F) other aspects of the multiemployer system, and
            (3) the role of the multiemployer pension plan system in 
        helping small employers to offer pension benefits.

    (c) Sunset.--
            (1) In general.--Except as provided in this subsection, 
        notwithstanding any other provision of this Act, the provisions 
        of, and the amendments made by, sections 201(b), 202, and 212 
        shall not apply to plan years beginning after December 31, 2014.
            (2) Funding improvement and rehabilitation plans.--If a plan 
        is operating under a funding improvement or rehabilitation plan 
        under section 305 of such Act or 432 of such Code for its last 
        year beginning before January 1, 2015, such plan shall continue 
        to operate under such funding improvement or rehabilitation plan 
        during any period after December 31, 2014, such funding 
        improvement or rehabilitation plan is in effect and all 
        provisions of such Act or Code relating to the operation of such 
        funding improvement or rehabilitation plan shall continue in 
        effect during such period.

                  TITLE III--INTEREST RATE ASSUMPTIONS

SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

    (a) Amendments of ERISA.--
            (1) Determination of range.--Subclause (II) of section 
        302(b)(5)(B)(ii) of the Employee Retirement Income Security Act 
        of 1974 is amended--
                    (A) by striking ``2006'' and inserting ``2008'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, 2006, and 2007''.
            (2) Determination of current liability.--Subclause (IV) of 
        section 302(d)(7)(C)(i) of such Act is amended--
                    (A) by striking ``or 2005'' and inserting ``, 2005, 
                2006, or 2007'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, 2006, and 2007''.
            (3) PBGC premium rate.--Subclause (V) of section 
        4006(a)(3)(E)(iii) of such Act is amended 
        by striking ``2006'' and inserting ``2008''.

    (b) Amendments of Internal Revenue Code.--
            (1) Determination of range.--Subclause (II) of section 
        412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``2006'' and inserting ``2008'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, 2006, and 2007''.
            (2) Determination of current liability.--Subclause (IV) of 
        section 412(l)(7)(C)(i) of such Code is amended--
                    (A) by striking ``or 2005'' and inserting ``, 2005, 
                2006, or 2007'', and
                    (B) by striking ``and 2005'' in the heading and 
                inserting ``, 2005, 2006, and 2007''.
    (c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) of the 
Pension Funding Equity Act of 2004 is amended by 
striking ``2006'' and inserting ``2008''.

SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM 
            DISTRIBUTIONS.

    (a) Amendment to Employee Retirement Income Security Act of 1974.--
Paragraph (3) of section 205(g) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as 
follows:
    ``(3)(A) For purposes of paragraphs (1) and (2), the present value 
shall not be less than the present value calculated by using the 
applicable mortality table and the applicable interest rate.
    ``(B) For purposes of subparagraph (A)--
            ``(i) The term `applicable mortality table' means a 
        mortality table, modified as appropriate by the Secretary of the 
        Treasury, based on the mortality table specified for the plan 
        year under subparagraph (A) of section 303(h)(3) (without regard 
        to subparagraph (C) or (D) of such section).
            ``(ii) The term `applicable interest rate' means the 
        adjusted first, second, and third segment rates applied under 
        rules similar to the rules of section 303(h)(2)(C) for the month 
        before the date of the distribution or such other time as the 
        Secretary of the Treasury may by regulations prescribe.
            ``(iii) For purposes of clause (ii), the adjusted first, 
        second, and third segment rates are the first, second, and third 
        segment rates which would be determined under section 
        303(h)(2)(C) if--
                    ``(I) section 303(h)(2)(D) were applied by 
                substituting the average yields for the month described 
                in clause (ii) for the average yields for the 24-month 
                period described in such section,
                    ``(II) section 303(h)(2)(G)(i)(II) were applied by 
                substituting `section 205(g)(3)(B)(iii)(II)' for 
                `section 302(b)(5)(B)(ii)(II)', and
                    ``(III) the applicable percentage under section 
                303(h)(2)(G) were determined in accordance with the 
                following table:

 
 
 
  ``In  the  case  of  plan  years  The applicable  percentage is:
  beginning in:
 
  2008............................      20 percent
  2009............................      40 percent
  2010............................      60 percent
  2011............................      80 percent.''.

    (b) Amendment to Internal Revenue Code of 1986.--Paragraph (3) of 
section 417(e) of the Internal Revenue Code of 1986 is amended to read as follows:
            ``(3) Determination of present value.--
                    ``(A) In general.--For purposes of paragraphs (1) 
                and (2), the present value shall not be less than the 
                present value calculated by using the applicable 
                mortality table and the applicable interest rate.
                    ``(B) Applicable mortality table.--For purposes of 
                subparagraph (A), the term `applicable mortality table' 
                means a mortality table, modified as appropriate by the
                Secretary, based on the mortality table specified for 
                the plan year under subparagraph (A) of section 
                430(h)(3) (without regard to subparagraph (C) or (D) of 
                such section).
                    ``(C) Applicable interest rate.--For purposes of 
                subparagraph (A), the term `applicable interest rate' 
                means the adjusted first, second, and third segment 
                rates applied under rules similar to the rules of 
                section 430(h)(2)(C) for the month before the date of 
                the distribution or such other time as the Secretary may 
                by regulations prescribe.
                    ``(D) Applicable segment rates.--For purposes of 
                subparagraph (C), the adjusted first, second, and third 
                segment rates are the first, second, and third segment 
                rates which would be determined under section 
                430(h)(2)(C) if--
                          ``(i) section 430(h)(2)(D) were applied by 
                      substituting the average yields for the month 
                      described in clause (ii) for the average yields 
                      for the 24-month period described in such section,
                          ``(ii) section 430(h)(2)(G)(i)(II) were 
                      applied by substituting `section 
                      417(e)(3)(A)(ii)(II)' for `section 
                      412(b)(5)(B)(ii)(II)', and
                          ``(iii) the applicable percentage under 
                      section 430(h)(2)(G) were determined in accordance 
                      with the following table:

 
 
 
  ``In  the  case  of  plan  years  The applicable  percentage is:
  beginning in:
 
  2008............................      20 percent
  2009............................      40 percent
  2010............................      60 percent
  2011............................      80 percent.''.

    (c) Effective Date.--The amendments made 
by this section shall apply with respect to plan years beginning after 
December 31, 2007.

SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO 
            LUMP SUM DISTRIBUTIONS.

    (a) In General.--Clause (ii) of section 415(b)(2)(E) of the Internal 
Revenue Code of 1986 is amended to read as 
follows:
                          ``(ii) For purposes of adjusting any benefit 
                      under subparagraph (B) for any form of benefit 
                      subject to section 417(e)(3), the interest rate 
                      assumption shall not be less than the greatest 
                      of--
                                    ``(I) 5.5 percent,
                                    ``(II) the rate that provides a 
                                benefit of not more than 105 percent of 
                                the benefit that would be provided if 
                                the applicable interest rate (as defined 
                                in section 417(e)(3)) were the interest 
                                rate assumption, or
                                    ``(III) the rate specified under the 
                                plan.''.

    (b) Effective Date.--The amendment made 
by subsection (a) shall apply to distributions made in years beginning 
after December 31, 2005.

             TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS

SEC. 401. PBGC PREMIUMS.

    (a) Variable-Rate Premiums.--
            (1) Conforming amendments related to funding rules for 
        single-employer plans.--Section 4006(a)(3)(E) of the Employee 
        Retirement Income and Security Act of 1974 (29 U.S.C. 
        1306(a)(3)(E)) is amended by striking clauses (iii) and (iv) and 
        inserting the following:

    ``(iii) For purposes of clause (ii), the term `unfunded vested 
benefits' means, for a plan year, the excess (if any) of--
            ``(I) the funding target of the plan as determined under 
        section 303(d) for the plan year by only taking into account 
        vested benefits and by using the interest rate described in 
        clause (iv), over
            ``(II) the fair market value of plan assets for the plan 
        year which are held by the plan on the valuation date.

    ``(iv) The interest rate used in valuing benefits for purposes of 
subclause (I) of clause (iii) shall be equal to the first, second, or 
third segment rate for the month preceding the month in which the plan 
year begins, which would be determined under section 303(h)(2)(C) if 
section 303(h)(2)(D) were applied by using the monthly yields for the 
month preceding the month in which the plan year begins on investment 
grade corporate bonds with varying maturities and in the top 3 quality 
levels rather than the average of such yields for a 24-month period.''.
            (2) Effective date.--The 
        amendments made by paragraph (1) shall apply with respect to 
        plan years beginning after 2007.

    (b) Termination Premiums.--
            (1) Repeal of sunset provision.--Subparagraph (E) of section 
        4006(a)(7) of such Act is repealed.
            (2) Technical correction.--
                    (A) In general.--Section 4006(a)(7)(C)(ii) of such 
                Act is amended by striking ``subparagraph (B)(i)(I)'' 
                and inserting ``subparagraph (B)''.
                    (B) Effective date.--The 
                amendment made by this paragraph shall take effect as if 
                included in the provision of the Deficit Reduction Act 
                of 2005 to which it relates.

SEC. 402. 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) 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) 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, 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) 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 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.

    (h) Exclusion of Certain Employees From Minimum Coverage 
Requirements.--
            (1) In general.--Section 410(b)(3) of such Code is amended by striking the last sentence and 
        inserting the following: ``For purposes of subparagraph (B), 
        management pilots who are not represented in accordance with 
        title II of the Railway Labor Act shall be treated as covered by 
        a collective bargaining agreement described in such subparagraph 
        if the management pilots manage the flight operations of air 
        pilots who are so represented and the management pilots are, 
        pursuant to the terms of the agreement, included in the group of 
        employees benefitting under the trust described in such 
        subparagraph. Subparagraph (B) shall not apply in the case of a 
        plan which provides contributions or benefits for employees 
        whose principal duties are not customarily performed aboard an 
        aircraft in flight (other than management pilots described in 
        the preceding sentence).''
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning before, on, or after the date of 
        the enactment of this Act.

    (i) Extension of Special Rule for Additional Funding Requirements.--
In the case of an employer which is a commercial passenger airline, 
section 302(d)(12) of the Employee Retirement Income Security Act of 
1974 and section 412(l)(12) of the Internal
Revenue Code of 1986, as in effect before the date of the enactment of 
this Act, shall each be applied--
            (1) by substituting ``December 28, 2007'' for ``December 28, 
        2005'' in subparagraph (D)(i) thereof, and
            (2) without regard to subparagraph (D)(ii).

    (j) Effective Date.--Except as otherwise provided in this section, 
the provisions of and amendments made by this section shall apply to 
plan years ending after the date of the enactment of this Act.

SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND OTHER BENEFITS.

    (a) In General.--Section 4022(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1322(b)) is amended by adding at the end 
the following:
            ``(8) If an unpredictable contingent event benefit (as 
        defined in section 206(g)(1)) is payable by reason of the 
        occurrence of any event, this section shall be applied as if a 
        plan amendment had been adopted on the date such event 
        occurred.''.

    (b) Effective Date.--The amendment made 
by this section shall apply to benefits that become payable as a result 
of an event which occurs after July 26, 2005.

SEC. 404. RULES RELATING TO BANKRUPTCY OF EMPLOYER.

    (a) Guarantee.--Section 4022 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1322) is amended by adding at the end 
the following:
    ``(g) Bankruptcy Filing Substituted for Termination Date.--If a 
contributing sponsor of a plan has filed or has had filed against such 
person a petition seeking liquidation or reorganization in a case under 
title 11, United States Code, or under any similar Federal law or law of 
a State or political subdivision, and the case has not been dismissed as 
of the termination date of the plan, then this section shall be applied 
by treating the date such petition was filed as the termination date of 
the plan.''.
    (b) Allocation of Assets Among Priority Groups in Bankruptcy 
Proceedings.--Section 4044 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1344) is amended by adding at the end the 
following:
    ``(e) Bankruptcy Filing Substituted for Termination Date.--If a 
contributing sponsor of a plan has filed or has had filed against such 
person a petition seeking liquidation or reorganization in a case under 
title 11, United States Code, or under any similar Federal law or law of 
a State or political subdivision, and the case has not been dismissed as 
of the termination date of the plan, then subsection (a)(3) shall be 
applied by treating the date such petition was filed as the termination 
date of the plan.''.
    (c) Effective Date.--The amendments made 
this section shall apply with respect to proceedings initiated under 
title 11, United States Code, or under any similar Federal law or law of 
a State or political subdivision, on or after the date that is 30 days 
after the date of enactment of this Act.

SEC. 405. PBGC PREMIUMS FOR SMALL PLANS.

    (a) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)) is amended--
            (1) by striking ``The additional'' in subparagraph (E)(i) 
        and inserting ``Except as provided in subparagraph (H), the 
        additional'', and
            (2) by inserting after subparagraph (G) the following new 
        subparagraph:

    ``(H)(i) In the case of an employer who has 25 or fewer employees on 
the first day of the plan year, the additional premium determined under 
subparagraph (E) for each participant shall not exceed $5 multiplied by 
the number of participants in the plan as of the close of the preceding 
plan year.
    ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined by 
taking into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees limitation 
has been satisfied.''
    (b) Effective Dates.--The amendment made 
by this section shall apply to plan years beginning after December 31, 
2006.

SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
            REFUNDS.

    (a) In General.--Section 4007(b) of the Employment Retirement Income 
Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
            (1) by striking ``(b)'' and inserting ``(b)(1)'', and
            (2) by inserting at the end the following new paragraph:

    ``(2) The corporation is authorized to pay, 
subject to regulations prescribed by the corporation, interest on the 
amount of any overpayment of premium refunded to a designated payor. 
Interest under this paragraph shall be calculated at the same rate and 
in the same manner as interest is calculated for underpayments under 
paragraph (1).''

    (b) Effective Date.--The amendments made 
by subsection (a) shall apply to interest accruing for periods beginning 
not earlier than the date of the enactment of this Act.

SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

    (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade or 
        business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the capital 
        interest or the profits interest in such partnership, or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.

For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 (other than 
paragraph (3)(C) thereof) shall apply, including the application of such 
rules under section 414(c) of such Code.
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the product 
of--
            ``(i) a fraction (not to exceed 1) the numerator of which is 
        the number of years from the later of the effective date or the 
        adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
            ``(ii) the amount of benefits that would be guaranteed under 
        this section if the participant were not a majority owner.''

    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
            ``(3) If assets available for allocation under paragraph (4) 
        of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that paragraph, 
        the assets shall be allocated first to benefits described in 
        subparagraph (A) of that paragraph. Any remaining assets shall 
        then be allocated to benefits described in subparagraph (B) of 
        that paragraph. If assets allocated to such subparagraph (B) are 
        insufficient to satisfy in full the benefits described in that 
        subparagraph, the assets shall be allocated pro rata among 
        individuals on the basis of the present value (as of the 
        termination date) of their respective benefits described in that 
        subparagraph.''.

    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following new 
                subsection:

    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade or 
        business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.

For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 (other than 
paragraph (3)(C) thereof) shall apply, including the application of such 
rules under section 414(c) of such Code.''.
            (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is 
        amended by striking ``section 4022(b)(6)'' and inserting 
        ``section 4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan termi- 
        nations--
                    (A) under section 4041(c) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1341(c)) with 
                respect to which notices of intent to terminate are 
                provided under section 4041(a)(2) of such Act (29 U.S.C. 
                1341(a)(2)) after December 31, 2005, and
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which notices of determination are 
                provided under such section after such date.
            (2) Conforming amendments.--The amendments made by subsection (c) shall take effect on 
        January 1, 2006.

SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BENEFITS ATTRIBUTABLE TO 
            RECOVERIES FROM EMPLOYERS.

    (a) Modification of Average Recovery Percentage of Outstanding 
Amount of Benefit Liabilities Payable by Corporation to Participants and 
Beneficiaries.--Section 4022(c)(3)(B)(ii) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1322(c)(3)(B)(ii)) is amended to 
read as follows:
                          ``(ii) notices of intent to terminate were 
                      provided (or in the case of a termination by the 
                      corporation, a notice of determination under 
                      section 4042 was issued) during the 5-Federal 
                      fiscal year period ending with the third fiscal 
                      year preceding the fiscal year in which occurs the 
                      date of the notice of intent to terminate (or the 
                      notice of determination under section 4042) with 
                      respect to the plan termination for which the 
                      recovery ratio is being determined.''

    (b) Valuation of Section 4062(c) Liability for Determining Amounts 
Payable by Corporation to Participants and Beneficiaries.--
            (1) Single-employer plan benefits guaranteed.--Section 
        4022(c)(3)(A) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 13) is amended to read 
        as follows:
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the term `recovery ratio' means the 
                ratio which--
                          ``(i) the sum of the values of all recoveries 
                      under section 4062, 4063, or 4064, determined by 
                      the corporation in connection with plan 
                      terminations described under subparagraph (B), 
                      bears to
                          ``(ii) the sum of all unfunded benefit 
                      liabilities under such plans as of the termination 
                      date in connection with any such prior 
                      termination.''.
            (2) Allocation of assets.--Section 4044 of the Employee 
        Retirement Income Security Act of 1974   
        (29 U.S.C. 1362) is amended by adding at the end the following 
        new subsection:

    ``(e) Valuation of Section 4062(c) Liability for Determining Amounts 
Payable by Corporation to Participants and Beneficiaries.--
            ``(1) In general.--In the case of a terminated plan, the 
        value of the recovery of liability under section 4062(c) 
        allocable as a plan asset under this section for purposes of 
        determining the amount of benefits payable by the corporation 
        shall be determined by multiplying--
                    ``(A) the amount of liability under section 4062(c) 
                as of the termination date of the plan, by
                    ``(B) the applicable section 4062(c) recovery ratio.
            ``(2) Section 4062(c) recovery ratio.--For purposes of this 
        subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), the term `section 4062(c) recovery 
                ratio' means the ratio which--
                          ``(i) the sum of the values of all recoveries 
                      under section 4062(c) determined by the 
                      corporation in connection with plan terminations 
                      described under subparagraph (B), bears to
                          ``(ii) the sum of all the amounts of liability 
                      under section 4062(c) with respect to such plans 
                      as of the termination date in connection with any 
                      such prior termination.
                    ``(B) Prior terminations.--A plan termination 
                described in this subparagraph is a termination with 
                respect to which--
                          ``(i) the value of recoveries under section 
                      4062(c) have been determined by the corporation, 
                      and
                          ``(ii) notices of intent to terminate were 
                      provided (or in the case of a termination by the 
                      corporation, a notice of determination under 
                      section 4042 was issued) during the 5-Federal 
                      fiscal year period ending with the third fiscal 
                      year preceding the fiscal year in which occurs the 
                      date of the notice of intent to terminate (or the 
                      notice of determination under section 4042) with 
                      respect to the plan termination for which the 
                      recovery ratio is being determined.
                    ``(C) Exception.--In the case of a terminated plan 
                with respect to which the outstanding amount of benefit 
                liabilities exceeds $20,000,000, the term `section 
                4062(c) recovery ratio' means, with respect to the 
                termination of such plan, the ratio of--
                          ``(i) the value of the recoveries on behalf of 
                      the plan under section 4062(c), to
                          ``(ii) the amount of the liability owed under 
                      section 4062(c) as of the date of plan termination 
                      to the trustee appointed under section 4042 (b) or 
                      (c).
            ``(3) Subsection not to apply.--This subsection shall not 
        apply with respect to the determination of--
                    ``(A) whether the amount of outstanding benefit 
                liabilities exceeds $20,000,000, or
                    ``(B) the amount of any liability under section 4062 
                to the corporation or the trustee appointed under 
                section 4042 (b) or (c).
            ``(4) Determinations.--Determinations under this subsection 
        shall be made by the corporation. Such determinations shall be 
        binding unless shown by clear and convincing evidence to be 
        unreasonable.''.

    (c) Effective Date.--The amendments made 
by this section shall apply for any termination for which notices of 
intent to terminate are provided (or in the case of a termination by the 
corporation, a notice of determination under section 4042 under the 
Employee Retirement Income Security Act of 1974 is issued) on or after
the date which is 30 days after the date of enactment of this section.

SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR CHANGE IN 
            MEMBERSHIP OF A CONTROLLED GROUP.

    (a) In General.--Section 4041(b) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1341(b)) is amended by adding at the end 
the following new paragraph:
            ``(5) Special rule for certain plans where cessation or 
        change in membership of a controlled group.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if--
                          ``(i) there is transaction or series of 
                      transactions which result in a person ceasing to 
                      be a member of a controlled group, and
                          ``(ii) such person immediately before the 
                      transaction or series of transactions maintained a 
                      single-employer plan which is a defined benefit 
                      plan which is fully funded,
                then the interest rate used in determining whether the 
                plan is sufficient for benefit liabilities or to 
                otherwise assess plan liabilities for purposes of this 
                subsection or section 4042(a)(4) shall be not less than 
                the interest rate used in determining whether the plan 
                is fully funded.
                    ``(B) Limitations.--Subparagraph (A) shall not apply 
                to any transaction or series of transactions unless--
                          ``(i) any employer maintaining the plan 
                      immediately before or after such transaction or 
                      series of transactions--
                                    ``(I) has an outstanding senior 
                                unsecured debt instrument which is rated 
                                investment grade by each of the 
                                nationally recognized statistical rating 
                                organizations for corporate bonds that 
                                has issued a credit rating for such 
                                instrument, or
                                    ``(II) if no such debt instrument of 
                                such employer has been rated by such an 
                                organization but 1 or more of such 
                                organizations has made an issuer credit 
                                rating for such employer, all such 
                                organizations which have so rated the 
                                employer have rated such employer 
                                investment grade, and
                          ``(ii) the employer maintaining the plan after 
                      the transaction or series of transactions employs 
                      at least 20 percent of the employees located in 
                      the United States who were employed by such 
                      employer immediately before the transaction or 
                      series of transactions.
                    ``(C) Fully funded.--For purposes of subparagraph 
                (A), a plan shall be treated as fully funded with 
                respect to any transaction or series of transactions 
                if--
                          ``(i) in the case of a transaction or series 
                      of transactions which occur in a plan year 
                      beginning before January 1, 2008, the funded 
                      current liability percentage determined under 
                      section 302(d) for the plan year is at least 100 
                      percent, and
                          ``(ii) in the case of a transaction or series 
                      of transactions which occur in a plan year 
                      beginning on or
                      after such date, the funding target attainment 
                      percentage determined under section 303 is, as of 
                      the valuation date for such plan year, at least 
                      100 percent.
                    ``(D) 2 year limitation.--Subparagraph (A) shall not 
                apply to any transaction or series of transactions if 
                the plan referred to in subparagraph (A)(ii) is 
                terminated under section 4041(c) or 4042 after the close 
                of the 2-year period beginning on the date on which the 
                first such transaction occurs.''.

    (b) Effective Date.--The amendments made 
by this section shall apply to any transaction or series of transactions 
occurring on and after the date of the enactment of this Act.

SEC. 410. MISSING PARTICIPANTS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (e) and by inserting after subsection (b) 
the following new subsections:
    ``(c) Multiemployer Plans.--The corporation 
shall prescribe rules similar to the rules in subsection (a) for 
multiemployer plans covered by this title that terminate under section 
4041A.

    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the meaning 
                of section 3(2))--
                          ``(i) to which the provisions of this section 
                      do not apply (without regard to this subsection), 
                      and
                          ``(ii) which is not a plan described in 
                      paragraphs (2) through (11) of section 4021(b), 
                      and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                          ``(i) has missing participants, and
                          ``(ii) has not provided for the transfer of 
                      assets to pay the benefits of all missing 
                      participants to
                      another pension plan (within the meaning of 
                      section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''.

    (b) Conforming Amendments.--Section 206(f) of such Act (29 U.S.C. 
1056(f)) is amended--
            (1) by striking ``title IV'' and inserting ``section 4050''; 
        and
            (2) by striking ``the plan shall provide that,''.

    (c) Effective Date.--The amendments made by this section shall apply to distributions 
made after final regulations implementing subsections (c) and (d) of 
section 4050 of the Employee Retirement Income Security Act of 1974 (as 
added by subsection (a)), respectively, are prescribed.

SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION.

    (a) In General.--Title IV of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1301 et seq.) is amended--
            (1) by striking the second sentence of section 
        4002(a) and inserting the following: ``In 
        carrying out its functions under this title, the corporation 
        shall be administered by a Director, who shall be appointed by 
        the President, by and with the advice and consent of the Senate, 
        and who shall act in accordance with the policies established by 
        the board.''; and
            (2) in section 4003(b), by--
                    (A) striking ``under this title, any member'' and 
                inserting ``under this title, the Director, any 
                member''; and
                    (B) striking ``designated by the chairman'' and 
                inserting ``designated by the Director or chairman''.

    (b) Compensation of Director.--Section 5314 of title 5, United 
States Code, is amended by adding at the end the following new item:
        ``Director, Pension Benefit Guaranty Corporation.''.

    (c) Jurisdiction of Nomination.--
            (1) In general.--The Committee on Finance of the Senate and 
        the Committee on Health, Education, Labor, and Pensions of the 
        Senate shall have joint jurisdiction over the nomination of a 
        person nominated by the President to fill the position of 
        Director of the Pension Benefit Guaranty Corporation under 
        section 4002 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1302) (as amended by this Act), and if one 
        committee votes to order reported such a nomination, the other 
        shall report within 30 calendar days, or be automatically 
        discharged.
            (2) Rulemaking of the senate.--This subsection is enacted by 
        Congress--
                    (A) as an exercise of rulemaking power of the 
                Senate, and as such it is deemed a part of the rules of 
                the Senate, but applicable only with respect to the 
                procedure to be followed in the Senate in the case of a 
                nomination described in such sentence, and it supersedes 
                other rules only to the extent that it is inconsistent 
                with such rules; and
                    (B) with full recognition of the constitutional 
                right of the Senate to change the rules (so far as 
                relating to the procedure of the Senate) at any time, in 
                the same
                manner and to the same extent as in the case of any 
                other rule of the Senate.

    (d) Transition.--The 
term of the individual serving as Executive Director of the Pension 
Benefit Guaranty Corporation on the date of enactment of this Act shall 
expire on such date of enactment. Such individual, or any other 
individual, may serve as interim Director of such Corporation until an 
individual is appointed as Director of such Corporation under section 
4002 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1302) (as amended by this Act).

SEC. 412. INCLUSION OF INFORMATION IN THE PBGC ANNUAL REPORT.

    Section 4008 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1308) is amended by--
            (1) striking ``As soon as practicable'' and inserting ``(a) 
        As soon as practicable''; and
            (2) adding at the end the following:

    ``(b) The report under subsection (a) shall include--
            ``(1) a summary of the Pension Insurance Modeling System 
        microsimulation model, including the specific simulation 
        parameters, specific initial values, temporal parameters, and 
        policy parameters used to calculate the financial statements for 
        the corporation;
            ``(2) a comparison of--
                    ``(A) the average return on investments earned with 
                respect to assets invested by the corporation for the 
                year to which the report relates; and
                    ``(B) an amount equal to 60 percent of the average 
                return on investment for such year in the Standard & 
                Poor's 500 Index, plus 40 percent of the average return 
                on investment for such year in the Lehman Aggregate Bond 
                Index (or in a similar fixed income index); and
            ``(3) a statement regarding the deficit or surplus for such 
        year that the corporation would have had if the corporation had 
        earned the return described in paragraph (2)(B) with respect to 
        assets invested by the corporation.''.

                           TITLE V--DISCLOSURE

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

    (a) In General.--Section 101(f) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021(f)) is amended to read as follows:
    ``(f) Defined Benefit Plan Funding Notices.--
            ``(1) In general.--The administrator of a defined benefit 
        plan to which title IV applies shall for each plan year provide 
        a plan funding notice to the Pension Benefit Guaranty 
        Corporation, to each plan participant and beneficiary, to each 
        labor organization representing such participants or 
        beneficiaries, and, in the case of a multiemployer plan, to each 
        employer that has an obligation to contribute to the plan.
            ``(2) Information contained in notices.--
                    ``(A) Identifying information.--Each notice required 
                under paragraph (1) shall contain identifying 
                information, including the name of the plan, the address 
                and phone number of the plan administrator and the 
                plan's principal
                administrative officer, each plan sponsor's employer 
                identification number, and the plan number of the plan.
                    ``(B) Specific information.--A plan funding notice 
                under paragraph (1) shall include--
                          ``(i)(I) in the case of a single-employer 
                      plan, a statement as to whether the plan's funding 
                      target attainment percentage (as defined in 
                      section 303(d)(2)) for the plan year to which the 
                      notice relates, and for the 2 preceding plan 
                      years, is at least 100 percent (and, if not, the 
                      actual percentages), or
                          ``(II) in the case of a multiemployer plan, a 
                      statement as to whether the plan's funded 
                      percentage (as defined in section 305(i)) for the 
                      plan year to which the notice relates, and for the 
                      2 preceding plan years, is at least 100 percent 
                      (and, if not, the actual percentages),
                          ``(ii)(I) in the case of a single-employer 
                      plan, a statement of--
                                    ``(aa) the total assets (separately 
                                stating the prefunding balance and the 
                                funding standard carryover balance) and 
                                liabilities of the plan, determined in 
                                the same manner as under section 303, 
                                for the plan year for which the latest 
                                annual report filed under section 104(a) 
                                was filed and for the 2 preceding plan 
                                years, as reported in the annual report 
                                for each such plan year, and
                                    ``(bb) the value of the plan's 
                                assets and liabilities for the plan year 
                                to which the notice relates as of the 
                                last day of the plan year to which the 
                                notice relates determined using the 
                                asset valuation under subclause (II) of 
                                section 4006(a)(3)(E)(iii) and the 
                                interest rate under section 
                                4006(a)(3)(E)(iv), and
                          ``(II) in the case of a multiemployer plan, a 
                      statement of the value of the plan's assets and 
                      liabilities for the plan year to which the notice 
                      relates as the last day of such plan year and the 
                      preceding 2 plan years,
                          ``(iii) a statement of the number of 
                      participants who are--
                                    ``(I) retired or separated from 
                                service and are receiving benefits,
                                    ``(II) retired or separated 
                                participants entitled to future 
                                benefits, and
                                    ``(III) active participants under 
                                the plan,
                          ``(iv) a statement setting forth the funding 
                      policy of the plan and the asset allocation of 
                      investments under the plan (expressed as 
                      percentages of total assets) as of the end of the 
                      plan year to which the notice relates,
                          ``(v) in the case of a multiemployer plan, 
                      whether the plan was in critical or endangered 
                      status under section 305 for such plan year and, 
                      if so--
                                    ``(I) a statement describing how a 
                                person may obtain a copy of the plan's 
                                funding improvement or rehabilitation 
                                plan, as appropriate, adopted under 
                                section 305 and the actuarial and 
                                financial
                                data that demonstrate any action taken 
                                by the plan toward fiscal improvement, 
                                and
                                    ``(II) a summary of any funding 
                                improvement plan, rehabilitation plan, 
                                or modification thereof adopted under 
                                section 305 during the plan year to 
                                which the notice relates,
                          ``(vi) in the case of any plan amendment, 
                      scheduled benefit increase or reduction, or other 
                      known event taking effect in the current plan year 
                      and having a material effect on plan liabilities 
                      or assets for the year (as defined in regulations 
                      by the Secretary), an explanation of the 
                      amendment, schedule increase or reduction, or 
                      event, and a projection to the end of such plan 
                      year of the effect of the amendment, scheduled 
                      increase or reduction, or event on plan 
                      liabilities,
                          ``(vii)(I) in the case of a single-employer 
                      plan, a summary of the rules governing termination 
                      of single-employer plans under subtitle C of title 
                      IV, or
                          ``(II) in the case of a multiemployer plan, a 
                      summary of the rules governing reorganization or 
                      insolvency, including the limitations on benefit 
                      payments,
                          ``(viii) a general description of the benefits 
                      under the plan which are eligible to be guaranteed 
                      by the Pension Benefit Guaranty Corporation, along 
                      with an explanation of the limitations on the 
                      guarantee and the circumstances under which such 
                      limitations apply,
                          ``(ix) a statement that a person may obtain a 
                      copy of the annual report of the plan filed under 
                      section 104(a) upon request, through the Internet 
                      website of the Department of Labor, or through an 
                      Intranet website maintained by the applicable plan 
                      sponsor (or plan administrator on behalf of the 
                      plan sponsor), and
                          ``(x) if applicable, a statement that each 
                      contributing sponsor, and each member of the 
                      contributing sponsor's controlled group, of the 
                      single-employer plan was required to provide the 
                      information under section 4010 for the plan year 
                      to which the notice relates.
                    ``(C) Other information.--Each notice under 
                paragraph (1) shall include--
                          ``(i) in the case of a 
                      multiemployer plan, a statement that the plan 
                      administrator shall provide, upon written request, 
                      to any labor organization representing plan 
                      participants and beneficiaries and any employer 
                      that has an obligation to contribute to the plan, 
                      a copy of the annual report filed with the 
                      Secretary under section 104(a), and
                          ``(ii) any additional information which the 
                      plan administrator elects to include to the extent 
                      not inconsistent with regulations prescribed by 
                      the Secretary.
            ``(3) Time for providing notice.--
                    ``(A) In general.--Any notice under paragraph (1) 
                shall be provided not later than 120 days after the end 
                of the plan year to which the notice relates.
                    ``(B) Exception for small plans.--In the case of a 
                small plan (as such term is used under section 
                303(g)(2)(B)) any notice under paragraph (1) shall be 
                provided upon filing of the annual report under section 
                104(a).
            ``(4) Form and manner.--Any notice under paragraph (1)--
                    ``(A) shall be provided in a 
                form and manner prescribed in regulations of the 
                Secretary,
                    ``(B) shall be written in a manner so as to be 
                understood by the average plan participant, and
                    ``(C) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to persons to whom the notice is 
                required to be provided.''.

    (b) Repeal of Notice to Participants of Funding Status.--
            (1) In general.--Title IV of such Act (29 U.S.C. 1301 et 
        seq.) is amended by striking section 4011.
            (2) Clerical amendment.--Section 1 of such Act is amended in 
        the table of contents by striking the item relating to section 
        4011.

    (c) Model Notice.--Not later 
than 1 year after the date of the enactment of this Act, the Secretary 
of Labor shall publish a model version of the notice required by section 
101(f) of the Employee Retirement Income Security Act of 1974. The 
Secretary of Labor may promulgate any interim final rules as the 
Secretary determines appropriate to carry out the provisions of this 
subsection.

    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2007, except 
        that the amendment made by subsection (b) shall apply to plan 
        years beginning after December 31, 2006.
            (2) Transition rule.--Any requirement under section 101(f) 
        of the Employee Retirement Income Security Act of 1974 (as 
        amended by this section) to report the funding target attainment 
        percentage or funded percentage of a plan with respect to any 
        plan year beginning before January 1, 2008, shall be treated as 
        met if the plan reports--
                    (A) in the case of a plan year beginning in 2006, 
                the funded current liability percentage (as defined in 
                section 302(d)(8) of such Act) of the plan for such plan 
                year, and
                    (B) in the case of a plan year beginning in 2007, 
                the funding target attainment percentage or funded 
                percentage as determined using such methods of 
                estimation as the Secretary of the Treasury may provide.

SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.

    (a) Financial Information With Respect to Multiemployer Plans.--
            (1) In general.--Section 101 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1021), as amended by 
        section 103, is amended--
                    (A) by redesignating subsection (k) as subsection 
                (l); and
                    (B) by inserting after subsection (j) the following 
                new subsection:

    ``(k) Multiemployer Plan Information Made Available on Request.--
            ``(1) In general.--Each administrator of 
        a multiemployer plan shall, upon written request, furnish to any 
        plan participant
        or beneficiary, employee representative, or any employer that 
        has an obligation to contribute to the plan--
                    ``(A) a copy of any periodic actuarial report 
                (including any sensitivity testing) received by the plan 
                for any plan year which has been in the plan's 
                possession for at least 30 days,
                    ``(B) a copy of any quarterly, semi-annual, or 
                annual financial report prepared for the plan by any 
                plan investment manager or advisor or other fiduciary 
                which has been in the plan's possession for at least 30 
                days, and
                    ``(C) a copy of any application filed with the 
                Secretary of the Treasury requesting an extension under 
                section 304 of this Act or section 431(d) of the 
                Internal Revenue Code of 1986 and the determination of 
                such Secretary pursuant to such application.
            ``(2) Compliance.--Information required to be provided under 
        paragraph (1)--
                    ``(A) shall be 
                provided to the requesting participant, beneficiary, or 
                employer within 30 days after the request in a form and 
                manner prescribed in regulations of the Secretary,
                    ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to persons to whom the information 
                is required to be provided, and
                    ``(C) shall not--
                          ``(i) include any individually identifiable 
                      information regarding any plan participant, 
                      beneficiary, employee, fiduciary, or contributing 
                      employer, or
                          ``(ii) reveal any proprietary information 
                      regarding the plan, any contributing employer, or 
                      entity providing services to the plan.
            ``(3) Limitations.--In no case shall a participant, 
        beneficiary, or employer be entitled under this subsection to 
        receive more than one copy of any report or application 
        described in paragraph (1) during any one 12-month period. The 
        administrator may make a reasonable charge to cover copying, 
        mailing, and other costs of furnishing copies of information 
        pursuant to paragraph (1). The Secretary may by regulations 
        prescribe the maximum amount which will constitute a reasonable 
        charge under the preceding sentence.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``section 101(j)'' and 
        inserting ``subsection (j) or (k) of section 101''.
            (3) Regulations.--The Secretary 
        shall prescribe regulations under section 101(k)(2) of the 
        Employee Retirement Income Security Act of 1974 (as added by 
        paragraph (1)) not later than 1 year after the date of the 
        enactment of this Act.

    (b) Notice of Potential Withdrawal Liability to Multiemployer 
Plans.--
            (1) In general.--Section 101 of such Act (as amended by 
        subsection (a)) is amended--
                    (A) by redesignating subsection (l) as subsection 
                (m); and
                    (B) by inserting after subsection (k) the following 
                new subsection:

    ``(l) Notice of Potential Withdrawal Liability.--
            ``(1) In general.--The plan sponsor or administrator of a 
        multiemployer plan shall, upon written request, furnish to any 
        employer who has an obligation to contribute to the plan a 
        notice of--
                    ``(A) the estimated amount which would be the amount 
                of such employer's withdrawal liability under part 1 of 
                subtitle E of title IV if such employer withdrew on the 
                last day of the plan year preceding the date of the 
                request, and
                    ``(B) an explanation of how such estimated liability 
                amount was determined, including the actuarial 
                assumptions and methods used to determine the value of 
                the plan liabilities and assets, the data regarding 
                employer contributions, unfunded vested benefits, annual 
                changes in the plan's unfunded vested benefits, and the 
                application of any relevant limitations on the estimated 
                withdrawal liability.
        For purposes of subparagraph (B), the term `employer 
        contribution' means, in connection with a participant, a 
        contribution made by an employer as an employer of such 
        participant.
            ``(2) Compliance.--Any notice required to be provided under 
        paragraph (1)--
                    ``(A) shall be provided in a 
                form and manner prescribed in regulations of the 
                Secretary to the requesting employer within--
                          ``(i) 180 days after the 
                      request, or
                          ``(ii) subject to regulations of the 
                      Secretary, such longer time as may be necessary in 
                      the case of a plan that determines withdrawal 
                      liability based on any method described under 
                      paragraph (4) or (5) of section 4211(c); and
                    ``(B) may be provided in written, electronic, or 
                other appropriate form to the extent such form is 
                reasonably accessible to employers to whom the 
                information is required to be provided.
            ``(3) Limitations.--In no case shall an employer be entitled 
        under this subsection to receive more than one notice described 
        in paragraph (1) during any one 12-month period. The person 
        required to provide such notice may make a reasonable charge to 
        cover copying, mailing, and other costs of furnishing such 
        notice pursuant to paragraph (1). The Secretary may by 
        regulations prescribe the maximum amount which will constitute a 
        reasonable charge under the preceding sentence.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``section 101(j) or (k)'' and 
        inserting ``subsection (j), (k), or (l) of section 101''.

    (c) Notice of Amendment Reducing Future Accruals.--
            (1) Amendment of erisa.--Section 204(h)(1) of such Act (29 
        U.S.C. 1054(h)(1)) is amended by inserting at the end before the 
        period the following: ``and to each employer who has an 
        obligation to contribute to the plan''.
            (2) Amendment of internal revenue code.--Section 4980F(e)(1) 
        of such Code is amended by adding at the 
        end before the period the following: ``and to each employer who 
        has an obligation to contribute to the plan''.

    (d) Effective Date.--The amendments 
made by this section shall apply to plan years beginning after December 
31, 2007.

SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.

    (a) Additional Annual Reporting Requirements With Respect to Defined 
Benefit Plans.--
            (1) In general.--Section 103 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1023) is amended--
                    (A) in subsection (a)(1)(B), by striking 
                ``subsections (d) and (e)'' and inserting ``subsections 
                (d), (e), and (f)''; and
                    (B) by adding at the end the following new 
                subsection:

    ``(f) Additional Information With Respect to Defined Benefit 
Plans.--
            ``(1) Liabilities under 2 or more plans.--
                    ``(A) In general.--In any case in which any 
                liabilities to participants or their beneficiaries under 
                a defined benefit plan as of the end of a plan year 
                consist (in whole or in part) of liabilities to such 
                participants and beneficiaries under 2 or more pension 
                plans as of immediately before such plan year, an annual 
                report under this section for such plan year shall 
                include the funded percentage of each of such 2 or more 
                pension plans as of the last day of such plan year and 
                the funded percentage of the plan with respect to which 
                the annual report is filed as of the last day of such 
                plan year.
                    ``(B) Funded percentage.--For purposes of this 
                paragraph, the term `funded percentage'--
                          ``(i) in the case of a single-employer plan, 
                      means the funding target attainment percentage, as 
                      defined in section 303(d)(2), and
                          ``(ii) in the case of a multiemployer plan, 
                      has the meaning given such term in section 
                      305(i)(2).
            ``(2) Additional information for multiemployer plans.--With 
        respect to any defined benefit plan which is a multiemployer 
        plan, an annual report under this section for a plan year shall 
        include, in addition to the information required under paragraph 
        (1), the following, as of the end of the plan year to which the 
        report relates:
                    ``(A) The number of employers obligated to 
                contribute to the plan.
                    ``(B) A list of the employers that contributed more 
                than 5 percent of the total contributions to the plan 
                during such plan year.
                    ``(C) The number of participants under the plan on 
                whose behalf no contributions were made by an employer 
                as an employer of the participant for such plan year and 
                for each of the 2 preceding plan years.
                    ``(D) The ratios of--
                          ``(i) the number of participants under the 
                      plan on whose behalf no employer had an obligation 
                      to make an employer contribution during the plan 
                      year, to
                          ``(ii) the number of participants under the 
                      plan on whose behalf no employer had an obligation 
                      to make an employer contribution during each of 
                      the 2 preceding plan years.
                    ``(E) Whether the plan received an amortization 
                extension under section 304(d) of this Act or section 
                431(d) of the Internal Revenue Code of 1986 for such 
                plan year
                and, if so, the amount of the difference between the 
                minimum required contribution for the year and the 
                minimum required contribution which would have been 
                required without regard to the extension, and the period 
                of such extension.
                    ``(F) Whether the plan used the shortfall funding 
                method (as such term is used in section 305) for such 
                plan year and, if so, the amount of the difference 
                between the minimum required contribution for the year 
                and the minimum required contribution which would have 
                been required without regard to the use of such method, 
                and the period of use of such method.
                    ``(G) Whether the plan was in critical or endangered 
                status under section 305 for such plan year, and if so, 
                a summary of any funding improvement or rehabilitation 
                plan (or modification thereto) adopted during the plan 
                year, and the funded percentage of the plan.
                    ``(H) The number of employers that withdrew from the 
                plan during the preceding plan year and the aggregate 
                amount of withdrawal liability assessed, or estimated to 
                be assessed, against such withdrawn employers.
                    ``(I) In the case of a multiemployer plan that has 
                merged with another plan or to which assets and 
                liabilities have been transferred, the actuarial 
                valuation of the assets and liabilities of each affected 
                plan during the year preceding the effective date of the 
                merger or transfer, based upon the most recent data 
                available as of the day before the first day of the plan 
                year, or other valuation method performed under 
                standards and procedures as the Secretary may prescribe 
                by regulation.''.
            (2) Guidance by 
        secretary of labor.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of Labor shall publish 
        guidance to assist multiemployer defined benefit plans to--
                    (A) identify and enumerate plan participants for 
                whom there is no employer with an obligation to make an 
                employer contribution under the plan; and
                    (B) report such information under section 
                103(f)(2)(D) of the Employee Retirement Income Security 
                Act of 1974 (as added by this section).

    (b) Additional Information in Annual Actuarial Statement Regarding 
Plan Retirement Projections.--Section 103(d) of such Act (29 U.S.C. 
1023(d)) is amended--
            (1) by redesignating paragraphs (12) and (13) as paragraphs 
        (13) and (14), respectively; and
            (2) by inserting after paragraph (11) the following new 
        paragraph:
            ``(12) A statement explaining the actuarial assumptions and 
        methods used in projecting future retirements and forms of 
        benefit distributions under the plan.''.

    (c) Repeal of Summary Annual Report Requirement for Defined Benefit 
Plans.--
            (1) In general.--Section 104(b)(3) of such Act (29 U.S.C. 
        1024(b)(3)) is amended by inserting ``(other than an 
        administrator of a defined benefit plan to which the 
        requirements of section 103(f) applies)'' after ``the 
        administrators''.
            (2) Conforming amendment.--Section 101(a)(2) of such Act (29 
        U.S.C. 1021(a)(2)) is amended by inserting ``subsection (f) 
        and'' before ``sections 104(b)(3) and 105(a) and (c)''.

    (d) Furnishing Summary Plan Information to Employers and Employee 
Representatives of Multiemployer Plans.--Section 104 of such Act (29 
U.S.C. 1024) is amended--
            (1) in the header, by striking ``participants'' and 
        inserting ``participants and certain employers'';
            (2) by redesignating subsection (d) as subsection (e); and
            (3) by inserting after subsection (c) the following:

    ``(d) Furnishing Summary Plan Information to Employers and Employee 
Representatives of Multiemployer Plans.--
            ``(1) In general.--With respect to a 
        multiemployer plan subject to this section, within 30 days after 
        the due date under subsection (a)(1) for the filing of the 
        annual report for the fiscal year of the plan, the 
        administrators shall furnish to each employee organization and 
        to each employer with an obligation to contribute to the plan a 
        report that contains--
                    ``(A) a description of the contribution schedules 
                and benefit formulas under the plan, and any 
                modification to such schedules and formulas, during such 
                plan year;
                    ``(B) the number of employers obligated to 
                contribute to the plan;
                    ``(C) a list of the employers that contributed more 
                than 5 percent of the total contributions to the plan 
                during such plan year;
                    ``(D) the number of participants under the plan on 
                whose behalf no contributions were made by an employer 
                as an employer of the participant for such plan year and 
                for each of the 2 preceding plan years;
                    ``(E) whether the plan was in critical or endangered 
                status under section 305 for such plan year and, if so, 
                include--
                          ``(i) a list of the actions taken by the plan 
                      to improve its funding status; and
                          ``(ii) a statement describing how a person may 
                      obtain a copy of the plan's improvement or 
                      rehabilitation plan, as applicable, adopted under 
                      section 305 and the actuarial and financial data 
                      that demonstrate any action taken by the plan 
                      toward fiscal improvement;
                    ``(F) the number of employers that withdrew from the 
                plan during the preceding plan year and the aggregate 
                amount of withdrawal liability assessed, or estimated to 
                be assessed, against such withdrawn employers, as 
                reported on the annual report for the plan year to which 
                the report under this subsection relates;
                    ``(G) in the case of a multiemployer plan that has 
                merged with another plan or to which assets and 
                liabilities have been transferred, the actuarial 
                valuation of the assets and liabilities of each affected 
                plan during the year preceding the effective date of the 
                merger or transfer, based upon the most recent data 
                available as of the day before the first day of the plan 
                year, or other valuation method performed under 
                standards and procedures as the Secretary may prescribe 
                by regulation;
                    ``(H) a description as to whether the plan--
                          ``(i) sought or received an amortization 
                      extension under section 304(d) of this Act or 
                      section 431(d) of the Internal Revenue Code of 
                      1986 for such plan year; or
                          ``(ii) used the shortfall funding method (as 
                      such term is used in section 305) for such plan 
                      year; and
                    ``(I) notification of the 
                right under this section of the recipient to a copy of 
                the annual report filed with the Secretary under 
                subsection (a), summary plan description, summary of any 
                material modification of the plan, upon written request, 
                but that--
                          ``(i) in no case shall a recipient be entitled 
                      to receive more than one copy of any such document 
                      described during any one 12-month period; and
                          ``(ii) the administrator may make a reasonable 
                      charge to cover copying, mailing, and other costs 
                      of furnishing copies of information pursuant to 
                      this subparagraph.
            ``(2) Effect of subsection.--Nothing in this subsection 
        waives any other provision under this title requiring plan 
        administrators to provide, upon request, information to 
        employers that have an obligation to contribute under the 
        plan.''.

    (e) Model Form.--Not later 
than 1 year after the date of the enactment of this Act, the Secretary 
of Labor shall publish a model form for providing the statements, 
schedules, and other material required to be provided under section 
101(f) of the Employee Retirement Income Security Act of 1974, as 
amended by this section. The Secretary of Labor may promulgate any 
interim final rules as the Secretary determines appropriate to carry out 
the provisions of this subsection.

    (f) Effective Date.--The amendments made 
by this section shall apply to plan years beginning after December 31, 
2007.

SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT INFORMATION.

    (a) Electronic Display of Information.--Section 104(b) of such Act 
(29 U.S.C. 1024(b)) is amended by adding at the end the following:
    ``(5) Identification and basic plan information and actuarial 
information included in the annual report for any plan year shall be 
filed with the Secretary in an electronic format which accommodates 
display on the Internet, in accordance with regulations which shall be 
prescribed by the Secretary. The Secretary shall provide for display of 
such information included in the annual report, within 90 days after the 
date of the filing of the annual report, on an Internet website 
maintained by the Secretary and other appropriate 
media. Such information shall also be displayed 
on any Intranet website maintained by the plan sponsor (or by the plan 
administrator on behalf of the plan sponsor) for the purpose of 
communicating with employees and not the public, in accordance with 
regulations which shall be prescribed by the Secretary.''.

    (b) Effective Date.--The amendment made 
by this section shall apply to plan years beginning after December 31, 
2007.

SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

    (a) Change in Criteria for Persons Required To Provide Information 
to PBGC.--Section 4010(b) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1310(b)) is amended by striking paragraph (1) and 
inserting the following:
            ``(1) the funding target attainment percentage (as defined 
        in subsection (d)) at the end of the preceding plan year of a 
        plan maintained by the contributing sponsor or any member of its 
        controlled group is less than 80 percent;''.

    (b) Additional Information Required.--Section 4010 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1310) is amended by 
adding at the end the following new subsection:
    ``(d) Additional Information Required.--
            ``(1) In general.--The information submitted to the 
        corporation under subsection (a) shall include--
                    ``(A) the amount of benefit liabilities under the 
                plan determined using the assumptions used by the 
                corporation in determining liabilities;
                    ``(B) the funding target of the plan determined as 
                if the plan has been in at-risk status for at least 5 
                plan years; and
                    ``(C) the funding target attainment percentage of 
                the plan.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) Funding target.--The term `funding target' has 
                the meaning provided under section 303(d)(1).
                    ``(B) Funding target attainment percentage.--The 
                term `funding target attainment percentage' has the 
                meaning provided under section 302(d)(2).
                    ``(C) At-risk status.--The term `at-risk status' has 
                the meaning provided in section 303(i)(4).

    ``(e) Notice to Congress.--The corporation shall, on an annual 
basis, submit to the Committee on Health, Education, Labor, and Pensions 
and the Committee on Finance of the Senate and the Committee on 
Education and the Workforce and the Committee on Ways and Means of the 
House of Representatives, a summary report in the aggregate of the 
information submitted to the corporation under this section.''.
    (c) Effective Date.--The amendments made 
by this section shall apply with respect to years beginning after 2007.

SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN PARTICIPANTS.

    (a) Distress Terminations.--
            (1) In general.--Section 4041(c)(2) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) is 
        amended by adding at the end the following:
                    ``(D) Disclosure of termination information.--
                          ``(i) In general.--A plan administrator that 
                      has filed a notice of intent to terminate under 
                      subsection (a)(2) shall provide to an affected 
                      party any information provided to the corporation 
                      under subsection (a)(2) not later than 15 days 
                      after--
                                    ``(I) receipt of a request from the 
                                affected party for the information; or
                                    ``(II) the provision of new 
                                information to the corporation relating 
                                to a previous request.
                          ``(ii) Confidentiality.--
                                    ``(I) In general.--The plan 
                                administrator shall not provide 
                                information under clause (i) in a form 
                                that includes any information that may 
                                directly or indirectly be associated 
                                with, or otherwise identify, an 
                                individual participant or beneficiary.
                                    ``(II) Limitation.--A court may 
                                limit disclosure under this subparagraph 
                                of confidential information described in 
                                section 552(b) of title 5, United States 
                                Code, to any authorized representative 
                                of the participants or beneficiaries 
                                that agrees to ensure the 
                                confidentiality of such information.
                          ``(iii) Form and manner of information; 
                      charges.--
                                    ``(I) Form and manner.--The 
                                corporation may prescribe the form and 
                                manner of the provision of information 
                                under this subparagraph, which shall 
                                include delivery in written, electronic, 
                                or other appropriate form to the extent 
                                that such form is reasonably accessible 
                                to individuals to whom the information 
                                is required to be provided.
                                    ``(II) Reasonable charges.--A plan 
                                administrator may charge a reasonable 
                                fee for any information provided under 
                                this subparagraph in other than 
                                electronic form.
                          ``(iv) Authorized representative.--For 
                      purposes of this subparagraph, the term 
                      `authorized representative' means any employee 
                      organization representing participants in the 
                      pension plan.''.
            (2) Conforming amendment.--Section 4041(c)(1) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1341(c)(1)) is amended in subparagraph (C) by striking 
        ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
        (D)''.

    (b) Involuntary Terminations.--
            (1) In general.--Section 4042(c) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended by--
                    (A) striking ``(c) If the'' and inserting ``(c)(1) 
                If the'';
                    (B) redesignating paragraph (3) as paragraph (2); 
                and
                    (C) adding at the end the following:
            ``(3) Disclosure of termination information.--
                    ``(A) In general.--
                          ``(i) Information from plan sponsor or 
                      administrator.--A plan sponsor or plan 
                      administrator of a single-employer plan that has 
                      received a notice from the corporation of a 
                      determination that the plan should be terminated 
                      under this section shall provide to an affected 
                      party any information provided to the corporation 
                      in connection with the plan termination.
                          ``(ii) Information from corporation.--The 
                      corporation shall provide a copy of the 
                      administrative record, including the trusteeship 
                      decision record of a termination of a plan 
                      described under clause (i).
                    ``(B) Timing of disclosure.--The 
                plan sponsor, plan administrator, or the corporation, as 
                applicable, shall provide the information described in 
                subparagraph (A) not later than 15 days after--
                          ``(i) receipt of a request from an affected 
                      party for such information; or
                          ``(ii) in the case of information described 
                      under subparagraph (A)(i), the provision of any 
                      new information to the corporation relating to a 
                      previous request by an affected party.
                    ``(C) Confidentiality.--
                          ``(i) In general.--The plan administrator and 
                      plan sponsor shall not provide information under 
                      subparagraph (A)(i) in a form which includes any 
                      information that may directly or indirectly be 
                      associated with, or otherwise identify, an 
                      individual participant or beneficiary.
                          ``(ii) Limitation.--A court may limit 
                      disclosure under this paragraph of confidential 
                      information described in section 552(b) of title 
                      5, United States Code, to authorized 
                      representatives (within the meaning of section 
                      4041(c)(2)(D)(iv)) of the participants or 
                      beneficiaries that agree to ensure the 
                      confidentiality of such information.
                    ``(D) Form and manner of information; charges.--
                          ``(i) Form and manner.--The corporation may 
                      prescribe the form and manner of the provision of 
                      information under this paragraph, which shall 
                      include delivery in written, electronic, or other 
                      appropriate form to the extent that such form is 
                      reasonably accessible to individuals to whom the 
                      information is required to be provided.
                          ``(ii) Reasonable charges.--A plan sponsor may 
                      charge a reasonable fee for any information 
                      provided under this paragraph in other than 
                      electronic form.''.

    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to any plan termination under title IV of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1301 et seq.) 
        with respect to which the notice of intent to terminate (or in 
        the case of a termination by the Pension Benefit Guaranty 
        Corporation, a notice of determination under section 4042 of 
        such Act (29 U.S.C. 1342)) occurs after the date of enactment of 
        this Act.
            (2) Transition rule.--If notice under section 4041(c)(2)(D) 
        or 4042(c)(3) of the Employee Retirement Income Security Act of 
        1974 (as added by this section) would otherwise be required to 
        be provided before the 90th day after the date of the enactment 
        of this Act, such notice shall not be required to be provided 
        until such 90th day.

SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES.

    (a) In General.--Section 101 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1021), as amended by this Act, is 
amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following:
    ``(m) Notice of Right To Divest.--Not later than 
30 days before the first date on which an applicable individual of an 
applicable individual account plan is eligible to exercise the right 
under section 204(j) to direct the proceeds from the divestment of 
employer securities with respect to any type of contribution, the 
administrator shall provide to such individual a notice--
            ``(1) setting forth such right under such section, and
            ``(2) describing the importance of diversifying the 
        investment of retirement account assets.

The notice required by this subsection shall be written in a manner 
calculated to be understood by the average plan participant and may be 
delivered in written, electronic, or other appropriate form to the 
extent that such form is reasonably accessible to the recipient.''.
    (b) Penalties.--Section 502(c)(7) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended by striking 
``section 101(i)'' and inserting ``subsection (i) or (m) of section 
101''.
    (c) Model Notice.--The 
Secretary of the Treasury shall, within 180 days after the date of the 
enactment of this subsection, prescribe a model notice for purposes of 
satisfying the requirements of the amendments made by this section.

    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Transition rule.--If notice under section 101(m) of the 
        Employee Retirement Income Security Act of 1974 (as added by 
        this section) would otherwise be required to be provided before 
        the 90th day after the date of the enactment of this Act, such 
        notice shall not be required to be provided until such 90th day.

SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS.

    (a) Amendments of ERISA.--
            (1) In general.--Section 105(a) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended to 
        read as follows:

    ``(a) Requirements To Provide Pension Benefit Statements.--
            ``(1) Requirements.--
                    ``(A) Individual account plan.--The administrator of 
                an individual account plan (other than a one-participant 
                retirement plan described in section 101(i)(8)(B)) shall 
                furnish a pension benefit statement--
                          ``(i) at least once each calendar quarter to a 
                      participant or beneficiary who has the right to 
                      direct the investment of assets in his or her 
                      account under the plan,
                          ``(ii) at least once each calendar year to a 
                      participant or beneficiary who has his or her own 
                      account under the plan but does not have the right 
                      to direct the investment of assets in that 
                      account, and
                          ``(iii) upon written request to a plan 
                      beneficiary not described in clause (i) or (ii).
                    ``(B) Defined benefit plan.--The administrator of a 
                defined benefit plan (other than a one-participant 
                retirement plan described in section 101(i)(8)(B)) shall 
                furnish a pension benefit statement--
                          ``(i) at least once every 3 years to each 
                      participant with a nonforfeitable accrued benefit 
                      and who is employed by the employer maintaining 
                      the plan at the time the statement is to be 
                      furnished, and
                          ``(ii) to a participant or beneficiary of the 
                      plan upon written request.
                Information furnished under clause (i) to a participant 
                may be based on reasonable estimates determined under 
                regulations prescribed by the Secretary, in consultation 
                with the Pension Benefit Guaranty Corporation.
            ``(2) Statements.--
                    ``(A) In general.--A pension benefit statement under 
                paragraph (1)--
                          ``(i) shall indicate, on the basis of the 
                      latest available information--
                                    ``(I) the total benefits accrued, 
                                and
                                    ``(II) the nonforfeitable pension 
                                benefits, if any, which have accrued, or 
                                the earliest date on which benefits will 
                                become nonforfeitable,
                          ``(ii) shall include an explanation of any 
                      permitted disparity under section 401(l) of the 
                      Internal Revenue Code of 1986 or any floor-offset 
                      arrangement that may be applied in determining any 
                      accrued benefits described in clause (i),
                          ``(iii) shall be written in a manner 
                      calculated to be understood by the average plan 
                      participant, and
                          ``(iv) may be delivered in written, 
                      electronic, or other appropriate form to the 
                      extent such form is reasonably accessible to the 
                      participant or beneficiary.
                    ``(B) Additional information.--In the case of an 
                individual account plan, any pension benefit statement 
                under clause (i) or (ii) of paragraph (1)(A) shall 
                include--
                          ``(i) the value of each investment to which 
                      assets in the individual account have been 
                      allocated, determined as of the most recent 
                      valuation date under the plan, including the value 
                      of any assets held in the form of employer 
                      securities, without regard to whether such 
                      securities were contributed by the plan sponsor or 
                      acquired at the direction of the plan or of the 
                      participant or beneficiary, and
                          ``(ii) in the case of a pension benefit 
                      statement under paragraph (1)(A)(i)--
                                    ``(I) an explanation of any 
                                limitations or restrictions on any right 
                                of the participant or beneficiary under 
                                the plan to direct an investment,
                                    ``(II) an explanation, written in a 
                                manner calculated to be understood by 
                                the average plan participant, of the 
                                importance, for the long-term retirement 
                                security of participants and 
                                beneficiaries, of a well-balanced and 
                                diversified investment portfolio, 
                                including a statement of the risk that 
                                holding more than 20 percent of a 
                                portfolio
                                in the security of one entity (such as 
                                employer securities) may not be 
                                adequately diversified, and
                                    ``(III) a notice 
                                directing the participant or beneficiary 
                                to the Internet website of the 
                                Department of Labor for sources of 
                                information on individual investing and 
                                diversification.
                    ``(C) Alternative notice.--The requirements of 
                subparagraph (A)(i)(II) are met if, at least annually 
                and in accordance with requirements of the Secretary, 
                the plan--
                          ``(i) updates the information described in 
                      such paragraph which is provided in the pension 
                      benefit statement, or
                          ``(ii) provides in a separate statement such 
                      information as is necessary to enable a 
                      participant or beneficiary to determine their 
                      nonforfeitable vested benefits.
            ``(3) Defined benefit plans.--
                    ``(A) Alternative notice.--In the case of a defined 
                benefit plan, the requirements of paragraph (1)(B)(i) 
                shall be treated as met with respect to a participant if 
                at least once each year the administrator provides to 
                the participant notice of the availability of the 
                pension benefit statement and the ways in which the 
                participant may obtain such statement. Such notice may 
                be delivered in written, electronic, or other 
                appropriate form to the extent such form is reasonably 
                accessible to the participant.
                    ``(B) Years in which no benefits accrue.--The 
                Secretary may provide that years in which no employee or 
                former employee benefits (within the meaning of section 
                410(b) of the Internal Revenue Code of 1986) under the 
                plan need not be taken into account in determining the 
                3-year period under paragraph (1)(B)(i).''.
            (2) Conforming amendments.--
                    (A) Section 105 of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1025) is amended by 
                striking subsection (d).
                    (B) Section 105(b) of such Act (29 U.S.C. 1025(b)) 
                is amended to read as follows:

    ``(b) Limitation on Number of Statements.--In no case shall a 
participant or beneficiary of a plan be entitled to more than 1 
statement described in subparagraph (A)(iii) or (B)(ii) of subsection 
(a)(1), whichever is applicable, in any 12-month period.''.
                    (C) Section 502(c)(1) of such Act (29 U.S.C. 
                1132(c)(1)) is amended by striking ``or section 101(f)'' 
                and inserting ``section 101(f), or section 105(a)''.

    (b) Model Statements.--
            (1) In general.--The Secretary of Labor shall, within 1 year 
        after the date of the enactment of this section, develop 1 or 
        more model benefit statements that are written in a manner 
        calculated to be understood by the average plan participant and 
        that may be used by plan administrators in complying with the 
        requirements of section 105 of the Employee Retirement Income 
        Security Act of 1974.
            (2) Interim final rules.--The Secretary of Labor may 
        promulgate any interim final rules as the Secretary determines 
        appropriate to carry out the provisions of this subsection.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Special rule for collectively bargained agreements.--In 
        the case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, paragraph (1) shall be applied to benefits pursuant 
        to, and individuals covered by, any such agreement by 
        substituting for ``December 31, 2006'' the earlier of--
                    (A) the later of--
                          (i) December 31, 2007, or
                          (ii) the date on which the last of such 
                      collective bargaining agreements terminates 
                      (determined without regard to any extension 
                      thereof after such date of enactment), or
                    (B) December 31, 2008.

SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.

    (a) In General.--Section 101(i)(8)(B) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is amended by 
striking clauses (i) through (iv), by redesignating clause (v) as clause 
(ii), and by inserting before clause (ii), as so redesignated, the 
following new clause:
                          ``(i) on the first day of the plan year--
                                    ``(I) covered only one individual 
                                (or the individual and the individual's 
                                spouse) and the individual (or the 
                                individual and the individual's spouse) 
                                owned 100 percent of the plan sponsor 
                                (whether or not incorporated), or
                                    ``(II) covered only one or more 
                                partners (or partners and their spouses) 
                                in the plan sponsor, and''.

    (b) Effective Date.--The amendments made 
by this subsection shall take effect as if included in the provisions of 
section 306 of Public Law 107-204 (116 Stat. 745 et seq.).

  TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY 
                                  RULES

                      Subtitle A--Investment Advice

SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF INVESTMENT 
            ADVICE.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Exemption from prohibited transactions.--Section 408(b) 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1108(b)) is amended by adding at the end the following 
        new paragraph:
            ``(14) Any transaction in connection with the provision of 
        investment advice described in section 3(21)(A)(ii) to a 
        participant or beneficiary of an individual account plan that 
        permits such participant or beneficiary to direct the investment 
        of assets in their individual account, if--
                    ``(A) the transaction is--
                          ``(i) the provision of the investment advice 
                      to the participant or beneficiary of the plan with 
                      respect to a security or other property available 
                      as an investment under the plan,
                          ``(ii) the acquisition, holding, or sale of a 
                      security or other property available as an 
                      investment under the plan pursuant to the 
                      investment advice, or
                          ``(iii) the direct or indirect receipt of fees 
                      or other compensation by the fiduciary adviser or 
                      an affiliate thereof (or any employee, agent, or 
                      registered representative of the fiduciary adviser 
                      or affiliate) in connection with the provision of 
                      the advice or in connection with an acquisition, 
                      holding, or sale of a security or other property 
                      available as an investment under the plan pursuant 
                      to the investment advice; and
                    ``(B) the requirements of subsection (g) are met.''.
            (2) Requirements.--Section 408 of such Act is amended further by adding at the end the following 
        new subsection:

    ``(g) Provision of Investment Advice to Participant and 
Beneficiaries.--
            ``(1) In general.--The prohibitions provided in section 406 
        shall not apply to transactions described in subsection (b)(14) 
        if the investment advice provided by a fiduciary adviser is 
        provided under an eligible investment advice arrangement.
            ``(2) Eligible investment advice arrangement.--For purposes 
        of this subsection, the term `eligible investment advice 
        arrangement' means an arrangement--
                    ``(A) which either--
                          ``(i) provides that any fees (including any 
                      commission or other compensation) received by the 
                      fiduciary adviser for investment advice or with 
                      respect to the sale, holding, or acquisition of 
                      any security or other property for purposes of 
                      investment of plan assets do not vary depending on 
                      the basis of any investment option selected, or
                          ``(ii) uses a computer model under an 
                      investment advice program meeting the requirements 
                      of paragraph (3) in connection with the provision 
                      of investment advice by a fiduciary adviser to a 
                      participant or beneficiary, and
                    ``(B) with respect to which the requirements of 
                paragraph (4), (5), (6), (7), (8), and (9) are met.
            ``(3) Investment advice program using computer model.--
                    ``(A) In general.--An investment advice program 
                meets the requirements of this paragraph if the 
                requirements of subparagraphs (B), (C), and (D) are met.
                    ``(B) Computer model.--The requirements of this 
                subparagraph are met if the investment advice provided
                under the investment advice program is provided pursuant 
                to a computer model that--
                          ``(i) applies generally accepted investment 
                      theories that take into account the historic 
                      returns of different asset classes over defined 
                      periods of time,
                          ``(ii) utilizes relevant information about the 
                      participant, which may include age, life 
                      expectancy, retirement age, risk tolerance, other 
                      assets or sources of income, and preferences as to 
                      certain types of investments,
                          ``(iii) utilizes prescribed objective criteria 
                      to provide asset allocation portfolios comprised 
                      of investment options available under the plan,
                          ``(iv) operates in a manner that is not biased 
                      in favor of investments offered by the fiduciary 
                      adviser or a person with a material affiliation or 
                      contractual relationship with the fiduciary 
                      adviser, and
                          ``(v) takes into account all investment 
                      options under the plan in specifying how a 
                      participant's account balance should be invested 
                      and is not inappropriately weighted with respect 
                      to any investment option.
                    ``(C) Certification.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met with respect to any 
                      investment advice program if an eligible 
                      investment expert certifies, prior to the 
                      utilization of the computer model and in 
                      accordance with rules prescribed by the Secretary, 
                      that the computer model meets the requirements of 
                      subparagraph (B).
                          ``(ii) Renewal of certifications.--If, as 
                      determined under regulations prescribed by the 
                      Secretary, there are material modifications to a 
                      computer model, the requirements of this 
                      subparagraph are met only if a certification 
                      described in clause (i) is obtained with respect 
                      to the computer model as so modified.
                          ``(iii) Eligible investment expert.--The term 
                      `eligible investment expert' means any person--
                                    ``(I) which meets such requirements 
                                as the Secretary may provide, and
                                    ``(II) does not bear any material 
                                affiliation or contractual relationship 
                                with any investment adviser or a related 
                                person thereof (or any employee, agent, 
                                or registered representative of the 
                                investment adviser or related person).
                    ``(D) Exclusivity of recommendation.--The 
                requirements of this subparagraph are met with respect 
                to any investment advice program if--
                          ``(i) the only investment advice provided 
                      under the program is the advice generated by the 
                      computer model described in subparagraph (B), and
                          ``(ii) any transaction described in subsection 
                      (b)(14)(B)(ii) occurs solely at the direction of 
                      the participant or beneficiary.
                Nothing in the preceding sentence shall preclude the 
                participant or beneficiary from requesting investment 
                advice other than that described in subparagraph (A), 
                but
                only if such request has not been solicited by any 
                person connected with carrying out the arrangement.
            ``(4) Express authorization by separate fiduciary.--The 
        requirements of this paragraph are met with respect to an 
        arrangement if the arrangement is expressly authorized by a plan 
        fiduciary other than the person offering the investment advice 
        program, any person providing investment options under the plan, 
        or any affiliate of either.
            ``(5) Annual audit.--The requirements of this paragraph are 
        met if an independent auditor, who has appropriate technical 
        training or experience and proficiency and so represents in 
        writing--
                    ``(A) conducts an annual audit of the arrangement 
                for compliance with the requirements of this subsection, 
                and
                    ``(B) following completion of the 
                annual audit, issues a written report to the fiduciary 
                who authorized use of the arrangement which presents its 
                specific findings regarding compliance of the 
                arrangement with the requirements of this subsection.
        For purposes of this paragraph, an auditor is considered 
        independent if it is not related to the person offering the 
        arrangement to the plan and is not related to any person 
        providing investment options under the plan.
            ``(6) Disclosure.--The requirements of this paragraph are 
        met if--
                    ``(A) the fiduciary adviser provides to a 
                participant or a beneficiary before the initial 
                provision of the investment advice with regard to any 
                security or other property offered as an investment 
                option, a written notification (which may consist of 
                notification by means of electronic communication)--
                          ``(i) of the role of any party that has a 
                      material affiliation or contractual relationship 
                      with the financial adviser in the development of 
                      the investment advice program and in the selection 
                      of investment options available under the plan,
                          ``(ii) of the past performance and historical 
                      rates of return of the investment options 
                      available under the plan,
                          ``(iii) of all fees or other compensation 
                      relating to the advice that the fiduciary adviser 
                      or any affiliate thereof is to receive (including 
                      compensation provided by any third party) in 
                      connection with the provision of the advice or in 
                      connection with the sale, acquisition, or holding 
                      of the security or other property,
                          ``(iv) of any material affiliation or 
                      contractual relationship of the fiduciary adviser 
                      or affiliates thereof in the security or other 
                      property,
                          ``(v) the manner, and under what 
                      circumstances, any participant or beneficiary 
                      information provided under the arrangement will be 
                      used or disclosed,
                          ``(vi) of the types of services provided by 
                      the fiduciary adviser in connection with the 
                      provision of investment advice by the fiduciary 
                      adviser,
                          ``(vii) that the adviser is acting as a 
                      fiduciary of the plan in connection with the 
                      provision of the advice, and
                          ``(viii) that a recipient of the advice may 
                      separately arrange for the provision of advice by 
                      another adviser, that could have no material 
                      affiliation with and receive no fees or other 
                      compensation in connection with the security or 
                      other property, and
                    ``(B) at all times during the provision of advisory 
                services to the participant or beneficiary, the 
                fiduciary adviser--
                          ``(i) maintains the information described in 
                      subparagraph (A) in accurate form and in the 
                      manner described in paragraph (8),
                          ``(ii) provides, without charge, accurate 
                      information to the recipient of the advice no less 
                      frequently than annually,
                          ``(iii) provides, without charge, accurate 
                      information to the recipient of the advice upon 
                      request of the recipient, and
                          ``(iv) provides, without charge, accurate 
                      information to the recipient of the advice 
                      concerning any material change to the information 
                      required to be provided to the recipient of the 
                      advice at a time reasonably contemporaneous to the 
                      change in information.
            ``(7) Other conditions.--The requirements of this paragraph 
        are met if--
                    ``(A) the fiduciary adviser provides appropriate 
                disclosure, in connection with the sale, acquisition, or 
                holding of the security or other property, in accordance 
                with all applicable securities laws,
                    ``(B) the sale, acquisition, or holding occurs 
                solely at the direction of the recipient of the advice,
                    ``(C) the compensation received by the fiduciary 
                adviser and affiliates thereof in connection with the 
                sale, acquisition, or holding of the security or other 
                property is reasonable, and
                    ``(D) the terms of the sale, acquisition, or holding 
                of the security or other property are at least as 
                favorable to the plan as an arm's length transaction 
                would be.
            ``(8) Standards for presentation of information.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the notification required to be 
                provided to participants and beneficiaries under 
                paragraph (6)(A) is written in a clear and conspicuous 
                manner and in a manner calculated to be understood by 
                the average plan participant and is sufficiently 
                accurate and comprehensive to reasonably apprise such 
                participants and beneficiaries of the information 
                required to be provided in the notification.
                    ``(B) Model form for disclosure of fees and other 
                compensation.--The Secretary shall issue a model form 
                for the disclosure of fees and other compensation 
                required in paragraph (6)(A)(iii) which meets the 
                requirements of subparagraph (A).
            ``(9) Maintenance for 6 years of evidence of compliance.--
        The requirements of this paragraph are met if a fiduciary 
        adviser who has provided advice referred to in paragraph (1) 
        maintains, for a period of not less than 6 years after the 
        provision of the advice, any records necessary for determining 
        whether the requirements of the preceding provisions of this
        subsection and of subsection (b)(14) have been met. A 
        transaction prohibited under section 406 shall not be considered 
        to have occurred solely because the records are lost or 
        destroyed prior to the end of the 6-year period due to 
        circumstances beyond the control of the fiduciary adviser.
            ``(10) Exemption for plan sponsor and certain other 
        fiduciaries.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                plan sponsor or other person who is a fiduciary (other 
                than a fiduciary adviser) shall not be treated as 
                failing to meet the requirements of this part solely by 
                reason of the provision of investment advice referred to 
                in section 3(21)(A)(ii) (or solely by reason of 
                contracting for or otherwise arranging for the provision 
                of the advice), if--
                          ``(i) the advice is provided by a fiduciary 
                      adviser pursuant to an eligible investment advice 
                      arrangement between the plan sponsor or other 
                      fiduciary and the fiduciary adviser for the 
                      provision by the fiduciary adviser of investment 
                      advice referred to in such section,
                          ``(ii) the terms of the eligible investment 
                      advice arrangement require compliance by the 
                      fiduciary adviser with the requirements of this 
                      subsection, and
                          ``(iii) the terms of the eligible investment 
                      advice arrangement include a written 
                      acknowledgment by the fiduciary adviser that the 
                      fiduciary adviser is a fiduciary of the plan with 
                      respect to the provision of the advice.
                    ``(B) Continued duty of prudent selection of adviser 
                and periodic review.--Nothing in subparagraph (A) shall 
                be construed to exempt a plan sponsor or other person 
                who is a fiduciary from any requirement of this part for 
                the prudent selection and periodic review of a fiduciary 
                adviser with whom the plan sponsor or other person 
                enters into an eligible investment advice arrangement 
                for the provision of investment advice referred to in 
                section 3(21)(A)(ii). The plan sponsor or other person 
                who is a fiduciary has no duty under this part to 
                monitor the specific investment advice given by the 
                fiduciary adviser to any particular recipient of the 
                advice.
                    ``(C) Availability of plan assets for payment for 
                advice.--Nothing in this part shall be construed to 
                preclude the use of plan assets to pay for reasonable 
                expenses in providing investment advice referred to in 
                section 3(21)(A)(ii).
            ``(11) Definitions.--For purposes of this subsection and 
        subsection (b)(14)--
                    ``(A) Fiduciary adviser.--The term `fiduciary 
                adviser' means, with respect to a plan, a person who is 
                a fiduciary of the plan by reason of the provision of 
                investment advice referred to in section 3(21)(A)(ii) by 
                the person to the participant or beneficiary of the plan 
                and who is--
                          ``(i) registered as an investment adviser 
                      under the Investment Advisers Act of 1940 (15 
                      U.S.C. 80b-1 et seq.) or under the laws of the 
                      State in which the fiduciary maintains its 
                      principal office and place of business,
                          ``(ii) a bank or similar financial institution 
                      referred to in section 408(b)(4) or a savings 
                      association (as defined in section 3(b)(1) of the 
                      Federal Deposit Insurance Act (12 U.S.C. 
                      1813(b)(1)), but only if the advice is provided 
                      through a trust department of the bank or similar 
                      financial institution or savings association which 
                      is subject to periodic examination and review by 
                      Federal or State banking authorities,
                          ``(iii) an insurance company qualified to do 
                      business under the laws of a State,
                          ``(iv) a person registered as a broker or 
                      dealer under the Securities Exchange Act of 1934 
                      (15 U.S.C. 78a et seq.),
                          ``(v) an affiliate of a person described in 
                      any of clauses (i) through (iv), or
                          ``(vi) an employee, agent, or registered 
                      representative of a person described in clauses 
                      (i) through (v) who satisfies the requirements of 
                      applicable insurance, banking, and securities laws 
                      relating to the provision of the advice.
                For purposes of this part, a person who develops the 
                computer model described in paragraph (3)(B) or markets 
                the investment advice program or computer model shall be 
                treated as a person who is a fiduciary of the plan by 
                reason of the provision of investment advice referred to 
                in section 3(21)(A)(ii) to the participant or 
                beneficiary and shall be treated as a fiduciary adviser 
                for purposes of this subsection and subsection (b)(14), 
                except that the Secretary may prescribe rules under 
                which only 1 fiduciary adviser may elect to be treated 
                as a fiduciary with respect to the plan.
                    ``(B) Affiliate.--The term `affiliate' of another 
                entity means an affiliated person of the entity (as 
                defined in section 2(a)(3) of the Investment Company Act 
                of 1940 (15 U.S.C. 80a-2(a)(3))).
                    ``(C) Registered representative.--The term 
                `registered representative' of another entity means a 
                person described in section 3(a)(18) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) 
                (substituting the entity for the broker or dealer 
                referred to in such section) or a person described in 
                section 202(a)(17) of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity 
                for the investment adviser referred to in such 
                section).''.
            (3) Effective date.--The 
        amendments made by this subsection shall apply with respect to 
        advice referred to in section 3(21)(A)(ii) of the Employee 
        Retirement Income Security Act of 1974 provided after December 
        31, 2006.

    (b) Amendments to Internal Revenue Code of 1986.--
            (1) Exemption from prohibited transactions.--Subsection (d) 
        of section 4975 of the Internal Revenue Code of 1986 (relating to exemption from tax on prohibited 
        transactions) is amended--
                    (A) in paragraph (15), by striking ``or'' at the 
                end;
                    (B) in paragraph (16), by striking the period at the 
                end and inserting ``;or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(17) Any transaction in connection with the provision of 
        investment advice described in subsection (e)(3)(B) to a 
        participant or beneficiary in a plan and that permits such 
        participant or beneficiary to direct the investment of plan 
        assets in an individual account, if--
                    ``(A) the transaction is--
                          ``(i) the provision of the investment advice 
                      to the participant or beneficiary of the plan with 
                      respect to a security or other property available 
                      as an investment under the plan,
                          ``(ii) the acquisition, holding, or sale of a 
                      security or other property available as an 
                      investment under the plan pursuant to the 
                      investment advice, or
                          ``(iii) the direct or indirect receipt of fees 
                      or other compensation by the fiduciary adviser or 
                      an affiliate thereof (or any employee, agent, or 
                      registered representative of the fiduciary adviser 
                      or affiliate) in connection with the provision of 
                      the advice or in connection with an acquisition, 
                      holding, or sale of a security or other property 
                      available as an investment under the plan pursuant 
                      to the investment advice; and
                    ``(B) the requirements of subsection (f)(8) are 
                met.''.
            (2) Requirements.--Subsection (f) of such section 4975 (relating to other definitions and special 
        rules) is amended by adding at the end the following new 
        paragraph:
            ``(8) Provision of investment advice to participant and 
        beneficiaries.-- I24    ``(A) In general.--The prohibitions 
        provided in subsection (c) shall not apply to transactions 
        described in subsection (b)(14) if the investment advice 
        provided by a fiduciary adviser is provided under an eligible 
        investment advice arrangement.
                    ``(B) Eligible investment advice arrangement.--For 
                purposes of this paragraph, the term `eligible 
                investment advice arrangement' means an arrangement--
                          ``(i) which either--
                                    ``(I) provides that any fees 
                                (including any commission or other 
                                compensation) received by the fiduciary 
                                adviser for investment advice or with 
                                respect to the sale, holding, or 
                                acquisition of any security or other 
                                property for purposes of investment of 
                                plan assets do not vary depending on the 
                                basis of any investment option selected, 
                                or
                                    ``(II) uses a computer model under 
                                an investment advice program meeting the 
                                requirements of subparagraph (C) in 
                                connection with the provision of 
                                investment advice by a fiduciary adviser 
                                to a participant or beneficiary, and
                          ``(ii) with respect to which the requirements 
                      of subparagraphs (D), (E), (F), (G), (H), and (I) 
                      are met.
                    ``(C) Investment advice program using computer 
                model.--
                          ``(i) In general.--An investment advice 
                      program meets the requirements of this 
                      subparagraph if the requirements of clauses (ii), 
                      (iii), and (iv) are met.
                          ``(ii) Computer model.--The requirements of 
                      this clause are met if the investment advice 
                      provided under
                      the investment advice program is provided pursuant 
                      to a computer model that--
                                    ``(I) applies generally accepted 
                                investment theories that take into 
                                account the historic returns of 
                                different asset classes over defined 
                                periods of time,
                                    ``(II) utilizes relevant information 
                                about the participant, which may include 
                                age, life expectancy, retirement age, 
                                risk tolerance, other assets or sources 
                                of income, and preferences as to certain 
                                types of investments,
                                    ``(III) utilizes prescribed 
                                objective criteria to provide asset 
                                allocation portfolios comprised of 
                                investment options available under the 
                                plan,
                                    ``(IV) operates in a manner that is 
                                not biased in favor of investments 
                                offered by the fiduciary adviser or a 
                                person with a material affiliation or 
                                contractual relationship with the 
                                fiduciary adviser, and
                                    ``(V) takes into account all 
                                investment options under the plan in 
                                specifying how a participant's account 
                                balance should be invested and is not 
                                inappropriately weighted with respect to 
                                any investment option.
                          ``(iii) Certification.--
                                    ``(I) In general.--The requirements 
                                of this clause are met with respect to 
                                any investment advice program if an 
                                eligible investment expert certifies, 
                                prior to the utilization of the computer 
                                model and in accordance with rules 
                                prescribed by the Secretary of Labor, 
                                that the computer model meets the 
                                requirements of clause (ii).
                                    ``(II) Renewal of certifications.--
                                If, as determined under regulations 
                                prescribed by the Secretary of Labor, 
                                there are material modifications to a 
                                computer model, the requirements of this 
                                clause are met only if a certification 
                                described in subclause (I) is obtained 
                                with respect to the computer model as so 
                                modified.
                                    ``(III) Eligible investment 
                                expert.--The term `eligible investment 
                                expert' means any person which meets 
                                such requirements as the Secretary of 
                                Labor may provide and which does not 
                                bear any material affiliation or 
                                contractual relationship with any 
                                investment adviser or a related person 
                                thereof (or any employee, agent, or 
                                registered representative of the 
                                investment adviser or related person).
                          ``(iv) Exclusivity of recommendation.--The 
                      requirements of this clause are met with respect 
                      to any investment advice program if--
                                    ``(I) the only investment advice 
                                provided under the program is the advice 
                                generated by the computer model 
                                described in clause (ii), and
                                    ``(II) any transaction described in 
                                subsection (b)(14)(B)(ii) occurs solely 
                                at the direction of the participant or 
                                beneficiary.
                      Nothing in the preceding sentence shall preclude 
                      the participant or beneficiary from requesting 
                      investment advice other than that described in 
                      clause (i), but only if such request has not been 
                      solicited by any person connected with carrying 
                      out the arrangement.
                    ``(D) Express authorization by separate fiduciary.--
                The requirements of this subparagraph are met with 
                respect to an arrangement if the arrangement is 
                expressly authorized by a plan fiduciary other than the 
                person offering the investment advice program, any 
                person providing investment options under the plan, or 
                any affiliate of either.
                    ``(E) Audits.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if an independent auditor, 
                      who has appropriate technical training or 
                      experience and proficiency and so represents in 
                      writing--
                                    ``(I) conducts an annual audit of 
                                the arrangement for compliance with the 
                                requirements of this paragraph, and
                                    ``(II) following 
                                completion of the annual audit, issues a 
                                written report to the fiduciary who 
                                authorized use of the arrangement which 
                                presents its specific findings regarding 
                                compliance of the arrangement with the 
                                requirements of this paragraph.
                          ``(ii) Special rule for individual retirement 
                      and similar plans.--In the case of a plan 
                      described in subparagraphs (B) through (F) (and so 
                      much of subparagraph (G) as relates to such 
                      subparagraphs) of subsection (e)(1), in lieu of 
                      the requirements of clause (i), audits of the 
                      arrangement shall be conducted at such times and 
                      in such manner as the Secretary of Labor may 
                      prescribe.
                          ``(iii) Independent auditor.--For purposes of 
                      this subparagraph, an auditor is considered 
                      independent if it is not related to the person 
                      offering the arrangement to the plan and is not 
                      related to any person providing investment options 
                      under the plan.
                    ``(F) Disclosure.--The requirements of this 
                subparagraph are met if--
                          ``(i) the fiduciary adviser provides to a 
                      participant or a beneficiary before the initial 
                      provision of the investment advice with regard to 
                      any security or other property offered as an 
                      investment option, a written notification (which 
                      may consist of notification by means of electronic 
                      communication)--
                                    ``(I) of the role of any party that 
                                has a material affiliation or 
                                contractual relationship with the 
                                financial adviser in the development of 
                                the investment advice program and in the 
                                selection of investment options 
                                available under the plan,
                                    ``(II) of the past performance and 
                                historical rates of return of the 
                                investment options available under the 
                                plan,
                                    ``(III) of all fees or other 
                                compensation relating to the advice that 
                                the fiduciary adviser or any
                                affiliate thereof is to receive 
                                (including compensation provided by any 
                                third party) in connection with the 
                                provision of the advice or in connection 
                                with the sale, acquisition, or holding 
                                of the security or other property,
                                    ``(IV) of any material affiliation 
                                or contractual relationship of the 
                                fiduciary adviser or affiliates thereof 
                                in the security or other property,
                                    ``(V) the manner, and under what 
                                circumstances, any participant or 
                                beneficiary information provided under 
                                the arrangement will be used or 
                                disclosed,
                                    ``(VI) of the types of services 
                                provided by the fiduciary adviser in 
                                connection with the provision of 
                                investment advice by the fiduciary 
                                adviser,
                                    ``(VII) that the adviser is acting 
                                as a fiduciary of the plan in connection 
                                with the provision of the advice, and
                                    ``(VIII) that a recipient of the 
                                advice may separately arrange for the 
                                provision of advice by another adviser, 
                                that could have no material affiliation 
                                with and receive no fees or other 
                                compensation in connection with the 
                                security or other property, and
                          ``(ii) at all times during the provision of 
                      advisory services to the participant or 
                      beneficiary, the fiduciary adviser--
                                    ``(I) maintains the information 
                                described in clause (i) in accurate form 
                                and in the manner described in 
                                subparagraph (H),
                                    ``(II) provides, without charge, 
                                accurate information to the recipient of 
                                the advice no less frequently than 
                                annually,
                                    ``(III) provides, without charge, 
                                accurate information to the recipient of 
                                the advice upon request of the 
                                recipient, and
                                    ``(IV) provides, without charge, 
                                accurate information to the recipient of 
                                the advice concerning any material 
                                change to the information required to be 
                                provided to the recipient of the advice 
                                at a time reasonably contemporaneous to 
                                the change in information.
                    ``(G) Other conditions.--The requirements of this 
                subparagraph are met if--
                          ``(i) the fiduciary adviser provides 
                      appropriate disclosure, in connection with the 
                      sale, acquisition, or holding of the security or 
                      other property, in accordance with all applicable 
                      securities laws,
                          ``(ii) the sale, acquisition, or holding 
                      occurs solely at the direction of the recipient of 
                      the advice,
                          ``(iii) the compensation received by the 
                      fiduciary adviser and affiliates thereof in 
                      connection with the sale, acquisition, or holding 
                      of the security or other property is reasonable, 
                      and
                          ``(iv) the terms of the sale, acquisition, or 
                      holding of the security or other property are at 
                      least as favorable to the plan as an arm's length 
                      transaction would be.
                    ``(H) Standards for presentation of information.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if the notification required 
                      to be provided to participants and beneficiaries 
                      under subparagraph (F)(i) is written in a clear 
                      and conspicuous manner and in a manner calculated 
                      to be understood by the average plan participant 
                      and is sufficiently accurate and comprehensive to 
                      reasonably apprise such participants and 
                      beneficiaries of the information required to be 
                      provided in the notification.
                          ``(ii) Model form for disclosure of fees and 
                      other compensation.--The Secretary of Labor shall 
                      issue a model form for the disclosure of fees and 
                      other compensation required in subparagraph 
                      (F)(i)(III) which meets the requirements of clause 
                      (i).
                    ``(I) Maintenance for 6 years of evidence of 
                compliance.--The requirements of this subparagraph are 
                met if a fiduciary adviser who has provided advice 
                referred to in subparagraph (A) maintains, for a period 
                of not less than 6 years after the provision of the 
                advice, any records necessary for determining whether 
                the requirements of the preceding provisions of this 
                paragraph and of subsection (d)(17) have been met. A 
                transaction prohibited under section 406 shall not be 
                considered to have occurred solely because the records 
                are lost or destroyed prior to the end of the 6-year 
                period due to circumstances beyond the control of the 
                fiduciary adviser.
                    ``(J) Definitions.--For purposes of this paragraph 
                and subsection (d)(17)--
                          ``(i) Fiduciary adviser.--The term `fiduciary 
                      adviser' means, with respect to a plan, a person 
                      who is a fiduciary of the plan by reason of the 
                      provision of investment advice by the person to 
                      the participant or beneficiary of the plan and who 
                      is--
                                    ``(I) registered as an investment 
                                adviser under the Investment Advisers 
                                Act of 1940 (15 U.S.C. 80b-1 et seq.) or 
                                under the laws of the State in which the 
                                fiduciary maintains its principal office 
                                and place of business,
                                    ``(II) a bank or similar financial 
                                institution referred to in section 
                                408(b)(4) or a savings association (as 
                                defined in section 3(b)(1) of the 
                                Federal Deposit Insurance Act (12 U.S.C. 
                                1813(b)(1)), but only if the advice is 
                                provided through a trust department of 
                                the bank or similar financial 
                                institution or savings association which 
                                is subject to periodic examination and 
                                review by Federal or State banking 
                                authorities,
                                    ``(III) an insurance company 
                                qualified to do business under the laws 
                                of a State,
                                    ``(IV) a person registered as a 
                                broker or dealer under the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78a et 
                                seq.),
                                    ``(V) an affiliate of a person 
                                described in any of subclauses (I) 
                                through (IV), or
                                    ``(VI) an employee, agent, or 
                                registered representative of a person 
                                described in subclauses (I) through (V) 
                                who satisfies the requirements of 
                                applicable insurance, banking, and 
                                securities laws relating to the 
                                provision of the advice.
                      For purposes of this title, a person who develops 
                      the computer model described in subparagraph 
                      (C)(ii) or markets the investment advice program 
                      or computer model shall be treated as a person who 
                      is a fiduciary of the plan by reason of the 
                      provision of investment advice referred to in 
                      subsection (e)(3)(B) to the participant or 
                      beneficiary and shall be treated as a fiduciary 
                      adviser for purposes of this paragraph and 
                      subsection (d)(17), except that the Secretary of 
                      Labor may prescribe rules under which only 1 
                      fiduciary adviser may elect to be treated as a 
                      fiduciary with respect to the plan.
                          ``(ii) Affiliate.--The term `affiliate' of 
                      another entity means an affiliated person of the 
                      entity (as defined in section 2(a)(3) of the 
                      Investment Company Act of 1940 (15 U.S.C. 80a-
                      2(a)(3))).
                          ``(iii) Registered representative.--The term 
                      `registered representative' of another entity 
                      means a person described in section 3(a)(18) of 
                      the Securities Exchange Act of 1934 (15 U.S.C. 
                      78c(a)(18)) (substituting the entity for the 
                      broker or dealer referred to in such section) or a 
                      person described in section 202(a)(17) of the 
                      Investment Advisers Act of 1940 (15 U.S.C. 80b-
                      2(a)(17)) (substituting the entity for the 
                      investment adviser referred to in such 
                      section).''.
            (3) Determination of feasibility 
        of application of computer model investment advice programs for 
        individual retirement and similar plans.--
                    (A) Solicitation of information.--As soon as 
                practicable after the date of the enactment of this Act, 
                the Secretary of Labor, in consultation with the 
                Secretary of the Treasury, shall--
                          (i) solicit information as to the feasibility 
                      of the application of computer model investment 
                      advice programs for plans described in 
                      subparagraphs (B) through (F) (and so much of 
                      subparagraph (G) as relates to such subparagraphs) 
                      of section 4975(e)(1) of the Internal Revenue Code 
                      of 1986, including soliciting information from--
                                    (I) at least the top 50 trustees of 
                                such plans, determined on the basis of 
                                assets held by such trustees, and
                                    (II) other persons offering computer 
                                model investment advice programs based 
                                on nonproprietary products, and
                          (ii) shall on the basis of such information 
                      make the determination under subparagraph (B).
                The information solicited by the Secretary of Labor 
                under clause (i) from persons described in subclauses 
                (I) and (II) of clause (i) shall include information on 
                computer
                modeling capabilities of such persons with respect to 
                the current year and preceding year, including such 
                capabilities for investment accounts maintained by such 
                persons.
                    (B) Determination of feasibility.--The Secretary of 
                Labor, in consultation with the Secretary of the 
                Treasury, shall, on the basis of information received 
                under subparagraph (A), determine whether there is any 
                computer model investment advice program which may be 
                utilized by a plan described in subparagraph (A)(i) to 
                provide investment advice to the account beneficiary of 
                the plan which--
                          (i) utilizes relevant information about the 
                      account beneficiary, which may include age, life 
                      expectancy, retirement age, risk tolerance, other 
                      assets or sources of income, and preferences as to 
                      certain types of investments,
                          (ii) takes into account the full range of 
                      investments, including equities and bonds, in 
                      determining the options for the investment 
                      portfolio of the account beneficiary, and
                          (iii) allows the account beneficiary, in 
                      directing the investment of assets, sufficient 
                      flexibility in obtaining advice to evaluate and 
                      select investment options.
                The Secretary of Labor 
                shall report the results of such determination to the 
                committees of Congress referred to in subparagraph 
                (D)(ii) not later than December 31, 2007.
                    (C) Application of computer model investment advice 
                program.--
                          (i) Certification required for use of computer 
                      model.--
                                    (I) Restriction on use.--Subclause 
                                (II) of section 4975(f)(8)(B)(i) of the 
                                Internal Revenue Code of 1986 shall not 
                                apply to a plan described in 
                                subparagraph (A)(i).
                                    (II) Restriction lifted if model 
                                certified.--If the Secretary of Labor 
                                determines under subparagraph (B) or (D) 
                                that there is a computer model 
                                investment advice program described in 
                                subparagraph (B), subclause (I) shall 
                                cease to apply as of the date of such 
                                determination.
                          (ii) Class exemption if no initial 
                      certification by secretary.--If the Secretary of 
                      Labor determines under subparagraph (B) that there 
                      is no computer model investment advice program 
                      described in subparagraph (B), the Secretary of 
                      Labor shall grant a class exemption from treatment 
                      as a prohibited transaction under section 4975(c) 
                      of the Internal Revenue Code of 1986 to any 
                      transaction described in section 4975(d)(17)(A) of 
                      such Code with respect to plans described in 
                      subparagraph (A)(i), subject to such conditions as 
                      set forth in such exemption as are in the 
                      interests of the plan and its account beneficiary 
                      and protective of the rights of the account 
                      beneficiary and as are necessary to--
                                    (I) ensure the requirements of 
                                sections 4975(d)(17) and 4975(f)(8) 
                                (other than subparagraph (C) thereof) of 
                                the Internal Revenue Code of 1986 are 
                                met, and
                                    (II) ensure the investment advice 
                                provided under the investment advice 
                                program utilizes prescribed objective 
                                criteria to provide asset allocation 
                                portfolios comprised of securities or 
                                other property available as investments 
                                under the plan.
                      If the Secretary of Labor 
                      solicits any information under subparagraph (A) 
                      from a person and such person does not provide 
                      such information within 60 days after the 
                      solicitation, then, unless such failure was due to 
                      reasonable cause and not wilful neglect, such 
                      person shall not be entitled to utilize the class 
                      exemption under this clause.
                    (D) Subsequent determination.--
                          (i) In general.--If the Secretary of Labor 
                      initially makes a determination described in 
                      subparagraph (C)(ii), the Secretary may 
                      subsequently determine that there is a computer 
                      model investment advice program described in 
                      subparagraph (B). If the Secretary makes such 
                      subsequent determination, then the class exemption 
                      described in subparagraph (C)(ii) shall cease to 
                      apply after the later of--
                                    (I) the date which is 2 years after 
                                such subsequent determination, or
                                    (II) the date which is 3 years after 
                                the first date on which such exemption 
                                took effect.
                          (ii) Requests for determination.--
                      Any person may request the 
                      Secretary of Labor to make a determination under 
                      this subparagraph with respect to any computer 
                      model investment advice program, and the Secretary 
                      of Labor shall make a determination with respect 
                      to such request within 90 days. If the Secretary 
                      of Labor makes a determination that such program 
                      is not described in subparagraph (B), the 
                      Secretary shall, within 10 days of such 
                      determination, notify the Committee on Ways and 
                      Means and the Committee on Education and the 
                      Workforce of the House of Representatives and the 
                      Committee on Finance and the Committee on Health, 
                      Education, Labor, and Pensions of the Senate of 
                      such determination and the reasons for such 
                      determination.
                    (E) Effective date.--The provisions of this 
                paragraph shall take effect on the date of the enactment 
                of this Act.
            (4) Effective date.--Except as 
        provided in this subsection, the amendments made by this 
        subsection shall apply with respect to advice referred to in 
        section 4975(c)(3)(B) of the Internal Revenue Code of 1986 
        provided after December 31, 2006.

    (c) Coordination With Existing 
Exemptions.--Any exemption under section 408(b) of the Employee 
Retirement Income Security Act of 1974 and section 4975(d) of the 
Internal Revenue Code of 1986 provided by the amendments made by this 
section shall
not in any manner alter existing individual or class exemptions, 
provided by statute or administrative action.

                   Subtitle B--Prohibited Transactions

SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO FINANCIAL 
            INVESTMENTS.

    (a) Exemption for Block Trading.--
            (1) Amendments to employee retirement income security act of 
        1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as 
        amended by section 601, is amended by adding at the end the 
        following new paragraph:
            ``(15)(A) Any transaction involving the purchase or sale of 
        securities, or other property (as determined by the Secretary), 
        between a plan and a party in interest (other than a fiduciary 
        described in section 3(21)(A)) with respect to a plan if--
                    ``(i) the transaction involves a block trade,
                    ``(ii) at the time of the transaction, the interest 
                of the plan (together with the interests of any other 
                plans maintained by the same plan sponsor), does not 
                exceed 10 percent of the aggregate size of the block 
                trade,
                    ``(iii) the terms of the transaction, including the 
                price, are at least as favorable to the plan as an arm's 
                length transaction, and
                    ``(iv) the compensation associated with the purchase 
                and sale is not greater than the compensation associated 
                with an arm's length transaction with an unrelated 
                party.
            ``(B) For purposes of this paragraph, the term `block trade' 
        means any trade of at least 10,000 shares or with a market value 
        of at least $200,000 which will be allocated across two or more 
        unrelated client accounts of a fiduciary.''.
            (2) Amendments to internal revenue code of 1986.--
                    (A) In general.--Subsection (d) of section 4975 of 
                the Internal Revenue Code of 1986 (relating to 
                exemptions), as amended by section 601, is amended by 
                striking ``or'' at the end of paragraph (16), by 
                striking the period at the end of paragraph (17) and 
                inserting ``, or'', and by adding at the end the 
                following new paragraph:
            ``(18) any transaction involving the purchase or sale of 
        securities, or other property (as determined by the Secretary of 
        Labor), between a plan and a party in interest (other than a 
        fiduciary described in subsection (e)(3)(B)) with respect to a 
        plan if--
                    ``(A) the transaction involves a block trade,
                    ``(B) at the time of the transaction, the interest 
                of the plan (together with the interests of any other 
                plans maintained by the same plan sponsor), does not 
                exceed 10 percent of the aggregate size of the block 
                trade,
                    ``(C) the terms of the transaction, including the 
                price, are at least as favorable to the plan as an arm's 
                length transaction, and
                    ``(D) the compensation associated with the purchase 
                and sale is not greater than the compensation associated 
                with an arm's length transaction with an unrelated 
                party.''.
                    (B) Special rule relating to block trade.--
                Subsection (f) of section 4975 of such Code (relating to 
                other
                definitions and special rules), as amended by section 
                601, is amended by adding at the end the following new 
                paragraph:
            ``(9) Block trade.--The term `block trade' means any trade 
        of at least 10,000 shares or with a market value of at least 
        $200,000 which will be allocated across two or more unrelated 
        client accounts of a fiduciary.''.

    (b) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 1112(a)) 
is amended--
            (1) by redesignating paragraph (2) as paragraph (3),
            (2) by striking ``and'' at the end of paragraph (1), and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) no bond shall be required of any entity which is 
        registered as a broker or a dealer under section 15(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the broker 
        or dealer is subject to the fidelity bond requirements of a 
        self-regulatory organization (within the meaning of section 
        3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).''.

    (c) Exemption for Electronic Communication Network.--
            (1) Amendments to employee retirement income security act of 
        1974.--Section 408(b) of such Act, as amended by subsection 
        (a), is amended by adding at the end the 
        following:
            ``(16) Any transaction involving the purchase or sale of 
        securities, or other property (as determined by the Secretary), 
        between a plan and a party in interest if--
                    ``(A) the transaction is executed through an 
                electronic communication network, alternative trading 
                system, or similar execution system or trading venue 
                subject to regulation and oversight by--
                          ``(i) the applicable Federal regulating 
                      entity, or
                          ``(ii) such foreign regulatory entity as the 
                      Secretary may determine by regulation,
                    ``(B) either--
                          ``(i) the transaction is effected pursuant to 
                      rules designed to match purchases and sales at the 
                      best price available through the execution system 
                      in accordance with applicable rules of the 
                      Securities and Exchange Commission or other 
                      relevant governmental authority, or
                          ``(ii) neither the execution system nor the 
                      parties to the transaction take into account the 
                      identity of the parties in the execution of 
                      trades,
                    ``(C) the price and compensation associated with the 
                purchase and sale are not greater than the price and 
                compensation associated with an arm's length transaction 
                with an unrelated party,
                    ``(D) if the party in interest has an ownership 
                interest in the system or venue described in 
                subparagraph (A), the system or venue has been 
                authorized by the plan sponsor or other independent 
                fiduciary for transactions described in this paragraph, 
                and
                    ``(E) not less than 30 
                days prior to the initial transaction described in this 
                paragraph executed through any system or venue described 
                in subparagraph (A), a plan fiduciary is provided 
                written or electronic notice of the
                execution of such transaction through such system or 
                venue.''.
            (2) Amendments to internal revenue code of 1986.--Subsection 
        (d) of section 4975 of the Internal Revenue Code of 1986 
        (relating to exemptions), as amended by subsection (a), is 
        amended by striking ``or'' at the end of paragraph (17), by 
        striking the period at the end of paragraph (18) and inserting 
        ``, or'', and by adding at the end the following new paragraph:
            ``(19) any transaction involving the purchase or sale of 
        securities, or other property (as determined by the Secretary of 
        Labor), between a plan and a party in interest if--
                    ``(A) the transaction is executed through an 
                electronic communication network, alternative trading 
                system, or similar execution system or trading venue 
                subject to regulation and oversight by--
                          ``(i) the applicable Federal regulating 
                      entity, or
                          ``(ii) such foreign regulatory entity as the 
                      Secretary of Labor may determine by regulation,
                    ``(B) either--
                          ``(i) the transaction is effected pursuant to 
                      rules designed to match purchases and sales at the 
                      best price available through the execution system 
                      in accordance with applicable rules of the 
                      Securities and Exchange Commission or other 
                      relevant governmental authority, or
                          ``(ii) neither the execution system nor the 
                      parties to the transaction take into account the 
                      identity of the parties in the execution of 
                      trades,
                    ``(C) the price and compensation associated with the 
                purchase and sale are not greater than the price and 
                compensation associated with an arm's length transaction 
                with an unrelated party,
                    ``(D) if the party in interest has an ownership 
                interest in the system or venue described in 
                subparagraph (A), the system or venue has been 
                authorized by the plan sponsor or other independent 
                fiduciary for transactions described in this paragraph, 
                and
                    ``(E) not less than 30 
                days prior to the initial transaction described in this 
                paragraph executed through any system or venue described 
                in subparagraph (A), a plan fiduciary is provided 
                written or electronic notice of the execution of such 
                transaction through such system or venue.''.

    (d) Exemption for Service Providers.--
            (1) Amendments to employee retirement income security act of 
        1974.--Section 408(b) of such Act (29 
        U.S.C. 1106), as amended by subsection (c), is amended by adding 
        at the end the following new paragraph:
            ``(17)(A) Transactions described in subparagraphs (A), (B), 
        and (D) of section 406(a)(1) between a plan and a person that is 
        a party in interest other than a fiduciary (or an affiliate) who 
        has or exercises any discretionary authority or control with 
        respect to the investment of the plan assets involved in the 
        transaction or renders investment advice (within the meaning of 
        section 3(21)(A)(ii)) with respect to those assets, solely by 
        reason of providing services to the plan or solely by reason of 
        a relationship to such a service provider described
        in subparagraph (F), (G), (H), or (I) of section 3(14), or both, 
        but only if in connection with such transaction the plan 
        receives no less, nor pays no more, than adequate consideration.
            ``(B) For purposes of this paragraph, the term `adequate 
        consideration' means--
                          ``(i) in the case of a security for which 
                      there is a generally recognized market--
                                    ``(I) the price of the security 
                                prevailing on a national securities 
                                exchange which is registered under 
                                section 6 of the Securities Exchange Act 
                                of 1934, taking into account factors 
                                such as the size of the transaction and 
                                marketability of the security, or
                                    ``(II) if the security is not traded 
                                on such a national securities exchange, 
                                a price not less favorable to the plan 
                                than the offering price for the security 
                                as established by the current bid and 
                                asked prices quoted by persons 
                                independent of the issuer and of the 
                                party in interest, taking into account 
                                factors such as the size of the 
                                transaction and marketability of the 
                                security, and
                          ``(ii) in the case of an asset other than a 
                      security for which there is a generally recognized 
                      market, the fair market value of the asset as 
                      determined in good faith by a fiduciary or 
                      fiduciaries in accordance with regulations 
                      prescribed by the Secretary.''.
            (2) Amendment to internal revenue code of 1986.--
                    (A) In general.--Subsection (d) of section 4975 of 
                the Internal Revenue Code of 1986 (relating to 
                exemptions), as amended by subsection (c), is amended by 
                striking ``or'' at the end of paragraph (18), by 
                striking the period at the end of paragraph (19) and 
                inserting ``, or'', and by adding at the end the 
                following new paragraph:
            ``(20) transactions described in subparagraphs (A), (B), and 
        (D) of subsection (c)(1) between a plan and a person that is a 
        party in interest other than a fiduciary (or an affiliate) who 
        has or exercises any discretionary authority or control with 
        respect to the investment of the plan assets involved in the 
        transaction or renders investment advice (within the meaning of 
        subsection (e)(3)(B)) with respect to those assets, solely by 
        reason of providing services to the plan or solely by reason of 
        a relationship to such a service provider described in 
        subparagraph (F), (G), (H), or (I) of subsection (e)(2), or 
        both, but only if in connection with such transaction the plan 
        receives no less, nor pays no more, than adequate 
        consideration.''.
                    (B) Special rule relating to service providers.--
                Subsection (f) of section 4975 of such Code (relating to 
                other definitions and special rules), as amended by 
                subsection (a), is amended by adding at the end the 
                following new paragraph:
            ``(10) Adequate consideration.--The term `adequate 
        consideration' means--
                    ``(A) in the case of a security for which there is a 
                generally recognized market--
                          ``(i) the price of the security prevailing on 
                      a national securities exchange which is registered 
                      under
                      section 6 of the Securities Exchange Act of 1934, 
                      taking into account factors such as the size of 
                      the transaction and marketability of the security, 
                      or
                          ``(ii) if the security is not traded on such a 
                      national securities exchange, a price not less 
                      favorable to the plan than the offering price for 
                      the security as established by the current bid and 
                      asked prices quoted by persons independent of the 
                      issuer and of the party in interest, taking into 
                      account factors such as the size of the 
                      transaction and marketability of the security, and
                    ``(B) in the case of an asset other than a security 
                for which there is a generally recognized market, the 
                fair market value of the asset as determined in good 
                faith by a fiduciary or fiduciaries in accordance with 
                regulations prescribed by the Secretary of Labor.''.

    (e) Relief for Foreign Exchange Transactions.--
            (1) Amendments to employee retirement income security act of 
        1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as 
        amended by subsection (d), is amended by adding at the end the 
        following new paragraph:
            ``(18) Foreign exchange transactions.--Any foreign exchange 
        transactions, between a bank or broker-dealer (or any affiliate 
        of either), and a plan (as defined in section 3(3)) with respect 
        to which such bank or broker-dealer (or affiliate) is a trustee, 
        custodian, fiduciary, or other party in interest, if--
                    ``(A) the transaction is in connection with the 
                purchase, holding, or sale of securities or other 
                investment assets (other than a foreign exchange 
                transaction unrelated to any other investment in 
                securities or other investment assets),
                    ``(B) at the time the foreign exchange transaction 
                is entered into, the terms of the transaction are not 
                less favorable to the plan than the terms generally 
                available in comparable arm's length foreign exchange 
                transactions between unrelated parties, or the terms 
                afforded by the bank or broker-dealer (or any affiliate 
                of either) in comparable arm's-length foreign exchange 
                transactions involving unrelated parties,
                    ``(C) the exchange rate used by such bank or broker-
                dealer (or affiliate) for a particular foreign exchange 
                transaction does not deviate by more or less than 3 
                percent from the interbank bid and asked rates for 
                transactions of comparable size and maturity at the time 
                of the transaction as displayed on an independent 
                service that reports rates of exchange in the foreign 
                currency market for such currency, and
                    ``(D) the bank or broker-dealer (or any affiliate of 
                either) does not have investment discretion, or provide 
                investment advice, with respect to the transaction.''.
            (2) Amendment to internal revenue code of 1986.--Subsection 
        (d) of section 4975 of the Internal Revenue Code of 1986 
        (relating to exemptions), as amended by subsection (d), is 
        amended by striking ``or'' at the end of paragraph (19), by 
        striking the period at the end of paragraph (20) and inserting 
        ``, or'', and by adding at the end the following new paragraph:
            ``(21) any foreign exchange transactions, between a bank or 
        broker-dealer (or any affiliate of either) and a plan (as 
        defined in this section) with respect to which such bank or 
        broker-dealer (or affiliate) is a trustee, custodian, fiduciary, 
        or other party in interest person, if--
                    ``(A) the transaction is in connection with the 
                purchase, holding, or sale of securities or other 
                investment assets (other than a foreign exchange 
                transaction unrelated to any other investment in 
                securities or other investment assets),
                    ``(B) at the time the foreign exchange transaction 
                is entered into, the terms of the transaction are not 
                less favorable to the plan than the terms generally 
                available in comparable arm's length foreign exchange 
                transactions between unrelated parties, or the terms 
                afforded by the bank or broker-dealer (or any affiliate 
                of either) in comparable arm's-length foreign exchange 
                transactions involving unrelated parties,
                    ``(C) the exchange rate used by such bank or broker-
                dealer (or affiliate) for a particular foreign exchange 
                transaction does not deviate by more or less than 3 
                percent from the interbank bid and asked rates for 
                transactions of comparable size and maturity at the time 
                of the transaction as displayed on an independent 
                service that reports rates of exchange in the foreign 
                currency market for such currency, and
                    ``(D) the bank or broker-dealer (or any affiliate of 
                either) does not have investment discretion, or provide 
                investment advice, with respect to the transaction.''.

    (f) Definition of Plan Asset Vehicle.--Section 3 of such Act (29 
U.S.C. 1002) is amended by adding at the end the following new 
paragraph:
    ``(42) the term `plan assets' means plan assets as defined by such 
regulations as the Secretary may prescribe, except that under such 
regulations the assets of any entity shall not be treated as plan assets 
if, immediately after the most recent acquisition of any equity interest 
in the entity, less than 25 percent of the total value of each class of 
equity interest in the entity is held by benefit plan investors. For 
purposes of determinations pursuant to this paragraph, the value of any 
equity interest held by a person (other than such a benefit plan 
investor) who has discretionary authority or control with respect to the 
assets of the entity or any person who provides investment advice for a 
fee (direct or indirect) with respect to such assets, or any affiliate 
of such a person, shall be disregarded for purposes of calculating the 
25 percent threshold. An entity shall be considered to hold plan assets 
only to the extent of the percentage of the equity interest held by 
benefit plan investors. For purposes of this paragraph, the term 
`benefit plan investor' means an employee benefit plan subject to part 
4, any plan to which section 4975 of the Internal Revenue Code of 1986 
applies, and any entity whose underlying assets include plan assets by 
reason of a plan's investment in such entity.''.
    (g) Exemption for Cross Trading.--
            (1) Amendments to employee retirement income security act of 
        1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as 
        amended by subsection (e), is amended by adding at the end the 
        following new paragraph:
            ``(19) Cross trading.--Any transaction described in sections 
        406(a)(1)(A) and 406(b)(2) involving the purchase and sale of a 
        security between a plan and any other account managed by the 
        same investment manager, if--
                    ``(A) the transaction is a purchase or sale, for no 
                consideration other than cash payment against prompt 
                delivery of a security for which market quotations are 
                readily available,
                    ``(B) the transaction is effected at the independent 
                current market price of the security (within the meaning 
                of section 270.17a-7(b) of title 17, Code of Federal 
                Regulations),
                    ``(C) no brokerage commission, fee (except for 
                customary transfer fees, the fact of which is disclosed 
                pursuant to subparagraph (D)), or other remuneration is 
                paid in connection with the transaction,
                    ``(D) a fiduciary (other than the investment manager 
                engaging in the cross-trades or any affiliate) for each 
                plan participating in the transaction authorizes in 
                advance of any cross-trades (in a document that is 
                separate from any other written agreement of the 
                parties) the investment manager to engage in cross 
                trades at the investment manager's discretion, after 
                such fiduciary has received disclosure regarding the 
                conditions under which cross trades may take place (but 
                only if such disclosure is separate from any other 
                agreement or disclosure involving the asset management 
                relationship), including the written policies and 
                procedures of the investment manager described in 
                subparagraph (H),
                    ``(E) each plan participating in the transaction has 
                assets of at least $100,000,000, except that if the 
                assets of a plan are invested in a master trust 
                containing the assets of plans maintained by employers 
                in the same controlled group (as defined in section 
                407(d)(7)), the master trust has assets of at least 
                $100,000,000,
                    ``(F) the investment manager provides to the plan 
                fiduciary who authorized cross trading under 
                subparagraph (D) a quarterly report detailing all cross 
                trades executed by the investment manager in which the 
                plan participated during such quarter, including the 
                following information, as applicable: (i) the identity 
                of each security bought or sold; (ii) the number of 
                shares or units traded; (iii) the parties involved in 
                the cross-trade; and (iv) trade price and the method 
                used to establish the trade price,
                    ``(G) the investment manager does not base its fee 
                schedule on the plan's consent to cross trading, and no 
                other service (other than the investment opportunities 
                and cost savings available through a cross trade) is 
                conditioned on the plan's consent to cross trading,
                    ``(H) the investment manager has adopted, and cross-
                trades are effected in accordance with, written cross-
                trading policies and procedures that are fair and 
                equitable to all accounts participating in the cross-
                trading program, and that include a description of the 
                manager's pricing policies and procedures, and the 
                manager's policies and procedures for allocating cross 
                trades in an objective manner among accounts 
                participating in the cross-trading program, and
                    ``(I) the investment 
                manager has designated an individual responsible for 
                periodically reviewing such purchases and sales to 
                ensure compliance with the written policies and 
                procedures described in subparagraph (H), and following 
                such review, the individual shall issue an annual 
                written report no later than 90 days following the 
                period to which it relates signed under penalty of 
                perjury to the plan fiduciary who authorized cross 
                trading under subparagraph (D) describing the steps 
                performed during the course of the review, the level of 
                compliance, and any specific instances of non-
                compliance.
        The written report under subparagraph 
        (I) shall also notify the plan fiduciary of the plan's right to 
        terminate participation in the investment manager's cross-
        trading program at any time.''.
            (2) Amendments of internal revenue code of 1986.--Subsection 
        (d) of section 4975 of the Internal Revenue Code of 1986 
        (relating to exemptions), as amended by subsection (e), is 
        amended by striking ``or'' at the end of paragraph (20), by 
        striking the period at the end of paragraph (21) and inserting 
        ``, or'', and by adding at the end the following new paragraph:
            ``(22) any transaction described in subsection (c)(1)(A) 
        involving the purchase and sale of a security between a plan and 
        any other account managed by the same investment manager, if--
                    ``(A) the transaction is a purchase or sale, for no 
                consideration other than cash payment against prompt 
                delivery of a security for which market quotations are 
                readily available,
                    ``(B) the transaction is effected at the independent 
                current market price of the security (within the meaning 
                of section 270.17a-7(b) of title 17, Code of Federal 
                Regulations),
                    ``(C) no brokerage commission, fee (except for 
                customary transfer fees, the fact of which is disclosed 
                pursuant to subparagraph (D)), or other remuneration is 
                paid in connection with the transaction,
                    ``(D) a fiduciary (other than the investment manager 
                engaging in the cross-trades or any affiliate) for each 
                plan participating in the transaction authorizes in 
                advance of any cross-trades (in a document that is 
                separate from any other written agreement of the 
                parties) the investment manager to engage in cross 
                trades at the investment manager's discretion, after 
                such fiduciary has received disclosure regarding the 
                conditions under which cross trades may take place (but 
                only if such disclosure is separate from any other 
                agreement or disclosure involving the asset management 
                relationship), including the written policies and 
                procedures of the investment manager described in 
                subparagraph (H),
                    ``(E) each plan participating in the transaction has 
                assets of at least $100,000,000, except that if the 
                assets of a plan are invested in a master trust 
                containing the assets of plans maintained by employers 
                in the same controlled group (as defined in section 
                407(d)(7) of the Employee Retirement Income Security Act 
                of 1974), the master trust has assets of at least 
                $100,000,000,
                    ``(F) the investment manager provides to the plan 
                fiduciary who authorized cross trading under 
                subparagraph (D) a quarterly report detailing all cross 
                trades executed by the investment manager in which the 
                plan participated during such quarter, including the 
                following information, as applicable: (i) the identity 
                of each security bought or sold; (ii) the number of 
                shares or units traded; (iii) the parties involved in 
                the cross-trade; and (iv) trade price and the method 
                used to establish the trade price,
                    ``(G) the investment manager does not base its fee 
                schedule on the plan's consent to cross trading, and no 
                other service (other than the investment opportunities 
                and cost savings available through a cross trade) is 
                conditioned on the plan's consent to cross trading,
                    ``(H) the investment manager has adopted, and cross-
                trades are effected in accordance with, written cross-
                trading policies and procedures that are fair and 
                equitable to all accounts participating in the cross-
                trading program, and that include a description of the 
                manager's pricing policies and procedures, and the 
                manager's policies and procedures for allocating cross 
                trades in an objective manner among accounts 
                participating in the cross-trading program, and
                    ``(I) the investment 
                manager has designated an individual responsible for 
                periodically reviewing such purchases and sales to 
                ensure compliance with the written policies and 
                procedures described in subparagraph (H), and following 
                such review, the individual shall issue an annual 
                written report no later than 90 days following the 
                period to which it relates signed under penalty of 
                perjury to the plan fiduciary who authorized cross 
                trading under subparagraph (D) describing the steps 
                performed during the course of the review, the level of 
                compliance, and any specific instances of non-
                compliance.
        The written report shall also notify 
        the plan fiduciary of the plan's right to terminate 
        participation in the investment manager's cross-trading program 
        at any time.''.
            (3) Regulations.--No   
        later than 180 days after the date of the enactment of this Act, 
        the Secretary of Labor, after consultation with the Securities 
        and Exchange Commission, shall issue regulations regarding the 
        content of policies and procedures required to be adopted by an 
        investment manager under section 408(b)(19) of the Employee 
        Retirement Income Security Act of 1974.

    (h) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to transactions 
        occurring after the date of the enactment of this Act.
            (2) Bonding rule.--The amendments made by subsection (b) 
        shall apply to plan years beginning after such date.

SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING 
            SECURITIES AND COMMODITIES.

    (a) Amendment of Employee Retirement Income Security Act of 1974.--
Section 408(b) of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1108(b)), as amended by sections 601 and 611, is further 
amended by adding at the end the following new paragraph:
            ``(20)(A) Except as provided in subparagraphs (B) and (C), a 
        transaction described in section 406(a) in connection with the 
        acquisition, holding, or disposition of any security or 
        commodity, if the transaction is corrected before the end of the 
        correction period.
            ``(B) Subparagraph (A) does not apply to any transaction 
        between a plan and a plan sponsor or its affiliates that 
        involves the acquisition or sale of an employer security (as 
        defined in section 407(d)(1)) or the acquisition, sale, or lease 
        of employer real property (as defined in section 407(d)(2)).
            ``(C) In the case of any fiduciary or other party in 
        interest (or any other person knowingly participating in such 
        transaction), subparagraph (A) does not apply to any transaction 
        if, at the time the transaction occurs, such fiduciary or party 
        in interest (or other person) knew (or reasonably should have 
        known) that the transaction would (without regard to this 
        paragraph) constitute a violation of section 406(a).
            ``(D) For purposes of this paragraph, the term `correction 
        period' means, in connection with a fiduciary or party in 
        interest (or other person knowingly participating in the 
        transaction), the 14-day period beginning on the date on which 
        such fiduciary or party in interest (or other person) discovers, 
        or reasonably should have discovered, that the transaction would 
        (without regard to this paragraph) constitute a violation of 
        section 406(a).
            ``(E) For purposes of this paragraph--
                    ``(i) The term `security' has the meaning given such 
                term by section 475(c)(2) of the Internal Revenue Code 
                of 1986 (without regard to subparagraph (F)(iii) and the 
                last sentence thereof).
                    ``(ii) The term `commodity' has the meaning given 
                such term by section 475(e)(2) of such Code (without 
                regard to subparagraph (D)(iii) thereof).
                    ``(iii) The term `correct' means, with respect to a 
                trans- action--
                          ``(I) to undo the transaction to the extent 
                      possible and in any case to make good to the plan 
                      or affected account any losses resulting from the 
                      transaction, and
                          ``(II) to restore to the plan or affected 
                      account any profits made through the use of assets 
                      of the plan.''.

    (b) Amendment of Internal Revenue Code of 1986.--
            (1) In general.--Subsection (d) of section 4975 of the 
        Internal Revenue Code of 1986 (relating to exemptions), as 
        amended by sections 601 and 611, is amended by striking ``or'' 
        at the end of paragraph (21), by striking the period at the end 
        of paragraph (22) and inserting ``, or'', and by adding at the 
        end the following new paragraph:
            ``(23) except as provided in subsection (f)(11), a 
        transaction described in subparagraph (A), (B), (C), or (D) of 
        subsection (c)(1) in connection with the acquisition, holding, 
        or disposition of any security or commodity, if the transaction 
        is corrected before the end of the correction period.''.
            (2) Special rules relating to correction period.--Subsection 
        (f) of section 4975 of such Code (relating to other definitions 
        and special rules), as amended by sections 601 and 611, is 
        amended by adding at the end the following new paragraph:
            ``(11) Correction period.--
                    ``(A) In general.--For purposes of subsection 
                (d)(23), the term `correction period' means the 14-day 
                period beginning on the date on which the disqualified 
                person discovers, or reasonably should have discovered, 
                that the transaction would (without regard to this 
                paragraph and subsection (d)(23)) constitute a 
                prohibited transaction.
                    ``(B) Exceptions.--
                          ``(i) Employer securities.--Subsection (d)(23) 
                      does not apply to any transaction between a plan 
                      and a plan sponsor or its affiliates that involves 
                      the acquisition or sale of an employer security 
                      (as defined in section 407(d)(1)) or the 
                      acquisition, sale, or lease of employer real 
                      property (as defined in section 407(d)(2)).
                          ``(ii) Knowing prohibited transaction.--In the 
                      case of any disqualified person, subsection 
                      (d)(23) does not apply to a transaction if, at the 
                      time the transaction is entered into, the 
                      disqualified person knew (or reasonably should 
                      have known) that the transaction would (without 
                      regard to this paragraph) constitute a prohibited 
                      transaction.
                    ``(C) Abatement of tax where there is a 
                correction.--If a transaction is not treated as a 
                prohibited transaction by reason of subsection (d)(23), 
                then no tax under subsections (a) and (b) shall be 
                assessed with respect to such transaction, and if 
                assessed the assessment shall be abated, and if 
                collected shall be credited or refunded as an 
                overpayment.
                    ``(D) Definitions.--For purposes of this paragraph 
                and subsection (d)(23)--
                          ``(i) Security.--The term `security' has the 
                      meaning given such term by section 475(c)(2) 
                      (without regard to subparagraph (F)(iii) and the 
                      last sentence thereof).
                          ``(ii) Commodity.--The term `commodity' has 
                      the meaning given such term by section 475(e)(2) 
                      (without regard to subparagraph (D)(iii) thereof).
                          ``(iii) Correct.--The term `correct' means, 
                      with respect to a transaction--
                                    ``(I) to undo the transaction to the 
                                extent possible and in any case to make 
                                good to the plan or affected account any 
                                losses resulting from the transaction, 
                                and
                                    ``(II) to restore to the plan or 
                                affected account any profits made 
                                through the use of assets of the 
                                plan.''.

    (c) Effective Date.--The amendments made 
by this section shall apply to any transaction which the fiduciary or 
disqualified person discovers, or reasonably should have discovered, 
after the date of the enactment of this Act constitutes a prohibited 
transaction.

                  Subtitle C--Fiduciary and Other Rules

SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING 
            SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO 
            DIRECT INVESTMENTS.

    (a) In General.--Section 404(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(c)) is amended--
            (1) in paragraph (1)--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively, and by inserting 
                ``(A)'' after ``(c)(1)'',
                    (B) in subparagraph (A)(ii) (as redesignated by 
                paragraph (1)), by inserting before the period the 
                following: ``, except that this clause shall not apply 
                in connection with such participant or beneficiary for 
                any blackout period during which the ability of such 
                participant or beneficiary to direct the investment of 
                the assets in his or her account is suspended by a plan 
                sponsor or fiduciary'', and
                    (C) by adding at the end the following new 
                subparagraphs:

    ``(B) If a person referred to in subparagraph (A)(ii) meets the 
requirements of this title in connection with authorizing and 
implementing the blackout period, any person who is otherwise a 
fiduciary shall not be liable under this title for any loss occurring 
during such period.
    ``(C) For purposes of this paragraph, the term `blackout period' has 
the meaning given such term by section 101(i)(7).''; and
            (2) by adding at the end the following:
            ``(4)(A) In any case in which a qualified change in 
        investment options occurs in connection with an individual 
        account plan, a participant or beneficiary shall not be treated 
        for purposes of paragraph (1) as not exercising control over the 
        assets in his account in connection with such change if the 
        requirements of subparagraph (C) are met in connection with such 
        change.
            ``(B) For purposes of subparagraph (A), the term  `qualified 
        change in investment options' means, in connection with an 
        individual account plan, a change in the investment options 
        offered to the participant or beneficiary under the terms of the 
        plan, under which--
                    ``(i) the account of the participant or beneficiary 
                is reallocated among one or more remaining or new 
                investment options which are offered in lieu of one or 
                more investment options offered immediately prior to the 
                effective date of the change, and
                    ``(ii) the stated characteristics of the remaining 
                or new investment options provided under clause (i), 
                including characteristics relating to risk and rate of 
                return, are, as of immediately after the change, 
                reasonably similar to those of the existing investment 
                options as of immediately before the change.
            ``(C) The requirements of this subparagraph are met in 
        connection with a qualified change in investment options if--
                    ``(i) at least 30 days and no more than 60 days 
                prior to the effective date of the change, the plan 
                administrator furnishes written notice of the change to 
                the participants
                and beneficiaries, including information comparing the 
                existing and new investment options and an explanation 
                that, in the absence of affirmative investment 
                instructions from the participant or beneficiary to the 
                contrary, the account of the participant or beneficiary 
                will be invested in the manner described in subparagraph 
                (B),
                    ``(ii) the participant or beneficiary has not 
                provided to the plan administrator, in advance of the 
                effective date of the change, affirmative investment 
                instructions contrary to the change, and
                    ``(iii) the investments under the plan of the 
                participant or beneficiary as in effect immediately 
                prior to the effective date of the change were the 
                product of the exercise by such participant or 
                beneficiary of control over the assets of the account 
                within the meaning of paragraph (1).''.

    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2007.
            (2) Special rule for collectively 
        bargained agreements.--In the case of a plan maintained pursuant 
        to 1 or more collective bargaining agreements between employee 
        representatives and 1 or more employers ratified on or before 
        the date of the enactment of this Act, paragraph (1) shall be 
        applied to benefits pursuant to, and individuals covered by, any 
        such agreement by substituting for ``December 31, 2007'' the 
        earlier of--
                    (A) the later of--
                          (i) December 31, 2008, or
                          (ii) the date on which the last of such 
                      collective bargaining agreements terminates 
                      (determined without regard to any extension 
                      thereof after such date of enactment), or
                    (B) December 31, 2009.

SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT.

    (a) In General.--Section 412(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1112), as amended by section 611(b), is 
amended by adding at the end the following: ``In the case of a plan that 
holds employer securities (within the meaning of section 407(d)(1)), 
this subsection shall be applied by substituting `$1,000,000' for 
`$500,000' each place it appears.''.
    (b) Effective Date.--The amendment made 
by this section shall apply to plan years beginning after December 31, 
2007.

SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE WITH EXERCISE 
            OF ERISA RIGHTS.

    (a) In General.--Section 511 of the Employment Retirement Income 
Security Act of 1974 (29 U.S.C. 1141) is amended--
            (1) by striking ``$10,000'' and inserting ``$100,000'', and
            (2) by striking ``one year'' and inserting ``10 years''.

    (b) Effective Date.--The amendments made 
by this section shall apply to violations occurring on and after the 
date of the enactment of this Act.

SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE PARTICIPANT 
            FAILS TO EXERCISE INVESTMENT ELECTION.

    (a) In General.--Section 404(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(c)), as amended by section 622, is 
amended by adding at the end the following new paragraph:
            ``(5) Default investment arrangements.--
                    ``(A) In general.--For purposes of paragraph (1), a 
                participant in an individual account plan meeting the 
                notice requirements of subparagraph (B) shall be treated 
                as exercising control over the assets in the account 
                with respect to the amount of contributions and earnings 
                which, in the absence of an investment election by the 
                participant, are invested by the plan in accordance with 
                regulations prescribed by the Secretary. The regulations 
                under this subparagraph shall provide guidance on the 
                appropriateness of designating default investments that 
                include a mix of asset classes consistent with capital 
                preservation or long-term capital appreciation, or a 
                blend of both.
                    ``(B) Notice requirements.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if each participant--
                                    ``(I) receives, within a reasonable 
                                period of time before each plan year, a 
                                notice explaining the employee's right 
                                under the plan to designate how 
                                contributions and earnings will be 
                                invested and explaining how, in the 
                                absence of any investment election by 
                                the participant, such contributions and 
                                earnings will be invested, and
                                    ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the beginning of the plan year to 
                                make such designation.
                          ``(ii) Form of notice.--
                      The requirements of 
                      clauses (i) and (ii) of section 401(k)(12)(D) of 
                      the Internal Revenue Code of 1986 shall apply with 
                      respect to the notices described in this 
                      subparagraph.''.

    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2006.
            (2) Regulations.--Final regulations 
        under section 404(c)(5)(A) of the Employee Retirement Income 
        Security Act of 1974 (as added by this section) shall be issued 
        no later than 6 months after the date of the enactment of this 
        Act.

SEC. 625. CLARIFICATION OF 
            FIDUCIARY RULES.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Labor shall issue final 
regulations clarifying that the selection of an annuity contract as an 
optional form of distribution from an individual account plan to a 
participant or beneficiary--
            (1) is not subject to the safest available annuity standard 
        under Interpretive Bulletin 95-1 (29 CFR 2509.95-1), and
            (2) is subject to all otherwise applicable fiduciary 
        standards.

    (b) Effective Date.--This section shall take effect on the date of 
enactment of this Act.

                  TITLE VII--BENEFIT ACCRUAL STANDARDS

SEC. 701. BENEFIT ACCRUAL STANDARDS.

    (a) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Rules relating to reduction in rate of benefit 
        accrual.--Section 204(b) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1054(b)) is amended by adding at 
        the end the following new paragraph:
            ``(5) Special rules relating to age.--
                    ``(A) Comparison to similarly situated younger 
                individual.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1)(H)(i) if a participant's accrued benefit, as 
                      determined as of any date under the terms of the 
                      plan, would be equal to or greater than that of 
                      any similarly situated, younger individual who is 
                      or could be a participant.
                          ``(ii) Similarly situated.--For purposes of 
                      this subparagraph, a participant is similarly 
                      situated to any other individual if such 
                      participant is identical to such other individual 
                      in every respect (including period of service, 
                      compensation, position, date of hire, work 
                      history, and any other respect) except for age.
                          ``(iii) Disregard of subsidized early 
                      retirement benefits.--In determining the accrued 
                      benefit as of any date for purposes of this 
                      clause, the subsidized portion of any early 
                      retirement benefit or retirement-type subsidy 
                      shall be disregarded.
                          ``(iv) Accrued benefit.--For purposes of this 
                      subparagraph, the accrued benefit may, under the 
                      terms of the plan, be expressed as an annuity 
                      payable at normal retirement age, the balance of a 
                      hypothetical account, or the current value of the 
                      accumulated percentage of the employee's final 
                      average compensation.
                    ``(B) Applicable defined benefit plans.--
                          ``(i) Interest credits.--
                                    ``(I) In general.--An applicable 
                                defined benefit plan shall be treated as 
                                failing to meet the requirements of 
                                paragraph (1)(H) unless the terms of the 
                                plan provide that any interest credit 
                                (or an equivalent amount) for any plan 
                                year shall be at a rate which is not 
                                greater than a market rate of return. A 
                                plan shall not be treated as failing to 
                                meet the requirements of this subclause 
                                merely because the plan provides for a 
                                reasonable minimum guaranteed rate of 
                                return or for a rate of return that is 
                                equal to the greater of a fixed or 
                                variable rate of return.
                                    ``(II) Preservation of capital.--An 
                                interest credit (or an equivalent 
                                amount) of less than zero shall in no 
                                event result in the account balance or 
                                similar amount being less than the 
                                aggregate amount of contributions 
                                credited to the account.
                                    ``(III) Market rate of return.--The 
                                Secretary of the Treasury may provide by 
                                regulation for rules governing the 
                                calculation of a market rate of return 
                                for purposes of subclause (I) and for 
                                permissible methods of crediting 
                                interest to the account (including fixed 
                                or variable interest rates) resulting in 
                                effective rates of return meeting the 
                                requirements of subclause (I).
                          ``(ii) Special rule for plan conversions.--If, 
                      after June 29, 2005, an applicable plan amendment 
                      is adopted, the plan shall be treated as failing 
                      to meet the requirements of paragraph (1)(H) 
                      unless the requirements of clause (iii) are met 
                      with respect to each individual who was a 
                      participant in the plan immediately before the 
                      adoption of the amendment.
                          ``(iii) Rate of benefit accrual.--Subject to 
                      clause (iv), the requirements of this clause are 
                      met with respect to any participant if the accrued 
                      benefit of the participant under the terms of the 
                      plan as in effect after the amendment is not less 
                      than the sum of--
                                    ``(I) the participant's accrued 
                                benefit for years of service before the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect before the amendment, plus
                                    ``(II) the participant's accrued 
                                benefit for years of service after the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect after the amendment.
                          ``(iv) Special rules for early retirement 
                      subsidies.--For purposes of clause (iii)(I), the 
                      plan shall credit the accumulation account or 
                      similar amount with the amount of any early 
                      retirement benefit or retirement-type subsidy for 
                      the plan year in which the participant retires if, 
                      as of such time, the participant has met the age, 
                      years of service, and other requirements under the 
                      plan for entitlement to such benefit or subsidy.
                          ``(v) Applicable plan amendment.--For purposes 
                      of this subparagraph--
                                    ``(I) In general.--The term 
                                `applicable plan amendment' means an 
                                amendment to a defined benefit plan 
                                which has the effect of converting the 
                                plan to an applicable defined benefit 
                                plan.
                                    ``(II) Special rule for coordinated 
                                benefits.--If the benefits of 2 or more 
                                defined benefit plans established or 
                                maintained by an employer are 
                                coordinated in such a manner as to have 
                                the effect of the adoption of an 
                                amendment described in subclause (I), 
                                the sponsor of the defined benefit plan 
                                or plans providing for such coordination 
                                shall be treated as having adopted such 
                                a plan amendment as of the date such 
                                coordination begins.
                                    ``(III) Multiple amendments.--
                                The Secretary of 
                                the Treasury shall issue regulations to 
                                prevent the avoidance of the purposes of 
                                this subparagraph
                                through the use of 2 or more plan 
                                amendments rather than a single 
                                amendment.
                                    ``(IV) Applicable defined benefit 
                                plan.--For purposes of this 
                                subparagraph, the term `applicable 
                                defined benefit plan' has the meaning 
                                given such term by section 203(f)(3).
                          ``(vi) Termination requirements.--An 
                      applicable defined benefit plan shall not be 
                      treated as meeting the requirements of clause (i) 
                      unless the plan provides that, upon the 
                      termination of the plan--
                                    ``(I) if the interest credit rate 
                                (or an equivalent amount) under the plan 
                                is a variable rate, the rate of interest 
                                used to determine accrued benefits under 
                                the plan shall be equal to the average 
                                of the rates of interest used under the 
                                plan during the 5-year period ending on 
                                the termination date, and
                                    ``(II) the interest rate and 
                                mortality table used to determine the 
                                amount of any benefit under the plan 
                                payable in the form of an annuity 
                                payable at normal retirement age shall 
                                be the rate and table specified under 
                                the plan for such purpose as of the 
                                termination date, except that if such 
                                interest rate is a variable rate, the 
                                interest rate shall be determined under 
                                the rules of subclause (I).
                    ``(C) Certain offsets permitted.--A plan shall not 
                be treated as failing to meet the requirements of 
                paragraph (1)(H)(i) solely because the plan provides 
                offsets against benefits under the plan to the extent 
                such offsets are allowable in applying the requirements 
                of section 401(a) of the Internal Revenue Code of 1986.
                    ``(D) Permitted disparities in plan contributions or 
                benefits.--A plan shall not be treated as failing to 
                meet the requirements of paragraph (1)(H) solely because 
                the plan provides a disparity in contributions or 
                benefits with respect to which the requirements of 
                section 401(l) of the Internal Revenue Code of 1986 are 
                met.
                    ``(E) Indexing permitted.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1)(H) solely because the plan provides for 
                      indexing of accrued benefits under the plan.
                          ``(ii) Protection against loss.--Except in the 
                      case of any benefit provided in the form of a 
                      variable annuity, clause (i) shall not apply with 
                      respect to any indexing which results in an 
                      accrued benefit less than the accrued benefit 
                      determined without regard to such indexing.
                          ``(iii) Indexing.--For purposes of this 
                      subparagraph, the term `indexing' means, in 
                      connection with an accrued benefit, the periodic 
                      adjustment of the accrued benefit by means of the 
                      application of a recognized investment index or 
                      methodology.
                    ``(F) Early retirement benefit or retirement-type 
                subsidy.--For purposes of this paragraph, the terms 
                `early
                retirement benefit' and `retirement-type subsidy' have 
                the meaning given such terms in subsection (g)(2)(A).
                    ``(G) Benefit accrued to date.--For purposes of this 
                paragraph, any reference to the accrued benefit shall be 
                a reference to such benefit accrued to date.''.
            (2) Determinations of accrued benefit as balance of benefit 
        account or equivalent amounts.--Section 203 of such Act (29 
        U.S.C. 1053) is amended by adding at the end the following new 
        subsection:

    ``(f) Special Rules for Plans Computing Accrued Benefits by 
Reference to Hypothetical Account Balance or Equivalent Amounts.--
            ``(1) In general.--An applicable defined benefit plan shall 
        not be treated as failing to meet--
                    ``(A) subject to paragraph (2), the requirements of 
                subsection (a)(2), or
                    ``(B) the requirements of section 204(c) or section 
                205(g) with respect to contributions other than employee 
                contributions,
        solely because the present value of the accrued benefit (or any 
        portion thereof) of any participant is, under the terms of the 
        plan, equal to the amount expressed as the balance in the 
        hypothetical account described in paragraph (3) or as an 
        accumulated percentage of the participant's final average 
        compensation.
            ``(2) 3-year vesting.--In the case of an applicable defined 
        benefit plan, such plan shall be treated as meeting the 
        requirements of subsection (a)(2) only if an employee who has 
        completed at least 3 years of service has a nonforfeitable right 
        to 100 percent of the employee's accrued benefit derived from 
        employer contributions.
            ``(3) Applicable defined benefit plan and related rules.--
        For purposes of this subsection--
                    ``(A) In general.--The term `applicable defined 
                benefit plan' means a defined benefit plan under which 
                the accrued benefit (or any portion thereof) is 
                calculated as the balance of a hypothetical account 
                maintained for the participant or as an accumulated 
                percentage of the participant's final average 
                compensation.
                    ``(B) Regulations to include similar plans.--The 
                Secretary of the Treasury shall issue regulations which 
                include in the definition of an applicable defined 
                benefit plan any defined benefit plan (or any portion of 
                such a plan) which has an effect similar to an 
                applicable defined benefit plan.''.

    (b) Amendments to the Internal Revenue Code of 1986.--
            (1) Rules relating to reduction in rate of benefit 
        accrual.--Subsection (b) of section 411 of the Internal Revenue 
        Code of 1986 is amended by adding at the 
        end the following new paragraph:
            ``(5) Special rules relating to age.--
                    ``(A) Comparison to similarly situated younger 
                individual.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1)(H)(i) if a participant's accrued benefit, as 
                      determined as of any date under the terms of the 
                      plan, would be
                      equal to or greater than that of any similarly 
                      situated, younger individual who is or could be a 
                      participant.
                          ``(ii) Similarly situated.--For purposes of 
                      this subparagraph, a participant is similarly 
                      situated to any other individual if such 
                      participant is identical to such other individual 
                      in every respect (including period of service, 
                      compensation, position, date of hire, work 
                      history, and any other respect) except for age.
                          ``(iii) Disregard of subsidized early 
                      retirement benefits.--In determining the accrued 
                      benefit as of any date for purposes of this 
                      clause, the subsidized portion of any early 
                      retirement benefit or retirement-type subsidy 
                      shall be disregarded.
                          ``(iv) Accrued benefit.--For purposes of this 
                      subparagraph, the accrued benefit may, under the 
                      terms of the plan, be expressed as an annuity 
                      payable at normal retirement age, the balance of a 
                      hypothetical account, or the current value of the 
                      accumulated percentage of the employee's final 
                      average compensation.
                    ``(B) Applicable defined benefit plans.--
                          ``(i) Interest credits.--
                                    ``(I) In general.--An applicable 
                                defined benefit plan shall be treated as 
                                failing to meet the requirements of 
                                paragraph (1)(H) unless the terms of the 
                                plan provide that any interest credit 
                                (or an equivalent amount) for any plan 
                                year shall be at a rate which is not 
                                greater than a market rate of return. A 
                                plan shall not be treated as failing to 
                                meet the requirements of this subclause 
                                merely because the plan provides for a 
                                reasonable minimum guaranteed rate of 
                                return or for a rate of return that is 
                                equal to the greater of a fixed or 
                                variable rate of return.
                                    ``(II) Preservation of capital.--An 
                                interest credit (or an equivalent 
                                amount) of less than zero shall in no 
                                event result in the account balance or 
                                similar amount being less than the 
                                aggregate amount of contributions 
                                credited to the account.
                                    ``(III) Market rate of return.--The 
                                Secretary may provide by regulation for 
                                rules governing the calculation of a 
                                market rate of return for purposes of 
                                subclause (I) and for permissible 
                                methods of crediting interest to the 
                                account (including fixed or variable 
                                interest rates) resulting in effective 
                                rates of return meeting the requirements 
                                of subclause (I).
                          ``(ii) Special rule for plan conversions.--If, 
                      after June 29, 2005, an applicable plan amendment 
                      is adopted, the plan shall be treated as failing 
                      to meet the requirements of paragraph (1)(H) 
                      unless the requirements of clause (iii) are met 
                      with respect to each individual who was a 
                      participant in the plan immediately before the 
                      adoption of the amendment.
                          ``(iii) Rate of benefit accrual.--Subject to 
                      clause (iv), the requirements of this clause are 
                      met with respect to any participant if the accrued 
                      benefit of
                      the participant under the terms of the plan as in 
                      effect after the amendment is not less than the 
                      sum of--
                                    ``(I) the participant's accrued 
                                benefit for years of service before the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect before the amendment, plus
                                    ``(II) the participant's accrued 
                                benefit for years of service after the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect after the amendment.
                          ``(iv) Special rules for early retirement 
                      subsidies.--For purposes of clause (iii)(I), the 
                      plan shall credit the accumulation account or 
                      similar amount with the amount of any early 
                      retirement benefit or retirement-type subsidy for 
                      the plan year in which the participant retires if, 
                      as of such time, the participant has met the age, 
                      years of service, and other requirements under the 
                      plan for entitlement to such benefit or subsidy.
                          ``(v) Applicable plan amendment.--For purposes 
                      of this subparagraph--
                                    ``(I) In general.--The term 
                                `applicable plan amendment' means an 
                                amendment to a defined benefit plan 
                                which has the effect of converting the 
                                plan to an applicable defined benefit 
                                plan.
                                    ``(II) Special rule for coordinated 
                                benefits.--If the benefits of 2 or more 
                                defined benefit plans established or 
                                maintained by an employer are 
                                coordinated in such a manner as to have 
                                the effect of the adoption of an 
                                amendment described in subclause (I), 
                                the sponsor of the defined benefit plan 
                                or plans providing for such coordination 
                                shall be treated as having adopted such 
                                a plan amendment as of the date such 
                                coordination begins.
                                    ``(III) Multiple amendments.--
                                The Secretary 
                                shall issue regulations to prevent the 
                                avoidance of the purposes of this 
                                subparagraph through the use of 2 or 
                                more plan amendments rather than a 
                                single amendment.
                                    ``(IV) Applicable defined benefit 
                                plan.--For purposes of this 
                                subparagraph, the term `applicable 
                                defined benefit plan' has the meaning 
                                given such term by section 411(a)(13).
                          ``(vi) Termination requirements.--An 
                      applicable defined benefit plan shall not be 
                      treated as meeting the requirements of clause (i) 
                      unless the plan provides that, upon the 
                      termination of the plan--
                                    ``(I) if the interest credit rate 
                                (or an equivalent amount) under the plan 
                                is a variable rate, the rate of interest 
                                used to determine accrued benefits under 
                                the plan shall be equal to the average 
                                of the rates of interest used under the 
                                plan during the 5-year period ending on 
                                the termination date, and
                                    ``(II) the interest rate and 
                                mortality table used to determine the 
                                amount of any benefit under the
                                plan payable in the form of an annuity 
                                payable at normal retirement age shall 
                                be the rate and table specified under 
                                the plan for such purpose as of the 
                                termination date, except that if such 
                                interest rate is a variable rate, the 
                                interest rate shall be determined under 
                                the rules of subclause (I).
                    ``(C) Certain offsets permitted.--A plan shall not 
                be treated as failing to meet the requirements of 
                paragraph (1)(H)(i) solely because the plan provides 
                offsets against benefits under the plan to the extent 
                such offsets are allowable in applying the requirements 
                of section 401(a).
                    ``(D) Permitted disparities in plan contributions or 
                benefits.--A plan shall not be treated as failing to 
                meet the requirements of paragraph (1)(H) solely because 
                the plan provides a disparity in contributions or 
                benefits with respect to which the requirements of 
                section 401(l) are met.
                    ``(E) Indexing permitted.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1)(H) solely because the plan provides for 
                      indexing of accrued benefits under the plan.
                          ``(ii) Protection against loss.--Except in the 
                      case of any benefit provided in the form of a 
                      variable annuity, clause (i) shall not apply with 
                      respect to any indexing which results in an 
                      accrued benefit less than the accrued benefit 
                      determined without regard to such indexing.
                          ``(iii) Indexing.--For purposes of this 
                      subparagraph, the term `indexing' means, in 
                      connection with an accrued benefit, the periodic 
                      adjustment of the accrued benefit by means of the 
                      application of a recognized investment index or 
                      methodology.
                    ``(F) Early retirement benefit or retirement-type 
                subsidy.--For purposes of this paragraph, the terms 
                `early retirement benefit' and `retirement-type subsidy' 
                have the meaning given such terms in subsection 
                (d)(6)(B)(i).
                    ``(G) Benefit accrued to date.--For purposes of this 
                paragraph, any reference to the accrued benefit shall be 
                a reference to such benefit accrued to date.''.
            (2) Determinations of accrued benefit as balance of benefit 
        account or equivalent amounts.--Subsection (a) of section 411 of 
        such Code is amended by adding at the end the following new 
        paragraph:
            ``(13) Special rules for plans computing accrued benefits by 
        reference to hypothetical account balance or equivalent 
        amounts.--
                    ``(A) In general.--An applicable defined benefit 
                plan shall not be treated as failing to meet--
                          ``(i) subject to paragraph (2), the 
                      requirements of subsection (a)(2), or
                          ``(ii) the requirements of subsection (c) or 
                      section 417(e) with respect to contributions other 
                      than employee contributions,
                solely because the present value of the accrued benefit 
                (or any portion thereof) of any participant is, under 
                the
                terms of the plan, equal to the amount expressed as the 
                balance in the hypothetical account described in 
                paragraph (3) or as an accumulated percentage of the 
                participant's final average compensation.
                    ``(B) 3-year vesting.--In the case of an applicable 
                defined benefit plan, such plan shall be treated as 
                meeting the requirements of subsection (a)(2) only if an 
                employee who has completed at least 3 years of service 
                has a nonforfeitable right to 100 percent of the 
                employee's accrued benefit derived from employer 
                contributions.
                    ``(C) Applicable defined benefit plan and related 
                rules.--For purposes of this subsection--
                          ``(i) In general.--The term `applicable 
                      defined benefit plan' means a defined benefit plan 
                      under which the accrued benefit (or any portion 
                      thereof) is calculated as the balance of a 
                      hypothetical account maintained for the 
                      participant or as an accumulated percentage of the 
                      participant's final average compensation.
                          ``(ii) Regulations to include similar plans.--
                      The Secretary shall issue regulations which 
                      include in the definition of an applicable defined 
                      benefit plan any defined benefit plan (or any 
                      portion of such a plan) which has an effect 
                      similar to an applicable defined benefit plan.''.

    (c) Amendments to Age Discrimination in Employment Act.--Section 
4(i) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 
623(i)) is amended by adding at the end the following new paragraph:
            ``(10) Special rules relating to age.--
                    ``(A) Comparison to similarly situated younger 
                individual.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1) if a participant's accrued benefit, as 
                      determined as of any date under the terms of the 
                      plan, would be equal to or greater than that of 
                      any similarly situated, younger individual who is 
                      or could be a participant.
                          ``(ii) Similarly situated.--For purposes of 
                      this subparagraph, a participant is similarly 
                      situated to any other individual if such 
                      participant is identical to such other individual 
                      in every respect (including period of service, 
                      compensation, position, date of hire, work 
                      history, and any other respect) except for age.
                          ``(iii) Disregard of subsidized early 
                      retirement benefits.--In determining the accrued 
                      benefit as of any date for purposes of this 
                      clause, the subsidized portion of any early 
                      retirement benefit or retirement-type subsidy 
                      shall be disregarded.
                          ``(iv) Accrued benefit.--For purposes of this 
                      subparagraph, the accrued benefit may, under the 
                      terms of the plan, be expressed as an annuity 
                      payable at normal retirement age, the balance of a 
                      hypothetical account, or the current value of the 
                      accumulated percentage of the employee's final 
                      average compensation.
                    ``(B) Applicable defined benefit plans.--
                          ``(i) Interest credits.--
                                    ``(I) In general.--An applicable 
                                defined benefit plan shall be treated as 
                                failing to meet the requirements of 
                                paragraph (1) unless the terms of the 
                                plan provide that any interest credit 
                                (or an equivalent amount) for any plan 
                                year shall be at a rate which is not 
                                greater than a market rate of return. A 
                                plan shall not be treated as failing to 
                                meet the requirements of this subclause 
                                merely because the plan provides for a 
                                reasonable minimum guaranteed rate of 
                                return or for a rate of return that is 
                                equal to the greater of a fixed or 
                                variable rate of return.
                                    ``(II) Preservation of capital.--An 
                                interest credit (or an equivalent 
                                amount) of less than zero shall in no 
                                event result in the account balance or 
                                similar amount being less than the 
                                aggregate amount of contributions 
                                credited to the account.
                                    ``(III) Market rate of return.--The 
                                Secretary of the Treasury may provide by 
                                regulation for rules governing the 
                                calculation of a market rate of return 
                                for purposes of subclause (I) and for 
                                permissible methods of crediting 
                                interest to the account (including fixed 
                                or variable interest rates) resulting in 
                                effective rates of return meeting the 
                                requirements of subclause (I).
                          ``(ii) Special rule for plan conversions.--If, 
                      after June 29, 2005, an applicable plan amendment 
                      is adopted, the plan shall be treated as failing 
                      to meet the requirements of paragraph (1)(H) 
                      unless the requirements of clause (iii) are met 
                      with respect to each individual who was a 
                      participant in the plan immediately before the 
                      adoption of the amendment.
                          ``(iii) Rate of benefit accrual.--Subject to 
                      clause (iv), the requirements of this clause are 
                      met with respect to any participant if the accrued 
                      benefit of the participant under the terms of the 
                      plan as in effect after the amendment is not less 
                      than the sum of--
                                    ``(I) the participant's accrued 
                                benefit for years of service before the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect before the amendment, plus
                                    ``(II) the participant's accrued 
                                benefit for years of service after the 
                                effective date of the amendment, 
                                determined under the terms of the plan 
                                as in effect after the amendment.
                          ``(iv) Special rules for early retirement 
                      subsidies.--For purposes of clause (iii)(I), the 
                      plan shall credit the accumulation account or 
                      similar amount with the amount of any early 
                      retirement benefit or retirement-type subsidy for 
                      the plan year in which the participant retires if, 
                      as of such time, the participant has met the age, 
                      years of service, and other requirements under the 
                      plan for entitlement to such benefit or subsidy.
                          ``(v) Applicable plan amendment.--For purposes 
                      of this subparagraph--
                                    ``(I) In general.--The term 
                                `applicable plan amendment' means an 
                                amendment to a defined benefit plan 
                                which has the effect of converting the 
                                plan to an applicable defined benefit 
                                plan.
                                    ``(II) Special rule for coordinated 
                                benefits.--If the benefits of 2 or more 
                                defined benefit plans established or 
                                maintained by an employer are 
                                coordinated in such a manner as to have 
                                the effect of the adoption of an 
                                amendment described in subclause (I), 
                                the sponsor of the defined benefit plan 
                                or plans providing for such coordination 
                                shall be treated as having adopted such 
                                a plan amendment as of the date such 
                                coordination begins.
                                    ``(III) Multiple amendments.--
                                The Secretary of 
                                the Treasury shall issue regulations to 
                                prevent the avoidance of the purposes of 
                                this subparagraph through the use of 2 
                                or more plan amendments rather than a 
                                single amendment.
                                    ``(IV) Applicable defined benefit 
                                plan.--For purposes of this 
                                subparagraph, the term `applicable 
                                defined benefit plan' has the meaning 
                                given such term by section 203(f)(3) of 
                                the Employee Retirement Income Security 
                                Act of 1974.
                          ``(vi) Termination requirements.--An 
                      applicable defined benefit plan shall not be 
                      treated as meeting the requirements of clause (i) 
                      unless the plan provides that, upon the 
                      termination of the plan--
                                    ``(I) if the interest credit rate 
                                (or an equivalent amount) under the plan 
                                is a variable rate, the rate of interest 
                                used to determine accrued benefits under 
                                the plan shall be equal to the average 
                                of the rates of interest used under the 
                                plan during the 5-year period ending on 
                                the termination date, and
                                    ``(II) the interest rate and 
                                mortality table used to determine the 
                                amount of any benefit under the plan 
                                payable in the form of an annuity 
                                payable at normal retirement age shall 
                                be the rate and table specified under 
                                the plan for such purpose as of the 
                                termination date, except that if such 
                                interest rate is a variable rate, the 
                                interest rate shall be determined under 
                                the rules of subclause (I).
                    ``(C) Certain offsets permitted.--A plan shall not 
                be treated as failing to meet the requirements of 
                paragraph (1) solely because the plan provides offsets 
                against benefits under the plan to the extent such 
                offsets are allowable in applying the requirements of 
                section 401(a) of the Internal Revenue Code of 1986.
                    ``(D) Permitted disparities in plan contributions or 
                benefits.--A plan shall not be treated as failing to 
                meet the requirements of paragraph (1) solely because 
                the plan provides a disparity in contributions or 
                benefits with respect to which the requirements of 
                section 401(l) of the Internal Revenue Code of 1986 are 
                met.
                    ``(E) Indexing permitted.--
                          ``(i) In general.--A plan shall not be treated 
                      as failing to meet the requirements of paragraph 
                      (1) solely because the plan provides for indexing 
                      of accrued benefits under the plan.
                          ``(ii) Protection against loss.--Except in the 
                      case of any benefit provided in the form of a 
                      variable annuity, clause (i) shall not apply with 
                      respect to any indexing which results in an 
                      accrued benefit less than the accrued benefit 
                      determined without regard to such indexing.
                          ``(iii) Indexing.--For purposes of this 
                      subparagraph, the term `indexing' means, in 
                      connection with an accrued benefit, the periodic 
                      adjustment of the accrued benefit by means of the 
                      application of a recognized investment index or 
                      methodology.
                    ``(F) Early retirement benefit or retirement-type 
                subsidy.--For purposes of this paragraph, the terms 
                `early retirement benefit' and `retirement-type subsidy' 
                have the meaning given such terms in section 
                203(g)(2)(A) of the Employee Retirement Income Security 
                Act of 1974.
                    ``(G) Benefit accrued to date.--For purposes of this 
                paragraph, any reference to the accrued benefit shall be 
                a reference to such benefit accrued to date.''.

    (d) No Inference.--Nothing in the 
amendments made by this section shall be construed to create an 
inference with respect to--
            (1) the treatment of applicable defined benefit plans or 
        conversions to applicable defined benefit plans under sections 
        204(b)(1)(H) of the Employee Retirement Income Security Act of 
        1974, 4(i)(1) of the Age Discrimination in Employment Act of 
        1967, and 411(b)(1)(H) of the Internal Revenue Code of 1986, as 
        in effect before such amendments, or
            (2) the determination of whether an applicable defined 
        benefit plan fails to meet the requirements of sections 
        203(a)(2), 204(c), or 204(g) of the Employee Retirement Income 
        Security Act of 1974 or sections 411(a)(2), 411(c), or 417(e) of 
        such Code, as in effect before such amendments, solely because 
        the present value of the accrued benefit (or any portion 
        thereof) of any participant is, under the terms of the plan, 
        equal to the amount expressed as the balance in a hypothetical 
        account or as an accumulated percentage of the participant's 
        final average compensation.

For purposes of this subsection, the term ``applicable defined benefit 
plan'' has the meaning given such term by section 203(f)(3) of the 
Employee Retirement Income Security Act of 1974 and section 
411(a)(13)(C) of such Code, as in effect after such amendments.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to periods beginning on or after June 29, 2005.
            (2) Present value of accrued benefit.--The amendments made 
        by subsections (a)(2) and (b)(2) shall apply to distributions 
        made after the date of the enactment of this Act.
            (3) Vesting and interest credit requirements.--In the case 
        of a plan in existence on June 29, 2005, the requirements of 
        clause (i) of section 411(b)(5)(B) of the Internal Revenue Code 
        of 1986, clause (i) of section 204(b)(5)(B) of the Employee
        Retirement Income Security Act of 1974, and clause (i) of 
        section 4(i)(10)(B) of the Age Discrimination in Employment Act 
        of 1967 (as added by this Act) and the requirements of 203(f)(2) 
        of the Employee Retirement Income Security Act of 1974 and 
        section 411(a)(13)(B) of the Internal Revenue Code of 1986 (as 
        so added) shall, for purposes of applying the amendments made by 
        subsections (a) and (b), apply to years beginning after December 
        31, 2007, unless the plan sponsor elects the application of such 
        requirements for any period after June 29, 2005, and before the 
        first year beginning after December 31, 2007.
            (4) Special rule for collectively bargained plans.--In the 
        case of a plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified on or before the date of the enactment 
        of this Act, the requirements described in paragraph (3) shall, 
        for purposes of applying the amendments made by subsections (a) 
        and (b), not apply to plan years beginning before--
                    (A) the earlier of--
                          (i) the date on which the last of such 
                      collective bargaining agreements terminates 
                      (determined without regard to any extension 
                      thereof on or after such date of enactment), or
                          (ii) January 1, 2008, or
                    (B) January 1, 2010.
            (5) Conversions.--The requirements of clause (ii) of section 
        411(b)(5)(B) of the Internal Revenue Code of 1986, clause (ii) 
        of section 204(b)(5)(B) of the Employee Retirement Income 
        Security Act of 1974, and clause (ii) of section 4(i)(10)(B) of 
        the Age Discrimination in Employment Act of 1967 (as added by 
        this Act), shall apply to plan amendments adopted after, and 
        taking effect after, June 29, 2005, except that the plan sponsor 
        may elect to have such amendments apply to plan amendments 
        adopted before, and taking effect after, such date.

SEC. 702. REGULATIONS RELATING TO 
            MERGERS AND ACQUISITIONS.

    The Secretary of the Treasury or his delegate shall, not later than 
12 months after the date of the enactment of this Act, prescribe 
regulations for the application of the amendments made by, and the 
provisions of, this title in cases where the conversion of a plan to an 
applicable defined benefit plan is made with respect to a group of 
employees who become employees by reason of a merger, acquisition, or 
similar transaction.

             TITLE VIII--PENSION RELATED REVENUE PROVISIONS

                    Subtitle A--Deduction Limitations

SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.

    (a) In General.--Section 404 of the Internal Revenue Code of 
1986 (relating to deduction for contributions of 
an employer
to an employees' trust or annuity plan and compensation under a deferred 
payment plan) is amended--
            (1) in subsection (a)(1)(A), by inserting ``in the case of a 
        defined benefit plan other than a multiemployer plan, in an 
        amount determined under subsection (o), and in the case of any 
        other plan'' after ``section 501(a),'', and
            (2) by inserting at the end the following new subsection:

    ``(o) Deduction Limit for Single-Employer Plans.--For purposes of 
subsection (a)(1)(A)--
            ``(1) In general.--In the case of a defined benefit plan to 
        which subsection (a)(1)(A) applies (other than a multiemployer 
        plan), the amount determined under this subsection for any 
        taxable year shall be equal to the greater of--
                    ``(A) the sum of the amounts determined under 
                paragraph (2) with respect to each plan year ending with 
                or within the taxable year, or
                    ``(B) the sum of the minimum required contributions 
                under section 430 for such plan years.
            ``(2) Determination of amount.--
                    ``(A) In general.--The amount determined under this 
                paragraph for any plan year shall be equal to the excess 
                (if any) of--
                          ``(i) the sum of--
                                    ``(I) the funding target for the 
                                plan year,
                                    ``(II) the target normal cost for 
                                the plan year, and
                                    ``(III) the cushion amount for the 
                                plan year, over
                          ``(ii) the value (determined under section 
                      430(g)(2)) of the assets of the plan which are 
                      held by the plan as of the valuation date for the 
                      plan year.
                    ``(B) Special rule for certain employers.--If 
                section 430(i) does not apply to a plan for a plan year, 
                the amount determined under subparagraph (A)(i) for the 
                plan year shall in no event be less than the sum of--
                          ``(i) the funding target for the plan year 
                      (determined as if section 430(i) applied to the 
                      plan), plus
                          ``(ii) the target normal cost for the plan 
                      year (as so determined).
            ``(3) Cushion amount.--For purposes of paragraph 
        (2)(A)(i)(III)--
                    ``(A) In general.--The cushion amount for any plan 
                year is the sum of--
                          ``(i) 50 percent of the funding target for the 
                      plan year, and
                          ``(ii) the amount by which the funding target 
                      for the plan year would increase if the plan were 
                      to take into account--
                                    ``(I) increases in compensation 
                                which are expected to occur in 
                                succeeding plan years, or
                                    ``(II) if the plan does not base 
                                benefits for service to date on 
                                compensation, increases in benefits 
                                which are expected to occur in 
                                succeeding plan years (determined on the 
                                basis of the average annual increase in 
                                benefits over the 6 immediately 
                                preceding plan years).
                    ``(B) Limitations.--
                          ``(i) In general.--
                      In making the computation 
                      under subparagraph (A)(ii), the plan's actuary 
                      shall assume that the limitations under subsection 
                      (l) and section 415(b) shall apply.
                          ``(ii) Expected increases.--In the case of a 
                      plan year during which a plan is covered under 
                      section 4021 of the Employee Retirement Income 
                      Security Act of 1974, the plan's actuary may, 
                      notwithstanding subsection (l), take into account 
                      increases in the limitations which are expected to 
                      occur in succeeding plan years.
            ``(4) Special rules for plans with 100 or fewer 
        participants.--
                    ``(A) In general.--For purposes of determining the 
                amount under paragraph (3) for any plan year, in the 
                case of a plan which has 100 or fewer participants for 
                the plan year, the liability of the plan attributable to 
                benefit increases for highly compensated employees (as 
                defined in section 414(q)) resulting from a plan 
                amendment which is made or becomes effective, whichever 
                is later, within the last 2 years shall not be taken 
                into account in determining the target liability.
                    ``(B) Rule for determining number of participants.--
                For purposes of determining the number of plan 
                participants, all defined benefit plans maintained by 
                the same employer (or any member of such employer's 
                controlled group (within the meaning of section 
                412(f)(4))) shall be treated as one plan, but only 
                participants of such member or employer shall be taken 
                into account.
            ``(5) Special rule for terminating plans.--In the case of a 
        plan which, subject to section 4041 of the Employee Retirement 
        Income Security Act of 1974, terminates during the plan year, 
        the amount determined under paragraph (2) shall in no event be 
        less than the amount required to make the plan sufficient for 
        benefit liabilities (within the meaning of section 4041(d) of 
        such Act).
            ``(6) Actuarial assumptions.--Any computation under this 
        subsection for any plan year shall use the same actuarial 
        assumptions which are used for the plan year under section 430.
            ``(7) Definitions.--Any term used in this subsection which 
        is also used in section 430 shall have the same meaning given 
        such term by section 430.''.

    (b) Exception From Limitation on Deduction Where Combination of 
Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of 
such Code, as amended by this Act, is amended by 
adding at the end the following new clause:
                          ``(iv) Guaranteed plans.--In applying this 
                      paragraph, any single-employer plan covered under 
                      section 4021 of the Employee Retirement Income 
                      Security Act of 1974 shall not be taken into 
                      account.''.

    (c) Technical and Conforming Amendments.--
            (1) The last sentence of section 404(a)(1)(A) of such Code 
        is amended by striking ``section 412'' each place it appears and 
        inserting ``section 431''.
            (2) Section 404(a)(1)(B) of such Code is amended--
                    (A) by striking ``In the case of a plan'' and 
                inserting ``In the case of a multiemployer plan'',
                    (B) by striking ``section 412(c)(7)'' each place it 
                appears and inserting ``section 431(c)(6)'',
                    (C) by striking ``section 412(c)(7)(B)'' and 
                inserting ``section 431(c)(6)(A)(ii)'',
                    (D) by striking ``section 412(c)(7)(A)'' and 
                inserting ``section 431(c)(6)(A)(i)'', and
                    (E) by striking ``section 412'' and inserting 
                ``section 431''.
            (3) Section 404(a)(7) of such Code, as amended by this 
        Act, is amended--
                    (A) by adding at the end of subparagraph (A) the 
                following new sentence: ``In the case of a defined 
                benefit plan which is a single employer plan, the amount 
                necessary to satisfy the minimum funding standard 
                provided by section 412 shall not be less than the 
                plan's funding shortfall determined under section 
                430.'', and
                    (B) by striking subparagraph (D) and inserting:
                    ``(D) Insurance contract plans.--For purposes of 
                this paragraph, a plan described in section 412(e)(3) 
                shall be treated as a defined benefit plan.''.
            (4) Section 404A(g)(3)(A) of such Code is amended by 
        striking ``paragraphs (3) and (7) of section 412(c)'' and 
        inserting ``paragraphs (3) and (6) of section 431(c)''.

    (d) Special Rule for 2006 and 2007.--
            (1) In general.--Clause (i) of 
        section 404(a)(1)(D) of the Internal Revenue Code of 1986 
        (relating to special rule in case of certain plans) is amended 
        by striking ``section 412(l)'' and inserting ``section 
        412(l)(8)(A), except that section 412(l)(8)(A) shall be applied 
        for purposes of this clause by substituting `150 percent (140 
        percent in the case of a multiemployer plan) of current 
        liability' for `the current liability' in clause (i).''.
            (2) Conforming amendment.--Section 404(a)(1) of the Internal 
        Revenue Code of 1986 is amended by striking subparagraph (F).

    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to years beginning 
        after December 31, 2007.
            (2) Special rules.--The amendments made by subsection (d) 
        shall apply to years beginning after December 31, 2005.

SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

    (a) Increase in Deduction.--Section 404(a)(1)(D) of the Internal 
Revenue Code of 1986, as amended by this Act, is amended to read as 
follows:
                    ``(D) Amount determined on basis of unfunded current 
                liability.--In the case of a defined benefit plan which 
                is a multiemployer plan, except as provided in 
                regulations, the maximum amount deductible under the 
                limitations of this paragraph shall not be less than the 
                excess (if any) of--
                          ``(i) 140 percent of the current liability of 
                      the plan determined under section 431(c)(6)(C), 
                      over
                          ``(ii) the value of the plan's assets 
                      determined under section 431(c)(2).''.

    (b) Effective Date.--The amendment made 
by subsection (a) shall apply to years beginning after December 31, 
2007.

SEC. 803. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

    (a) In General.--Subparagraph (C) of section 404(a)(7) of the 
Internal Revenue Code of 1986 (relating to 
limitation on deductions where combination of defined contribution plan 
and defined benefit plan) is amended by adding after clause (ii) the 
following new clause:
                          ``(iii) Limitation.--In the case of employer 
                      contributions to 1 or more defined contribution 
                      plans, this paragraph shall only apply to the 
                      extent that such contributions exceed 6 percent of 
                      the compensation otherwise paid or accrued during 
                      the taxable year to the beneficiaries under such 
                      plans. For purposes of this clause, amounts 
                      carried over from preceding taxable years under 
                      subparagraph (B) shall be treated as employer 
                      contributions to 1 or more defined contributions 
                      to the extent attributable to employer 
                      contributions to such plans in such preceding 
                      taxable years.''.

    (b) Exception From Limitation on Deduction Where Combination of 
Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of 
such Code, as amended by this Act, is amended by adding at the end the 
following new clause:
                          ``(v) Multiemployer plans.--In applying this 
                      paragraph, any multiemployer plan shall not be 
                      taken into account.''.

    (c) Conforming Amendment.--Subparagraph (A) of section 4972(c)(6) of 
such Code (relating to nondeductible contributions) is amended to read 
as follows:
                    ``(A) so much of the contributions to 1 or more 
                defined contribution plans which are not deductible when 
                contributed solely because of section 404(a)(7) as does 
                not exceed the amount of contributions described in 
                section 401(m)(4)(A), or''.

    (d) Effective Date.--The amendments made 
by this section shall apply to contributions for taxable years beginning 
after December 31, 2005.

          Subtitle B--Certain Pension Provisions Made Permanent

SEC. 811. PENSIONS AND INDIVIDUAL RETIREMENT 
            ARRANGEMENT PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF 
            RECONCILIATION ACT OF 2001 MADE PERMANENT.

    Title IX of the Economic Growth and Tax Relief Reconciliation Act of 
2001 shall not apply to the provisions of, and amendments made by, 
subtitles A through F of title VI of such Act (relating to pension and 
individual retirement arrangement provisions).

SEC. 812. SAVER'S CREDIT.

    Section 25B of the Internal Revenue Code of 1986 (relating to elective deferrals and IRA contributions by certain 
individuals) is amended by striking subsection (h).

Subtitle C--Improvements in Portability, Distribution, and Contribution 
                                  Rules

SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE 
            CREDIT.

    (a) In General.--Section 415(n) of the Internal Revenue Code of 1986 
(relating to special rules for the purchase of permissive service 
credit) is amended--
            (1) by striking ``an employee'' in paragraph (1) and 
        inserting ``a participant'', and
            (2) by adding at the end of paragraph (3)(A) the following 
        new flush sentence:
                ``Such term may include service credit for periods for 
                which there is no performance of service, and, 
                notwithstanding clause (ii), may include service 
                credited in order to provide an increased benefit for 
                service credit which a participant is receiving under 
                the plan.''.

    (b) Special Rules for Trustee-to-Trustee Transfers.--Section 
415(n)(3) of such Code is amended by adding at the end the following new 
subparagraph:
                    ``(D) Special rules for trustee-to-trustee 
                transfers.--In the case of a trustee-to-trustee transfer 
                to which section 403(b)(13)(A) or 457(e)(17)(A) applies 
                (without regard to whether the transfer is made between 
                plans maintained by the same employer)--
                          ``(i) the limitations of subparagraph (B) 
                      shall not apply in determining whether the 
                      transfer is for the purchase of permissive service 
                      credit, and
                          ``(ii) the 
                      distribution rules applicable under this title to 
                      the defined benefit governmental plan to which any 
                      amounts are so transferred shall apply to such 
                      amounts and any benefits attributable to such 
                      amounts.''.

    (c) Nonqualified Service.--Section 415(n)(3) of such Code is 
amended--
            (1) by striking ``permissive service credit attributable to 
        nonqualified service'' each place it appears in subparagraph (B) 
        and inserting ``nonqualified service credit'',
            (2) by striking so much of subparagraph (C) as precedes 
        clause (i) and inserting:
                    ``(C) Nonqualified service credit.--For purposes of 
                subparagraph (B), the term `nonqualified service credit' 
                means permissive service credit other than that allowed 
                with respect to--'', and
            (3) by striking ``elementary or secondary education (through 
        grade 12), as determined under State law'' in subparagraph 
        (C)(ii) and inserting ``elementary or secondary education 
        (through grade 12), or a comparable level of education, as 
        determined under the applicable law of the jurisdiction in which 
        the service was performed''.

    (d) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (c) shall take effect as if included in the amendments made by 
        section 1526 of the Taxpayer Relief Act of 1997.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall take effect as if included in the amendments made by 
        section 647 of the Economic Growth and Tax Relief Reconciliation 
        Act of 2001.

SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.

    (a) In General.--Subparagraph (A) of section 402(c)(2) (relating to the maximum amount which may be rolled 
over) is amended--
            (1) by striking ``which is part of a plan which is a defined 
        contribution plan and which agrees to separately account'' and 
        inserting ``or to an annuity contract described in section 
        403(b) and such trust or contract provides for separate 
        accounting''; and
            (2) by inserting ``(and earnings thereon)'' after ``so 
        transferred''.

    (b) Effective Date.--The amendment made 
by subsection (a) shall apply to taxable years beginning after December 
31, 2006.

SEC. 823. CLARIFICATION OF MINIMUM DISTRIBUTION 
            RULES FOR GOVERNMENTAL PLANS.

    The Secretary of the Treasury shall issue regulations under which a 
governmental plan (as defined in section 414(d) of the Internal Revenue 
Code of 1986) shall, for all years to which section 401(a)(9) of such 
Code applies to such plan, be treated as having complied with such 
section 401(a)(9) if such plan complies with a reasonable good faith 
interpretation of such section 401(a)(9).

SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.

    (a) In General.--Subsection (e) of section 408A of the Internal 
Revenue Code of 1986 (defining qualified rollover contribution) is 
amended to read as follows:
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section, the term `qualified rollover contribution' means a rollover 
contribution--
            ``(1) to a Roth IRA from another such account,
            ``(2) from an eligible retirement plan, but only if--
                    ``(A) in the case of an individual retirement plan, 
                such rollover contribution meets the requirements of 
                section 408(d)(3), and
                    ``(B) in the case of any eligible retirement plan 
                (as defined in section 402(c)(8)(B) other than clauses 
                (i) and (ii) thereof), such rollover contribution meets 
                the requirements of section 402(c), 403(b)(8), or 
                457(e)(16), as applicable.

For purposes of section 408(d)(3)(B), there shall be disregarded any 
qualified rollover contribution from an individual retirement plan 
(other than a Roth IRA) to a Roth IRA.''.
    (b) Conforming Amendments.--
            (1) Section 408A(c)(3)(B) of 
        such Code, as in effect before the Tax Increase Prevention and 
        Reconciliation Act of 2005, is amended--
                    (A) in the text by striking ``individual retirement 
                plan'' and inserting ``an eligible retirement plan (as 
                defined by section 402(c)(8)(B))'', and
                    (B) in the heading by striking ``IRA'' the first 
                place it appears and inserting ``eligible retirement 
                plan''.
            (2) Section 408A(d)(3) of such Code is amended--
                    (A) in subparagraph (A), by striking ``section 
                408(d)(3)'' inserting ``sections 402(c), 403(b)(8), 
                408(d)(3), and 457(e)(16)'',
                    (B) in subparagraph (B), by striking ``individual 
                retirement plan'' and inserting ``eligible retirement 
                plan (as defined by section 402(c)(8)(B))'',
                    (C) in subparagraph (D), by inserting ``or 6047'' 
                after ``408(i)'',
                    (D) in subparagraph (D), by striking ``or both'' and 
                inserting ``persons subject to section 6047(d)(1), or 
                all of the foregoing persons'', and
                    (E) in the heading, by striking ``IRA'' the first 
                place it appears and inserting ``eligible retirement 
                plan''.

    (c) Effective Date.--The amendments made 
by this section shall apply to distributions after December 31, 2007.

SEC. 825. ELIGIBILITY FOR PARTICIPATION IN 
            RETIREMENT PLANS.

    An individual shall not be precluded from participating in an 
eligible deferred compensation plan by reason of having received a 
distribution under section 457(e)(9) of the Internal Revenue Code of 
1986, as in effect prior to the enactment of the Small Business Job 
Protection Act of 1996.

SEC. 826. MODIFICATIONS OF RULES GOVERNING 
            HARDSHIPS AND UNFORSEEN FINANCIAL EMERGENCIES.

    Within 180 days after the date of the enactment 
of this Act, the Secretary of the Treasury shall modify the rules for 
determining whether a participant has had a hardship for purposes of 
section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to 
provide that if an event (including the occurrence of a medical expense) 
would constitute a hardship under the plan if it occurred with respect 
to the participant's spouse or dependent (as defined in section 152 of 
such Code), such event shall, to the extent permitted under a plan, 
constitute a hardship if it occurs with respect to a person who is a 
beneficiary under the plan with respect to the participant. The 
Secretary of the Treasury shall issue similar rules for purposes of 
determining whether a participant has had--
            (1) a hardship for purposes of section 403(b)(11)(B) of such 
        Code; or
            (2) an unforeseen financial emergency for purposes of 
        sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 
        457(d)(1)(A)(iii) of such Code.

SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS 
            CALLED TO ACTIVE DUTY FOR AT LEAST 179 DAYS.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans) is amended by adding at 
the end the following new subparagraph:
                    ``(G) Distributions from retirement plans to 
                individuals called to active duty.--
                          ``(i) In general.--Any qualified reservist 
                      distribution.
                          ``(ii) Amount distributed may be repaid.--Any 
                      individual who receives a qualified reservist 
                      distribution may, at any time during the 2-year 
                      period beginning on the day after the end of the 
                      active duty period, make one or more contributions 
                      to an individual retirement plan of such 
                      individual in an aggregate amount not to exceed 
                      the amount of such distribution. The dollar 
                      limitations otherwise applicable to contributions 
                      to individual retirement plans shall not apply to 
                      any contribution made pursuant to the preceding 
                      sentence. No deduction shall be allowed for any 
                      contribution pursuant to this clause.
                          ``(iii) Qualified reservist distribution.--For 
                      purposes of this subparagraph, the term `qualified 
                      reservist distribution' means any distribution to 
                      an individual if--
                                    ``(I) such distribution is from an 
                                individual retirement plan, or from 
                                amounts attributable to employer 
                                contributions made pursuant to elective 
                                deferrals described in subparagraph (A) 
                                or (C) of section 402(g)(3) or section 
                                501(c)(18)(D)(iii),
                                    ``(II) such individual was (by 
                                reason of being a member of a reserve 
                                component (as defined in section 101 of 
                                title 37, United States Code)) ordered 
                                or called to active duty for a period in 
                                excess of 179 days or for an indefinite 
                                period, and
                                    ``(III) such distribution is made 
                                during the period beginning on the date 
                                of such order or call and ending at the 
                                close of the active duty period.
                          ``(iv) Application of subparagraph.--This 
                      subparagraph applies to individuals ordered or 
                      called to active duty after September 11, 2001, 
                      and before December 31, 2007. In no event shall 
                      the 2-year period referred to in clause (ii) end 
                      before the date which is 2 years after the date of 
                      the enactment of this subparagraph.''.

    (b) Conforming Amendments.--
            (1) Section 401(k)(2)(B)(i) of such Code is amended by striking ``or'' at the end of subclause 
        (III), by striking ``and'' at the end of subclause (IV) and 
        inserting ``or'', and by inserting after subclause (IV) the 
        following new subclause:
                                    ``(V) in the case of a qualified 
                                reservist distribution (as defined in 
                                section 72(t)(2)(G)(iii)), the date on 
                                which a period referred to in subclause 
                                (III) of such section begins, and''.
            (2) Section 403(b)(7)(A)(ii) of such Code is amended by 
        inserting ``(unless such amount is a distribution to which 
        section 72(t)(2)(G) applies)'' after ``distributee''.
            (3) Section 403(b)(11) of such Code is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period at 
        the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new subparagraph:

                    ``(C) for distributions to which section 72(t)(2)(G) 
                applies.''.

    (c)  Effective Date; Waiver of 
Limitations.--
            (1) Effective date.--The amendment made by this section 
        shall apply to distributions after September 11, 2001.
            (2) Waiver of limitations.--If refund or credit of any 
        overpayment of tax resulting from the amendments made by this 
        section is prevented at any time before the close of the 1-year 
        period beginning on the date of the enactment of this Act by the 
        operation of any law or rule of law (including res judicata), 
        such refund or credit may nevertheless be made or allowed if 
        claim therefor is filed before the close of such period.

SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX ON CERTAIN 
            DISTRIBUTIONS OF PENSION PLANS FOR PUBLIC SAFETY EMPLOYEES.

    (a) In General.--Section 72(t) of the Internal Revenue Code of 
1986 (relating to subsection not to apply to 
certain distributions) is amended by adding at the end the following new 
paragraph:
            ``(10) Distributions to qualified public safety employees in 
        governmental plans.--
                    ``(A) In general.--In the case of a distribution to 
                a qualified public safety employee from a governmental 
                plan (within the meaning of section 414(d)) which is a 
                defined benefit plan, paragraph (2)(A)(v) shall be 
                applied by substituting `age 50' for `age 55'.
                    ``(B) Qualified public safety employee.--For 
                purposes of this paragraph, the term `qualified public 
                safety employee' means any employee of a State or 
                political subdivision of a State who provides police 
                protection, firefighting services, or emergency medical 
                services for any area within the jurisdiction of such 
                State or political subdivision.''.

    (b) Effective Date.--The amendment made by 
this section shall apply to distributions after the date of the 
enactment of this Act.

SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN 
            RETIREMENT PLAN DISTRIBUTIONS.

    (a) In General.--
            (1) Qualified plans.--Section 402(c) of the Internal Revenue 
        Code of 1986 (relating to rollovers from exempt trusts) is 
        amended by adding at the end the following new paragraph:
            ``(11) Distributions to inherited individual retirement plan 
        of nonspouse beneficiary.--
                    ``(A) In general.--If, with respect to any portion 
                of a distribution from an eligible retirement plan of a 
                deceased employee, a direct trustee-to-trustee transfer 
                is made to an individual retirement plan described in 
                clause (i) or (ii) of paragraph (8)(B) established for 
                the purposes of receiving the distribution on behalf of 
                an individual who is a designated beneficiary (as 
                defined by section 401(a)(9)(E)) of the employee and who 
                is not the surviving spouse of the employee--
                          ``(i) the transfer shall be treated as an 
                      eligible rollover distribution for purposes of 
                      this subsection,
                          ``(ii) the individual retirement plan shall be 
                      treated as an inherited individual retirement 
                      account or individual retirement annuity (within 
                      the meaning of section 408(d)(3)(C)) for purposes 
                      of this title, and
                          ``(iii) section 
                      401(a)(9)(B) (other than clause (iv) thereof) 
                      shall apply to such plan.
                    ``(B) Certain trusts treated as beneficiaries.--For 
                purposes of this paragraph, to the extent provided in 
                rules prescribed by the Secretary, a trust maintained 
                for the benefit of one or more designated beneficiaries 
                shall be treated in the same manner as a trust 
                designated beneficiary.''.
            (2) Section 403(a) plans.--Subparagraph (B) of section 
        403(a)(4) of such Code (relating to 
        rollover amounts) is amended by inserting ``and (11)'' after 
        ``(7)''.
            (3) Section 403(b) plans.--Subparagraph (B) of section 
        403(b)(8) of such Code (relating to rollover amounts) is amended 
        by striking ``and (9)'' and inserting ``, (9), and (11)''.
            (4) Section 457 plans.--Subparagraph (B) of section 
        457(e)(16) of such Code (relating to rollover amounts) is 
        amended by striking ``and (9)'' and inserting ``, (9), and 
        (11)''.

    (b)  Effective Date.--The amendments made 
by this section shall apply to distributions after December 31, 2006.

SEC. 830. DIRECT PAYMENT OF TAX REFUNDS TO 
            INDIVIDUAL RETIREMENT PLANS.

    (a) In General.--The Secretary of the Treasury (or the Secretary's 
delegate) shall make available a form (or modify existing forms) for use 
by individuals to direct that a portion of any refund of overpayment of 
tax imposed by chapter 1 of the Internal Revenue Code of 1986 be paid 
directly to an individual retirement plan (as defined in section 
7701(a)(37) of such Code) of such individual.
    (b) Effective Date.--The form required by subsection (a) shall be 
made available for taxable years beginning after December 31, 2006.

SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN CERTAIN BANKRUPTCY 
            CASES.

    (a) Allowance of Contributions.--Section 219(b)(5) of the Internal 
Revenue Code of 1986 (relating to deductible amount) is amended by 
redesignating subparagraph (C) as subparagraph (D) and by inserting 
after subparagraph (B) the following new subparagraph:
                    ``(C) Catchup contributions for certain 
                individuals.--
                          ``(i) In general.--In the case of an 
                      applicable individual who elects to make a 
                      qualified retirement contribution in addition to 
                      the deductible amount determined under 
                      subparagraph (A)--
                                    ``(I) the deductible amount for any 
                                taxable year shall be increased by an 
                                amount equal to 3 times the applicable 
                                amount determined under subparagraph (B) 
                                for such taxable year, and
                                    ``(II) subparagraph (B) shall not 
                                apply.
                          ``(ii) Applicable individual.--For purposes of 
                      this subparagraph, the term `applicable 
                      individual' means, with respect to any taxable 
                      year, any individual who was a qualified 
                      participant in a qualified cash or
                      deferred arrangement (as defined in section 
                      401(k)) of an employer described in clause (iii) 
                      under which the employer matched at least 50 
                      percent of the employee's contributions to such 
                      arrangement with stock of such employer.
                          ``(iii) Employer described.--An employer is 
                      described in this clause if, in any taxable year 
                      preceding the taxable year described in clause 
                      (ii)--
                                    ``(I) such employer (or any 
                                controlling corporation of such 
                                employer) was a debtor in a case under 
                                title 11 of the United States Code, or 
                                similar Federal or State law, and
                                    ``(II) such employer (or any other 
                                person) was subject to an indictment or 
                                conviction resulting from business 
                                transactions related to such case.
                          ``(iv) Qualified participant.--For purposes of 
                      clause (ii), the term `qualified participant' 
                      means any applicable individual who was a 
                      participant in the cash or deferred arrangement 
                      described in such clause on the date that is 6 
                      months before the filing of the case described in 
                      clause (iii).
                          ``(v) Termination.--This subparagraph shall 
                      not apply to taxable years beginning after 
                      December 31, 2009.''.

    (b)  Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2006.

SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION 415 LIMITS.

    (a) In General.--Section 415(b)(3) of the Internal Revenue Code of 
1986 is amended by striking ``both was an active 
participant in the plan and''.

    (b) Effective Date.--The amendment made 
by this section shall apply to years beginning after December 31, 2005.

SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON CERTAIN 
            RETIREMENT SAVINGS INCENTIVES.

    (a) Saver's Credit.--Subsection (b) of section 25B of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) Joint returns.--In the case of a joint return, the 
        applicable percentage is--
                    ``(A) if the adjusted gross income of the taxpayer 
                is not over $30,000, 50 percent,
                    ``(B) if the adjusted gross income of the taxpayer 
                is over $30,000 but not over $32,500, 20 percent,
                    ``(C) if the adjusted gross income of the taxpayer 
                is over $32,500 but not over $50,000, 10 percent, and
                    ``(D) if the adjusted gross income of the taxpayer 
                is over $50,000, zero percent.
            ``(2) Other returns.--In the case of--
                    ``(A) a head of household, the applicable percentage 
                shall be determined under paragraph (1) except that such 
                paragraph shall be applied by substituting for each 
                dollar amount therein (as adjusted under paragraph (3)) 
                a dollar amount equal to 75 percent of such dollar 
                amount, and
                    ``(B) any taxpayer not 
                described in paragraph (1) or subparagraph (A), the 
                applicable percentage shall be determined under 
                paragraph (1) except that such paragraph shall be 
                applied by substituting for each dollar amount therein 
                (as adjusted under paragraph (3)) a dollar amount equal 
                to 50 percent of such dollar amount.
            ``(3) Inflation adjustment.--In the case of any taxable year 
        beginning in a calendar year after 2006, each of the dollar 
        amounts in paragraph (1) shall be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, determined by substituting 
                `calendar year 2005' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $500.''.

    (b) Deduction of Retirement Contributions for Active Participants.--
Section 219(g) of such Code is amended by adding 
at the end the following new paragraph:
            ``(8) Inflation adjustment.--In the case of any taxable year 
        beginning in a calendar year after 2006, the dollar amount in 
        the last row of the table contained in paragraph (3)(B)(i), the 
        dollar amount in the last row of the table contained in 
        paragraph (3)(B)(ii), and the dollar amount contained in 
        paragraph (7)(A), shall each be increased by an amount equal 
        to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined under 
                section 1(f)(3) for the calendar year in which the 
                taxable year begins, determined by substituting 
                `calendar year 2005' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000.''.

    (c) Contribution Limitation for Roth IRAs.--Section 408A(c)(3) of 
such Code is amended by adding at the end the following new 
subparagraph:
                    ``(C) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2006, 
                the dollar amounts in subclauses (I) and (II) of 
                subparagraph (C)(ii) shall each be increased by an 
                amount equal to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                      determined under section 1(f)(3) for the calendar 
                      year in which the taxable year begins, determined 
                      by substituting `calendar year 2005' for `calendar 
                      year 1992' in subparagraph (B) thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $1,000.''.

    (d) Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after 2006.

                 Subtitle D--Health and Medical Benefits

SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE HEALTH 
            BENEFITS AND COLLECTIVELY BARGAINED RETIREE HEALTH BENEFITS.

    (a) In General.--Section 420 of the Internal Revenue Code of 
1986 (relating to transfers of excess pension 
assets to retiree health accounts) is amended by adding at the end the 
following new subsection:

    ``(f) Qualified Transfers To Cover Future Retiree Health Costs and 
Collectively Bargained Retiree Health Benefits.--
            ``(1) In general.--An employer maintaining a defined benefit 
        plan (other than a multiemployer plan) may, in lieu of a 
        qualified transfer, elect for any taxable year to have the plan 
        make--
                    ``(A) a qualified future transfer, or
                    ``(B) a collectively bargained transfer.
        Except as provided in this subsection, a qualified future 
        transfer and a collectively bargained transfer shall be treated 
        for purposes of this title and the Employee Retirement Income 
        Security Act of 1974 as if it were a qualified transfer.
            ``(2) Qualified future and collectively bargained 
        transfers.--For purposes of this subsection--
                    ``(A) In general.--The terms `qualified future 
                transfer' and `collectively bargained transfer' mean a 
                transfer which meets all of the requirements for a 
                qualified transfer, except that--
                          ``(i) the determination of excess pension 
                      assets shall be made under subparagraph (B),
                          ``(ii) the limitation on the amount 
                      transferred shall be determined under subparagraph 
                      (C),
                          ``(iii) the minimum cost requirements of 
                      subsection (c)(3) shall be modified as provided 
                      under subparagraph (D), and
                          ``(iv) in the case of a collectively bargained 
                      transfer, the requirements of subparagraph (E) 
                      shall be met with respect to the transfer.
                    ``(B) Excess pension assets.--
                          ``(i) In general.--In determining excess 
                      pension assets for purposes of this subsection, 
                      subsection (e)(2) shall be applied by substituting 
                      `120 percent' for `125 percent'.
                          ``(ii) Requirement to maintain funded 
                      status.--If, as of any valuation date of any plan 
                      year in the transfer period, the amount determined 
                      under subsection (e)(2)(B) (after application of 
                      clause (i)) exceeds the amount determined under 
                      subsection (e)(2)(A), either--
                                    ``(I) the employer maintaining the 
                                plan shall make contributions to the 
                                plan in an amount not less than the 
                                amount required to reduce such excess to 
                                zero as of such date, or
                                    ``(II) there is transferred from the 
                                health benefits account to the plan an 
                                amount not less than the amount required 
                                to reduce such excess to zero as of such 
                                date.
                    ``(C) Limitation on amount transferred.--
                Notwithstanding subsection (b)(3), the amount of the 
                excess pension assets which may be transferred--
                          ``(i) in the case of a qualified future 
                      transfer shall be equal to the sum of--
                                    ``(I) if the transfer period 
                                includes the taxable year of the 
                                transfer, the amount determined under 
                                subsection (b)(3) for such taxable year, 
                                plus
                                    ``(II) in the case of all other 
                                taxable years in the transfer period, 
                                the sum of the qualified current retiree 
                                health liabilities which the plan 
                                reasonably estimates, in accordance with 
                                guidance issued by the Secretary, will 
                                be incurred for each of such years, and
                          ``(ii) in the case of a collectively bargained 
                      transfer, shall not exceed the amount which is 
                      reasonably estimated, in accordance with the 
                      provisions of the collective bargaining agreement 
                      and generally accepted accounting principles, to 
                      be the amount the employer maintaining the plan 
                      will pay (whether directly or through 
                      reimbursement) out of such account during the 
                      collectively bargained cost maintenance period for 
                      collectively bargained retiree health liabilities.
                    ``(D) Minimum cost requirements.--
                          ``(i) In general.--The requirements of 
                      subsection (c)(3) shall be treated as met if--
                                    ``(I) in the case of a qualified 
                                future transfer, each group health plan 
                                or arrangement under which applicable 
                                health benefits are provided provides 
                                applicable health benefits during the 
                                period beginning with the first year of 
                                the transfer period and ending with the 
                                last day of the 4th year following the 
                                transfer period such that the annual 
                                average amount of such the applicable 
                                employer cost during such period is not 
                                less than the applicable employer cost 
                                determined under subsection (c)(3)(A) 
                                with respect to the transfer, and
                                    ``(II) in the case of a collectively 
                                bargained transfer, each collectively 
                                bargained group health plan under which 
                                collectively bargained health benefits 
                                are provided provides that the 
                                collectively bargained employer cost for 
                                each taxable year during the 
                                collectively bargained cost maintenance 
                                period shall not be less than the amount 
                                specified by the collective bargaining 
                                agreement.
                          ``(ii) Election to maintain benefits for 
                      future transfers.--An employer may elect, in lieu 
                      of the requirements of clause (i)(I), to meet the 
                      requirements of subsection (c)(3) by meeting the 
                      requirements of such subsection (as in effect 
                      before the amendments made by section 535 of the 
                      Tax Relief Extension Act of 1999) for each of the 
                      years described in the period under clause (i)(I).
                          ``(iii) Collectively bargained employer 
                      cost.--For purposes of this subparagraph, the term 
                      `collectively bargained employer cost' means the 
                      average cost
                      per covered individual of providing collectively 
                      bargained retiree health benefits as determined in 
                      accordance with the applicable collective 
                      bargaining agreement. Such agreement may provide 
                      for an appropriate reduction in the collectively 
                      bargained employer cost to take into account any 
                      portion of the collectively bargained retiree 
                      health benefits that is provided or financed by a 
                      government program or other source.
                    ``(E) Special rules for collectively bargained 
                transfers.--
                          ``(i) In general.--A collectively bargained 
                      transfer shall only include a transfer which--
                                    ``(I) is made in accordance with a 
                                collective bargaining agreement,
                                    ``(II) before the transfer, the 
                                employer designates, in a written notice 
                                delivered to each employee organization 
                                that is a party to the collective 
                                bargaining agreement, as a collectively 
                                bargained transfer in accordance with 
                                this section, and
                                    ``(III) involves a plan maintained 
                                by an employer which, in its taxable 
                                year ending in 2005, provided health 
                                benefits or coverage to retirees and 
                                their spouses and dependents under all 
                                of the benefit plans maintained by the 
                                employer, but only if the aggregate cost 
                                (including administrative expenses) of 
                                such benefits or coverage which would 
                                have been allowable as a deduction to 
                                the employer (if such benefits or 
                                coverage had been provided directly by 
                                the employer and the employer used the 
                                cash receipts and disbursements method 
                                of accounting) is at least 5 percent of 
                                the gross receipts of the employer 
                                (determined in accordance with the last 
                                sentence of subsection 
                                (c)(2)(E)(ii)(II)) for such taxable 
                                year, or a plan maintained by a 
                                successor to such employer.
                          ``(ii) Use of assets.--Any assets transferred 
                      to a health benefits account in a collectively 
                      bargained transfer (and any income allocable 
                      thereto) shall be used only to pay collectively 
                      bargained retiree health liabilities (other than 
                      liabilities of key employees not taken into 
                      account under paragraph (6)(B)(iii)) for the 
                      taxable year of the transfer or for any subsequent 
                      taxable year during the collectively bargained 
                      cost maintenance period (whether directly or 
                      through reimbursement).
            ``(3) Coordination with other transfers.--In applying 
        subsection (b)(3) to any subsequent transfer during a taxable 
        year in a transfer period or collectively bargained cost 
        maintenance period, qualified current retiree health liabilities 
        shall be reduced by any such liabilities taken into account with 
        respect to the qualified future transfer or collectively 
        bargained transfer to which such period relates.
            ``(4) Special deduction rules for collectively bargained 
        transfers.--In the case of a collectively bargained transfer--
                    ``(A) the limitation under subsection (d)(1)(C) 
                shall not apply, and
                    ``(B) notwithstanding subsection (d)(2), an employer 
                may contribute an amount to a health benefits account or 
                welfare benefit fund (as defined in section 419(e)(1)) 
                with respect to collectively bargained retiree health 
                liabilities for which transferred assets are required to 
                be used under subsection (c)(1)(B), and the 
                deductibility of any such contribution shall be governed 
                by the limits applicable to the deductibility of 
                contributions to a welfare benefit fund under a 
                collective bargaining agreement (as determined under 
                section 419A(f)(5)(A)) without regard to whether such 
                contributions are made to a health benefits account or 
                welfare benefit fund and without regard to the 
                provisions of section 404 or the other provisions of 
                this section.
        The Secretary shall provide rules to ensure 
        that the application of this paragraph does not result in a 
        deduction being allowed more than once for the same contribution 
        or for 2 or more contributions or expenditures relating to the 
        same collectively bargained retiree health liabilities.
            ``(5) Transfer period.--For purposes of this subsection, the 
        term `transfer period' means, with respect to any transfer, a 
        period of consecutive taxable years (not less than 2) specified 
        in the election under paragraph (1) which begins and ends during 
        the 10-taxable-year period beginning with the taxable year of 
        the transfer.
            ``(6) Terms relating to collectively bargained transfers.--
        For purposes of this subsection--
                    ``(A) Collectively bargained cost maintenance 
                period.--The term `collectively bargained cost 
                maintenance period' means, with respect to each covered 
                retiree and his covered spouse and dependents, the 
                shorter of--
                          ``(i) the remaining lifetime of such covered 
                      retiree and his covered spouse and dependents, or
                          ``(ii) the period of coverage provided by the 
                      collectively bargained health plan (determined as 
                      of the date of the collectively bargained 
                      transfer) with respect to such covered retiree and 
                      his covered spouse and dependents.
                    ``(B) Collectively bargained retiree health 
                liabilities.--
                          ``(i) In general.--The term `collectively 
                      bargained retiree health liabilities' means the 
                      present value, as of the beginning of a taxable 
                      year and determined in accordance with the 
                      applicable collective bargaining agreement, of all 
                      collectively bargained health benefits (including 
                      administrative expenses) for such taxable year and 
                      all subsequent taxable years during the 
                      collectively bargained cost maintenance period.
                          ``(ii) Reduction for amounts previously set 
                      aside.--The amount determined under clause (i) 
                      shall be reduced by the value (as of the close of 
                      the plan year preceding the year of the 
                      collectively bargained transfer) of the assets in 
                      all health benefits accounts or welfare benefit 
                      funds (as defined in section 419(e)(1))
                      set aside to pay for the collectively bargained 
                      retiree health liabilities.
                          ``(iii) Key employees excluded.--If an 
                      employee is a key employee (within the meaning of 
                      section 416(I)(1)) with respect to any plan year 
                      ending in a taxable year, such employee shall not 
                      be taken into account in computing collectively 
                      bargained retiree health liabilities for such 
                      taxable year or in calculating collectively 
                      bargained employer cost under subsection 
                      (c)(3)(C).
                    ``(C) Collectively bargained health benefits.--The 
                term `collectively bargained health benefits' means 
                health benefits or coverage which are provided to--
                          ``(i) retired employees who, immediately 
                      before the collectively bargained transfer, are 
                      entitled to receive such benefits upon retirement 
                      and who are entitled to pension benefits under the 
                      plan, and their spouses and dependents, and
                          ``(ii) if specified by the provisions of the 
                      collective bargaining agreement governing the 
                      collectively bargained transfer, active employees 
                      who, following their retirement, are entitled to 
                      receive such benefits and who are entitled to 
                      pension benefits under the plan, and their spouses 
                      and dependents.
                    ``(D) Collectively bargained health plan.--The term 
                `collectively bargained health plan' means a group 
                health plan or arrangement for retired employees and 
                their spouses and dependents that is maintained pursuant 
                to 1 or more collective bargaining agreements.''.

    (b) Effective Date.--The amendments made 
by this section shall apply to transfers after the date of the enactment 
of this Act.

SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER HEALTH 
            PLAN.

    (a) In General.--Section 420 of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``(other than a multiemployer plan)'' in 
        subsection (a), and
            (2) by adding at the end of subsection (e) the following new 
        paragraph:
            ``(5) Application to multiemployer plans.--In the case of a 
        multiemployer plan, this section shall be applied to any such 
        plan--
                    ``(A) by treating any reference in this section to 
                an employer as a reference to all employers maintaining 
                the plan (or, if appropriate, the plan sponsor), and
                    ``(B) in accordance with such modifications of this 
                section (and the provisions of this title relating to 
                this section) as the Secretary determines appropriate to 
                reflect the fact the plan is not maintained by a single 
                employer.''.

    (b) Effective Date.--The amendment made 
by this section shall apply to transfers made in taxable years beginning 
after December 31, 2006.

SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS SPONSORED 
            BY BONA FIDE ASSOCIATIONS.

    (a) In General.--Section 419A(c) of the Internal Revenue Code of 
1986 (relating to account limit) is amended by 
adding at the end the following new paragraph:
            ``(6) Additional reserve for medical benefits of bona fide 
        association plans.--
                    ``(A) In general.--An applicable account limit for 
                any taxable year may include a reserve in an amount not 
                to exceed 35 percent of the sum of--
                          ``(i) the qualified direct costs, and
                          ``(ii) the change in claims incurred but 
                      unpaid,
                for such taxable year with respect to medical benefits 
                (other than post-retirement medical benefits).
                    ``(B) Applicable account limit.--For purposes of 
                this subsection, the term `applicable account limit' 
                means an account limit for a qualified asset account 
                with respect to medical benefits provided through a plan 
                maintained by a bona fide association (as defined in 
                section 2791(d)(3) of the Public Health Service Act (42 
                U.S.C. 300gg-91(d)(3)).''.

    (b) Effective Date.--The amendment made 
by this section shall apply to taxable years beginning after December 
31, 2006.

SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS WITH A LONG-
            TERM CARE INSURANCE FEATURE.

    (a) Exclusion From Gross Income.--Subsection (e) of section 72 of 
the Internal Revenue Code of 1986 (relating to amounts not received as 
annuities) is amended by redesignating paragraph (11) as paragraph (12) 
and by inserting after paragraph (10) the following new paragraph:
            ``(11) Special rules for certain combination contracts 
        providing long-term care insurance.--Notwithstanding paragraphs 
        (2), (5)(C), and (10), in the case of any charge against the 
        cash value of an annuity contract or the cash surrender value of 
        a life insurance contract made as payment for coverage under a 
        qualified long-term care insurance contract which is part of or 
        a rider on such annuity or life insurance contract--
                    ``(A) the investment in the contract shall be 
                reduced (but not below zero) by such charge, and
                    ``(B) such charge shall not be includible in gross 
                income.''.

    (b) Tax-Free Exchanges Among Certain Insurance Policies.--
            (1) Annuity contracts can include qualified long-term care 
        insurance riders.--Paragraph (2) of section 1035(b) of such Code 
        is amended by adding at the end the following new sentence: 
        ``For purposes of the preceding sentence, a contract shall not 
        fail to be treated as an annuity contract solely because a 
        qualified long-term care insurance contract is a part of or a 
        rider on such contract.''.
            (2) Life insurance contracts can include qualified long-term 
        care insurance riders.--Paragraph (3) of section 1035(b) of such 
        Code is amended by adding at the end the following new sentence: 
        ``For purposes of the preceding sentence, a contract shall not 
        fail to be treated as a life insurance
        contract solely because a qualified long-term care insurance 
        contract is a part of or a rider on such contract.''.
            (3) Expansion of tax-free exchanges of life insurance, 
        endowment, and annuity contracts for long-term care contracts.--
        Subsection (a) of section 1035 of such Code (relating to certain exchanges of insurance 
        policies) is amended--
                    (A) in paragraph (1) by inserting ``or for a 
                qualified long-term care insurance contract'' before the 
                semicolon at the end,
                    (B) in paragraph (2) by inserting ``, or (C) for a 
                qualified long-term care insurance contract'' before the 
                semicolon at the end, and
                    (C) in paragraph (3) by inserting ``or for a 
                qualified long-term care insurance contract'' before the 
                period at the end.
            (4) Tax-free exchanges of qualified long-term care insurance 
        contract.--Subsection (a) of section 1035 of such Code (relating 
        to certain exchanges of insurance policies) is amended by 
        striking ``or'' at the end of paragraph (2), by striking the 
        period at the end of paragraph (3) and inserting ``; or'', and 
        by inserting after paragraph (3) the following new paragraph:
            ``(4) a qualified long-term care insurance contract for a 
        qualified long-term care insurance contract.''.

    (c) Treatment of Coverage Provided as Part of a Life Insurance or 
Annuity Contract.--Subsection (e) of section 7702B of such Code 
(relating to treatment of qualified long-term care insurance) is amended 
to read as follows:
    ``(e) Treatment of Coverage Provided as Part 
of a Life Insurance or Annuity Contract.--Except as otherwise provided 
in regulations prescribed by the Secretary, in the case of any long-term 
care insurance coverage (whether or not qualified) provided by a rider 
on or as part of a life insurance contract or an annuity contract--
            ``(1) In general.--This title shall 
        apply as if the portion of the contract providing such coverage 
        is a separate contract.
            ``(2) Denial of deduction under section 213.--No deduction 
        shall be allowed under section 213(a) for any payment made for 
        coverage under a qualified long-term care insurance contract if 
        such payment is made as a charge against the cash surrender 
        value of a life insurance contract or the cash value of an 
        annuity contract.
            ``(3) Portion defined.--For purposes of this subsection, the 
        term `portion' means only the terms and benefits under a life 
        insurance contract or annuity contract that are in addition to 
        the terms and benefits under the contract without regard to 
        long-term care insurance coverage.
            ``(4) Annuity contracts to which paragraph (1) does not 
        apply.--For purposes of this subsection, none of the following 
        shall be treated as an annuity contract:
                    ``(A) A trust described in section 401(a) which is 
                exempt from tax under section 501(a).
                    ``(B) A contract--
                          ``(i) purchased by a trust described in 
                      subparagraph (A),
                          ``(ii) purchased as part of a plan described 
                      in section 403(a),
                          ``(iii) described in section 403(b),
                          ``(iv) provided for employees of a life 
                      insurance company under a plan described in 
                      section 818(a)(3), or
                          ``(v) from an individual retirement account or 
                      an individual retirement annuity.
                    ``(C) A contract purchased by an employer for the 
                benefit of the employee (or the employee's spouse).
        Any dividend described in section 404(k) which is received by a 
        participant or beneficiary shall, for purposes of this 
        paragraph, be treated as paid under a separate contract to which 
        subparagraph (B)(i) applies.''.

    (d) Information Reporting.--
            (1) Subpart B of part III of subchapter A of chapter 61 of 
        such Code (relating to information concerning transactions with 
        other persons) is amended by adding at the end the following new 
        section:

``SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED 
            LONG-TERM CARE INSURANCE CONTRACTS UNDER COMBINED 
            ARRANGEMENTS.

    ``(a) Requirement of Reporting.--Any person 
who makes a charge against the cash value of an annuity contract, or the 
cash surrender value of a life insurance contract, which is excludible 
from gross income under section 72(e)(11) shall make a return, according 
to the forms or regulations prescribed by the Secretary, setting forth--
            ``(1) the amount of the aggregate of such charges against 
        each such contract for the calendar year,
            ``(2) the amount of the reduction in the investment in each 
        such contract by reason of such charges, and
            ``(3) the name, address, and TIN of the individual who is 
        the holder of each such contract.

    ``(b) Statements To Be Furnished to Persons With Respect to Whom 
Information Is Required.--Every person required to make a return under 
subsection (a) shall furnish to each individual whose name is required 
to be set forth in such return a written statement showing--
            ``(1) the name, address, and phone number of the information 
        contact of the person making the payments, and
            ``(2) the information required to be shown on the return 
        with respect to such individual.

The written statement required under the preceding 
sentence shall be furnished to the individual on or before January 31 of 
the year following the calendar year for which the return under 
subsection (a) was required to be made.''.
            (2) Penalty for failure to file.--
                    (A) Return.--Subparagraph (B) of section 6724(d)(1) 
                of such Code is amended by 
                striking ``or'' at the end of clause (xvii), by striking 
                ``and'' at the end of clause (xviii) and inserting 
                ``or'', and by adding at the end the following new 
                clause:
                          ``(xix) section 6050U (relating to charges or 
                      payments for qualified long-term care insurance 
                      contracts under combined arrangements), and''.
                    (B) Statement.--Paragraph (2) of section 6724(d) of 
                such Code is amended by striking 
                ``or'' at the end of subparagraph (AA), by striking the 
                period at the end of subparagraph (BB), and by inserting 
                after subparagraph (BB) the following new subparagraph:
                    ``(CC) section 6050U (relating to charges or 
                payments for qualified long-term care insurance 
                contracts under combined arrangements).''.
            (3) Clerical amendment.--The table of sections for subpart B 
        of part III of subchapter A of such chapter 61 of such Code is 
        amended by adding at the end the following new item:

``Sec. 6050U. Charges or payments for qualified long-term care insurance 
           contracts under combined arrangements.''.

    (e) Treatment of Policy Acquisition Expenses.--Subsection (e) of 
section 848 of such Code (relating to classification of contracts) is 
amended by adding at the end the following new paragraph:
            ``(6) Treatment of certain qualified long-term care 
        insurance contract arrangements.--An annuity or life insurance 
        contract which includes a qualified long-term care insurance 
        contract as a part of or a rider on such annuity or life 
        insurance contract shall be treated as a specified insurance 
        contract not described in subparagraph (A) or (B) of subsection 
        (c)(1).''.

    (f) Technical Amendment.--Paragraph (1) of section 7702B(e) of such 
Code (as in effect before amendment by subsection (c)) is amended by 
striking ``section'' and inserting ``title''.
    (g) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        contracts issued after December 31, 1996, but only with respect 
        to taxable years beginning after December 31, 2009.
            (2) Tax-free exchanges.--The amendments made by subsection 
        (b) shall apply with respect to exchanges occurring after 
        December 31, 2009.
            (3) Information reporting.--The amendments made by 
        subsection (d) shall apply to charges made after December 31, 
        2009.
            (4) Policy acquisition expenses.--The amendment made by 
        subsection (e) shall apply to specified policy acquisition 
        expenses determined for taxable years beginning after December 
        31, 2009.
            (5) Technical amendment.--The amendment made by subsection 
        (f) shall take effect as if included in section 321(a) of the 
        Health Insurance Portability and Accountability Act of 1996.

SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS FOR HEALTH 
            AND LONG-TERM CARE INSURANCE FOR PUBLIC SAFETY OFFICERS.

    (a) In General.--Section 402 of the Internal Revenue Code of 1986 
(relating to taxability of beneficiary of employees' trust) is amended 
by adding at the end the following new subsection:
    ``(l) Distributions From Governmental Plans for Health and Long-Term 
Care Insurance.--
            ``(1) In general.--In the case of an employee who is an 
        eligible retired public safety officer who makes the election
        described in paragraph (6) with respect to any taxable year of 
        such employee, gross income of such employee for such taxable 
        year does not include any distribution from an eligible 
        retirement plan to the extent that the aggregate amount of such 
        distributions does not exceed the amount paid by such employee 
        for qualified health insurance premiums of the employee, his 
        spouse, or dependents (as defined in section 152) for such 
        taxable year.
            ``(2) Limitation.--The amount which may be excluded from 
        gross income for the taxable year by reason of paragraph (1) 
        shall not exceed $3,000.
            ``(3) Distributions must otherwise be includible.--
                    ``(A) In general.--An amount shall be treated as a 
                distribution for purposes of paragraph (1) only to the 
                extent that such amount would be includible in gross 
                income without regard to paragraph (1).
                    ``(B) Application of section 72.--Notwithstanding 
                section 72, in determining the extent to which an amount 
                is treated as a distribution for purposes of 
                subparagraph (A), the aggregate amounts distributed from 
                an eligible retirement plan in a taxable year (up to the 
                amount excluded under paragraph (1)) shall be treated as 
                includible in gross income (without regard to 
                subparagraph (A)) to the extent that such amount does 
                not exceed the aggregate amount which would have been so 
                includible if all amounts distributed from all eligible 
                retirement plans were treated as 1 contract for purposes 
                of determining the inclusion of such distribution under 
                section 72. Proper adjustments shall be made in applying 
                section 72 to other distributions in such taxable year 
                and subsequent taxable years.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Eligible retirement plan.--For purposes of 
                paragraph (1), the term `eligible retirement plan' means 
                a governmental plan (within the meaning of section 
                414(d)) which is described in clause (iii), (iv), (v), 
                or (vi) of subsection (c)(8)(B).
                    ``(B) Eligible retired public safety officer.--The 
                term `eligible retired public safety officer' means an 
                individual who, by reason of disability or attainment of 
                normal retirement age, is separated from service as a 
                public safety officer with the employer who maintains 
                the eligible retirement plan from which distributions 
                subject to paragraph (1) are made.
                    ``(C) Public safety officer.--The term `public 
                safety officer' shall have the same meaning given such 
                term by section 1204(9)(A) of the Omnibus Crime Control 
                and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)).
                    ``(D) Qualified health insurance premiums.--The term 
                `qualified health insurance premiums' means premiums for 
                coverage for the eligible retired public safety officer, 
                his spouse, and dependents, by an accident or health 
                insurance plan or qualified long-term care insurance 
                contract (as defined in section 7702B(b)).
            ``(5) Special rules.--For purposes of this subsection--
                    ``(A) Direct payment to insurer required.--Paragraph 
                (1) shall only apply to a distribution if payment of the 
                premiums is made directly to the provider of the
                accident or health insurance plan or qualified long-term 
                care insurance contract by deduction from a distribution 
                from the eligible retirement plan.
                    ``(B) Related plans treated as 1.--All eligible 
                retirement plans of an employer shall be treated as a 
                single plan.
            ``(6) Election described.--
                    ``(A) In general.--For purposes of paragraph (1), an 
                election is described in this paragraph if the election 
                is made by an employee after separation from service 
                with respect to amounts not distributed from an eligible 
                retirement plan to have amounts from such plan 
                distributed in order to pay for qualified health 
                insurance premiums.
                    ``(B) Special rule.--A plan shall not be treated as 
                violating the requirements of section 401, or as 
                engaging in a prohibited transaction for purposes of 
                section 503(b), merely because it provides for an 
                election with respect to amounts that are otherwise 
                distributable under the plan or merely because of a 
                distribution made pursuant to an election described in 
                subparagraph (A).
            ``(7) Coordination with medical expense deduction.--The 
        amounts excluded from gross income under paragraph (1) shall not 
        be taken into account under section 213.
            ``(8) Coordination with deduction for health insurance costs 
        of self-employed individuals.--The amounts excluded from gross 
        income under paragraph (1) shall not be taken into account under 
        section 162(l).''.

    (b) Conforming Amendments.--
            (1) Section 403(a) of such Code (relating to taxability of beneficiary under a qualified 
        annuity plan) is amended by inserting after paragraph (1) the 
        following new paragraph:
            ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), paragraph 
        (1) shall not apply to the amount distributed under the contract 
        which is otherwise includible in gross income under this 
        subsection.''.
            (2) Section 403(b) of such Code (relating to taxability of 
        beneficiary under annuity purchased by section 501(c)(3) 
        organization or public school) is amended by inserting after 
        paragraph (1) the following new paragraph:
            ``(2) Special rule for health and long-term care 
        insurance.--To the extent provided in section 402(l), paragraph 
        (1) shall not apply to the amount distributed under the contract 
        which is otherwise includible in gross income under this 
        subsection.''.
            (3) Section 457(a) of such Code (relating to year of 
        inclusion in gross income) is amended by adding at the end the 
        following new paragraph:
            ``(3) Special rule for health and long-term care 
        insurance.--In the case of a plan of an eligible employer 
        described in subsection (e)(1)(A), to the extent provided in 
        section 402(l), paragraph (1) shall not apply to amounts 
        otherwise includible in gross income under this subsection.''.

    (c) Effective Date.--The amendments made 
by this section shall apply to distributions in taxable years beginning 
after December 31, 2006.

            Subtitle E--United States Tax Court Modernization

SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR 
            ANNUITIES.

    (a) In General.--Subsection (s) of section 7448 of the Internal 
Revenue Code of 1986 (relating to annuities to 
surviving spouses and dependent children of judges) is amended to read 
as follows:

    ``(s) Increases in Survivor Annuities.--Each time that an increase 
is made under section 8340(b) of title 5, United States Code, in 
annuities payable under subchapter III of chapter 83 of that title, each 
annuity payable from the survivors annuity fund under this section shall 
be increased at the same time by the same percentage by which annuities 
are increased under such section 8340(b).''.
    (b) Effective Date.--The amendment made 
by this section shall apply with respect to increases made under section 
8340(b) of title 5, United States Code, in annuities payable under 
subchapter III of chapter 83 of that title, taking effect after the date 
of the enactment of this Act.

SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65 OR 
            OVER.

    Section 7472 of the Internal Revenue Code of 1986 (relating to 
expenditures) is amended by inserting after the first sentence the 
following new sentence: ``Notwithstanding any other provision of law, 
the Tax Court is authorized to pay on behalf of its judges, age 65 or 
over, any increase in the cost of Federal Employees' Group Life 
Insurance imposed after the date of the enactment of the Pension 
Protection Act of 2006, including any expenses generated by such 
payments, as authorized by the chief judge in a manner consistent with 
such payments authorized by the Judicial Conference of the United States 
pursuant to section 604(a)(5) of title 28, United States Code.''.

SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS PLAN.

    (a) In General.--Section 7447 of the Internal Revenue Code of 1986 
(relating to retirement of judges) is amended by adding at the end the 
following new subsection:
    ``(j) Thrift Savings Plan.--
            ``(1) Election to contribute.--
                    ``(A) In general.--A judge of the Tax Court may 
                elect to contribute to the Thrift Savings Fund 
                established by section 8437 of title 5, United States 
                Code.
                    ``(B) Period of election.--An election may be made 
                under this paragraph only during a period provided under 
                section 8432(b) of title 5, United States Code, for 
                individuals subject to chapter 84 of such title.
            ``(2) Applicability of title 5 provisions.--Except as 
        otherwise provided in this subsection, the provisions of 
        subchapters III and VII of chapter 84 of title 5, United States 
        Code, shall apply with respect to a judge who makes an election 
        under paragraph (1).
            ``(3) Special rules.--
                    ``(A) Amount contributed.--The amount contributed by 
                a judge to the Thrift Savings Fund in any pay period 
                shall not exceed the maximum percentage of such judge's 
                basic pay for such period as allowable under section 
                8440f of title 5, United States Code. Basic pay does not 
                include any retired pay paid pursuant to this section.
                    ``(B) Contributions for benefit of judge.--No 
                contributions may be made for the benefit of a judge 
                under section 8432(c) of title 5, United States Code.
                    ``(C) Applicability of section 8433(b) of title 5 
                whether or not judge retires.--Section 8433(b) of title 
                5, United States Code, applies with respect to a judge 
                who makes an election under paragraph (1) and who 
                either--
                          ``(i) retires under subsection (b), or
                          ``(ii) ceases to serve as a judge of the Tax 
                      Court but does not retire under subsection (b).
                Retirement under subsection (b) is a separation from 
                service for purposes of subchapters III and VII of 
                chapter 84 of that title.
                    ``(D) Applicability of section 8351(b)(5) of title 
                5.--The provisions of section 8351(b)(5) of title 5, 
                United States Code, shall apply with respect to a judge 
                who makes an election under paragraph (1).
                    ``(E) Exception.--
                Notwithstanding subparagraph (C), if any judge retires 
                under this section, or resigns without having met the 
                age and service requirements set forth under subsection 
                (b)(2), and such judge's nonforfeitable account balance 
                is less than an amount that the Executive Director of 
                the Federal Retirement Thrift Investment Board 
                prescribes by regulation, the Executive Director shall 
                pay the nonforfeitable account balance to the 
                participant in a single payment.''.

    (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act, except that United States Tax Court judges may only begin to 
participate in the Thrift Savings Plan at the next open season beginning 
after such date.

SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF 
            SPECIAL TRIAL JUDGES OF THE TAX COURT.

    (a) Definitions.--Section 7448(a) of the Internal Revenue Code of 
1986 (relating to definitions), as amended by this Act, is amended by 
redesignating paragraphs (5), (6), (7), and (8) as paragraphs (7), (8), 
(9), and (10), respectively, and by inserting after paragraph (4) the 
following new paragraphs:
            ``(5) The term `special trial judge' means a judicial 
        officer appointed pursuant to section 7443A, including any 
        individual receiving an annuity under chapter 83 or 84 of title 
        5, United States Code, whether or not performing judicial duties 
        under section 7443B.
            ``(6) The term `special trial judge's salary' means the 
        salary of a special trial judge received under section 7443A(d), 
        any amount received as an annuity under chapter 83 or 84 of 
        title 5, United States Code, and compensation received under 
        section 7443B.''.
    (b) Election.--Subsection (b) of section 7448 of such Code (relating to annuities to surviving spouses and dependent 
children of judges) is amended--
            (1) by striking the subsection heading and inserting the 
        following:

    ``(b) Election.--
            ``(1) Judges.--'',
            (2) by moving the text 2 ems to the right, and
            (3) by adding at the end the following new paragraph:
            ``(2) Special trial judges.--Any special trial judge may by 
        written election filed with the chief judge bring himself or 
        herself within the purview of this 
        section. Such election shall be filed not 
        later than the later of 6 months after--
                    ``(A) 6 months after the date of the enactment of 
                this paragraph,
                    ``(B) the date the judge takes office, or
                    ``(C) the date the judge marries.''.

    (c) Conforming Amendments.--
            (1) The heading of section 7448 of such Code is amended by 
        inserting ``and special trial judges'' after ``judges''.
            (2) The item relating to section 7448 in the table of 
        sections for part I of subchapter C of chapter 76 of such Code 
        is amended by inserting ``and special trial judges'' after 
        ``judges''.
            (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
        and (u) of section 7448 of such Code, as amended by this Act, 
        are each amended--
                    (A) by inserting ``or special trial judge'' after 
                ``judge'' each place it appears other than in the phrase 
                ``chief judge'', and
                    (B) by inserting ``or special trial judge's'' after 
                ``judge's'' each place it appears.
            (4) Section 7448(c) of such Code is amended--
                    (A) in paragraph (1), by striking ``Tax Court 
                judges'' and inserting ``Tax Court judicial officers'', 
                and
                    (B) in paragraph (2)--
                          (i) in subparagraph (A), by inserting ``and 
                      section 7443A(d)'' after ``(a)(4)'', and
                          (ii) in subparagraph (B), by striking 
                      ``subsection (a)(4)'' and inserting ``subsection 
                      (a)(4) and (a)(6)''.
            (5) Section 7448(j)(1) of such Code is amended--
                    (A) in subparagraph (A), by striking ``service or 
                retired'' and inserting ``service, retired'', and by 
                inserting ``, or receiving any annuity under chapter 83 
                or 84 of title 5, United States Code,'' after ``section 
                7447'', and
                    (B) in the last sentence, by striking ``subsections 
                (a) (6) and (7)'' and inserting ``paragraphs (8) and (9) 
                of subsection (a)''.
            (6) Section 7448(m)(1) of such Code, as amended by this Act, 
        is amended by inserting ``or any annuity under chapter 83 or 84 
        of title 5, United States Code'' after ``7447(d)''.
            (7) Section 7448(n) of such Code is amended by inserting 
        ``his years of service pursuant to any appointment under section 
        7443A,'' after ``of the Tax Court,''.
            (8) Section 3121(b)(5)(E) of such Code is amended by 
        inserting ``or special trial judge'' before ``of the United 
        States Tax Court''.
            (9) Section 210(a)(5)(E) of the Social Security 
        Act is amended by inserting ``or special 
        trial judge'' before ``of the United States Tax Court''.

SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.

    (a) In General.--Paragraph (1) of section 6330(d) of the Internal 
Revenue Code of 1986 (relating to proceeding after hearing) is amended 
to read as follows:
            ``(1) Judicial review of determination.--
        The person may, within 30 days of a 
        determination under this section, appeal such determination to 
        the Tax Court (and the Tax Court shall have jurisdiction with 
        respect to such matter).''.

    (b) Effective Date.--The amendment made by this section shall apply 
to determinations made after the date which is 60 days after the date of 
the enactment of this Act.

SEC. 856. PROVISIONS FOR RECALL.

    (a) In General.--Part I of subchapter C of chapter 76 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
7443A the following new section:

``SEC. 7443B. RECALL OF SPECIAL TRIAL JUDGES OF 
            THE TAX COURT.

    ``(a) Recalling of Retired Special Trial Judges.--Any individual who 
has retired pursuant to the applicable provisions of title 5, United 
States Code, upon reaching the age and service requirements established 
therein, may at or after retirement be called upon by the chief judge of 
the Tax Court to perform such judicial duties with the Tax Court as may 
be requested of such individual for any period or periods specified by 
the chief judge; except that in the case of any such individual--
            ``(1) the aggregate of such periods in any 1 calendar year 
        shall not (without such individual's consent) exceed 90 calendar 
        days, and
            ``(2) such individual shall be relieved of performing such 
        duties during any period in which illness or disability 
        precludes the performance of such duties.

Any act, or failure to act, by an individual performing judicial duties 
pursuant to this subsection shall have the same force and effect as if 
it were the act (or failure to act) of a special trial judge of the Tax 
Court.
    ``(b) Compensation.--For the year in which a period of recall 
occurs, the special trial judge shall receive, in addition to the 
annuity provided under the applicable provisions of title 5, United 
States Code, an amount equal to the difference between that annuity and 
the current salary of the office to which the special trial judge is 
recalled.
    ``(c) Rulemaking Authority.--The provisions of this section may be 
implemented under such rules as may be promulgated by the Tax Court.''.
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter C of chapter 76 of such Code is amended by inserting after 
the item relating to section 7443A the following new item:

``Sec. 7443B. Recall of special trial judges of the Tax Court.''.

SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND DECIDE CERTAIN 
            EMPLOYMENT STATUS CASES.

    (a) In General.--Section 7443A(b) of the Internal Revenue Code of 
1986 (relating to proceedings which may be 
assigned to special trial judges) is amended by striking ``and'' at the 
end of paragraph (4), by redesignating paragraph (5) as paragraph (6), 
and by inserting after paragraph (4) the following new paragraph:
            ``(5) any proceeding under section 7436(c), and''.

    (b) Conforming Amendment.--Section 7443A(c) of such Code is amended 
by striking ``or (4)'' and inserting ``(4), or (5)''.
    (c) Effective Date.--The amendments made by 
this section shall apply to any proceeding under section 7436(c) of the 
Internal Revenue Code of 1986 with respect to which a decision has not 
become final (as determined under section 7481 of such Code) before the 
date of the enactment of this Act.

SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF 
            EQUITABLE RECOUPMENT.

    (a) Confirmation of Authority of Tax Court To Apply Doctrine of 
Equitable Recoupment.--Section 6214(b) of the Internal Revenue Code of 
1986 (relating to jurisdiction over other years and quarters) is amended 
by adding at the end the following new sentence: ``Notwithstanding the 
preceding sentence, the Tax Court may apply the doctrine of equitable 
recoupment to the same extent that it is available in civil tax cases 
before the district courts of the United States and the United States 
Court of Federal Claims.''.
    (b) Effective Date.--The amendment made 
by this section shall apply to any action or proceeding in the United 
States Tax Court with respect to which a decision has not become final 
(as determined under section 7481 of the Internal Revenue Code of 1986) 
as of the date of the enactment of this Act.

SEC. 859. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING 
            PETITION.

    (a) In General.--Section 7451 of the Internal Revenue Code of 1986 
(relating to fee for filing a Tax Court petition) is amended by striking 
all that follows ``petition'' and inserting a period.
    (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE TAXPAYERS.

    (a) In General.--Section 7475(b) of the Internal Revenue Code of 
1986 (relating to use of fees) is amended by inserting before the period 
at the end ``and to provide services to pro se taxpayers''.
    (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

                      Subtitle F--Other Provisions

SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT MORATORIUM ON 
            APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO 
            STATE AND LOCAL PLANS.

    (a) In General.--
            (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
        (G) of section 401(a)(26) of the Internal Revenue Code 
        of 1986 are each amended by striking 
        ``section 414(d))'' and all that follows and inserting ``section 
        414(d)).''.
            (2) Subparagraph (G) of section 401(k)(3) of such Code and 
        paragraph (2) of section 1505(d) of the Taxpayer Relief Act of 
        1997 (Public Law 105-34; 111 Stat. 1063) are each amended by striking ``maintained by a State or 
        local government or political subdivision thereof (or agency or 
        instrumentality thereof)''.

    (b) Conforming Amendments.--
            (1) The heading of subparagraph (G) of section 401(a)(5) of 
        the Internal Revenue Code of 1986 is amended by striking ``State 
        and local governmental'' and inserting ``Governmental''.
            (2) The heading of subparagraph (G) of section 401(a)(26) of 
        such Code is amended by striking ``Exception for state and 
        local'' and inserting ``Exception for''.
            (3) Section 401(k)(3)(G) of such Code is amended by 
        inserting ``Governmental plan.--'' after ``(G)''.

    (c) Effective Date.--The amendments made by this section shall apply 
to any year beginning after the date of the enactment of this Act.

SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE OF EXCESS FUNDS FROM 
            BLACK LUNG DISABILITY TRUSTS.

    (a) In General.--So much of section 501(c)(21)(C) of the Internal 
Revenue Code of 1986 (relating to black lung disability trusts) as 
precedes the last sentence is amended to read as follows:
                    ``(C) Payments described in subparagraph (A)(i)(IV) 
                may be made from such trust during a taxable year only 
                to the extent that the aggregate amount of such payments 
                during such taxable year does not exceed the excess (if 
                any), as of the close of the preceding taxable year, 
                of--
                          ``(i) the fair market value of the assets of 
                      the trust, over
                          ``(ii) 110 percent of the present value of the 
                      liability described in subparagraph (A)(i)(I) of 
                      such person.''.

    (b) Effective Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 2006.

SEC. 863. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED LIFE 
            INSURANCE.

    (a) In General.--Section 101 of the Internal Revenue Code of 1986 
(relating to certain death benefits) is amended by adding at the end the 
following new subsection:
    ``(j) Treatment of Certain Employer-Owned Life Insurance 
Contracts.--
            ``(1) General rule.--In the case of an employer-owned life 
        insurance contract, the amount excluded from gross income of an 
        applicable policyholder by reason of paragraph (1) of subsection 
        (a) shall not exceed an amount equal to the sum of the premiums 
        and other amounts paid by the policyholder for the contract.
            ``(2) Exceptions.--In the case of an employer-owned life 
        insurance contract with respect to which the notice and consent 
        requirements of paragraph (4) are met, paragraph (1) shall not 
        apply to any of the following:
                    ``(A) Exceptions based on insured's status.--Any 
                amount received by reason of the death of an insured 
                who, with respect to an applicable policyholder--
                          ``(i) was an employee at any time during the 
                      12-month period before the insured's death, or
                          ``(ii) is, at the time the contract is 
                      issued--
                                    ``(I) a director,
                                    ``(II) a highly compensated employee 
                                within the meaning of section 414(q) 
                                (without regard to paragraph (1)(B)(ii) 
                                thereof), or
                                    ``(III) a highly compensated 
                                individual within the meaning of section 
                                105(h)(5), except that `35 percent' 
                                shall be substituted for `25 percent' in 
                                subparagraph (C) thereof.
                    ``(B) Exception for amounts paid to insured's 
                heirs.--Any amount received by reason of the death of an 
                insured to the extent--
                          ``(i) the amount is paid to a member of the 
                      family (within the meaning of section 267(c)(4)) 
                      of the insured, any individual who is the 
                      designated beneficiary of the insured under the 
                      contract (other than the applicable policyholder), 
                      a trust established for the benefit of any such 
                      member of the family or designated beneficiary, or 
                      the estate of the insured, or
                          ``(ii) the amount is used to purchase an 
                      equity (or capital or profits) interest in the 
                      applicable policyholder from any person described 
                      in clause (i).
            ``(3) Employer-owned life insurance contract.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `employer-owned life insurance contract' means 
                a life insurance contract which--
                          ``(i) is owned by a person engaged in a trade 
                      or business and under which such person (or a 
                      related person described in subparagraph (B)(ii)) 
                      is directly or indirectly a beneficiary under the 
                      contract, and
                          ``(ii) covers the life of an insured who is an 
                      employee with respect to the trade or business of 
                      the applicable policyholder on the date the 
                      contract is issued.
                For purposes of the preceding sentence, if coverage for 
                each insured under a master contract is treated as a 
                separate contract for purposes of sections 817(h), 7702, 
                and 7702A, coverage for each such insured shall be 
                treated as a separate contract.
                    ``(B) Applicable policyholder.--For purposes of this 
                subsection--
                          ``(i) In general.--The term `applicable 
                      policyholder' means, with respect to any employer-
                      owned life insurance contract, the person 
                      described in subparagraph (A)(i) which owns the 
                      contract.
                          ``(ii) Related persons.--The term `applicable 
                      policyholder' includes any person which--
                                    ``(I) bears a relationship to the 
                                person described in clause (i) which is 
                                specified in section 267(b) or 
                                707(b)(1), or
                                    ``(II) is engaged in trades or 
                                businesses with such person which are 
                                under common control
                                (within the meaning of subsection (a) or 
                                (b) of section 52).
            ``(4) Notice and consent requirements.--The notice and 
        consent requirements of this paragraph are met if, before the 
        issuance of the contract, the employee--
                    ``(A) is notified in writing that the applicable 
                policyholder intends to insure the employee's life and 
                the maximum face amount for which the employee could be 
                insured at the time the contract was issued,
                    ``(B) provides written consent to being insured 
                under the contract and that such coverage may continue 
                after the insured terminates employment, and
                    ``(C) is informed in writing that an applicable 
                policyholder will be a beneficiary of any proceeds 
                payable upon the death of the employee.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Employee.--The term `employee' includes an 
                officer, director, and highly compensated employee 
                (within the meaning of section 414(q)).
                    ``(B) Insured.--The term `insured' means, with 
                respect to an employer-owned life insurance contract, an 
                individual covered by the contract who is a United 
                States citizen or resident. In the case of a contract 
                covering the joint lives of 2 individuals, references to 
                an insured include both of the individuals.''.

    (b) Reporting Requirements.--Subpart A of part III of subchapter A 
of chapter 61 of the Internal Revenue Code of 1986 (relating to 
information concerning persons subject to special provisions) is amended 
by inserting after section 6039H the following new section:

``SEC. 6039I. RETURNS AND RECORDS WITH RESPECT 
            TO EMPLOYER-OWNED LIFE INSURANCE CONTRACTS.

    ``(a)  In General.--Every applicable 
policyholder owning 1 or more employer-owned life insurance contracts 
issued after the date of the enactment of this section shall file a 
return (at such time and in such manner as the Secretary shall by 
regulations prescribe) showing for each year such contracts are owned--
            ``(1) the number of employees of the applicable policyholder 
        at the end of the year,
            ``(2) the number of such employees insured under such 
        contracts at the end of the year,
            ``(3) the total amount of insurance in force at the end of 
        the year under such contracts,
            ``(4) the name, address, and taxpayer identification number 
        of the applicable policyholder and the type of business in which 
        the policyholder is engaged, and
            ``(5) that the applicable policyholder has a valid consent 
        for each insured employee (or, if all such consents are not 
        obtained, the number of insured employees for whom such consent 
        was not obtained).

    ``(b) Recordkeeping Requirement.--Each applicable policyholder 
owning 1 or more employer-owned life insurance contracts during any year 
shall keep such records as may be necessary for purposes of determining 
whether the requirements of this section and section 101(j) are met.
    ``(c) Definitions.--Any term used in this section which is used in 
section 101(j) shall have the same meaning given such term by section 
101(j).''.
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 101(a) of the Internal Revenue 
        Code of 1986 is amended by striking ``and 
        subsection (f)'' and inserting ``subsection (f), and subsection 
        (j)''.
            (2) The table of sections for subpart A of part III of 
        subchapter A of chapter 61 of such Code is amended by inserting 
        after the item relating to section 6039H the following new item:

``Sec. 6039I. Returns and records with respect to employer-owned life 
           insurance contracts.''.

    (d) Effective Date.--The 
amendments made by this section shall apply to life insurance contracts 
issued after the date of the enactment of this Act, except for a 
contract issued after such date pursuant to an exchange described in 
section 1035 of the Internal Revenue Code of 1986 for a contract issued 
on or prior to that date. For purposes of the preceding sentence, any 
material increase in the death benefit or other material change shall 
cause the contract to be treated as a new contract except that, in the 
case of a master contract (within the meaning of section 264(f)(4)(E) of 
such Code), the addition of covered lives shall be treated as a new 
contract only with respect to such additional covered lives.

SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS WHO ASSIST IN 
            THE ADMINISTRATION OF COLLEGE ENTRANCE AND PLACEMENT EXAMS.

    (a) In General.--Section 530 of the Revenue Reconciliation Act of 
1978 is amended by adding at the end the 
following new subsection:

    ``(f) Treatment of Test Room Supervisors and Proctors Who Assist in 
the Administration of College Entrance and Placement Exams.--
            ``(1)  In general.--In the case of 
        an individual described in paragraph (2) who is providing 
        services as a test proctor or room supervisor by assisting in 
        the administration of college entrance or placement 
        examinations, this section shall be applied to such services 
        performed after December 31, 2006 (and remuneration paid for 
        such services) without regard to subsection (a)(3) thereof.
            ``(2) Applicability.--An individual is described in this 
        paragraph if the individual--
                    ``(A) is providing the services described in 
                subsection (a) to an organization described in section 
                501(c), and exempt from tax under section 501(a), of the 
                Internal Revenue Code of 1986, and
                    ``(B) is not otherwise treated as an employee of 
                such organization for purposes of subtitle C of such 
                Code (relating to employment taxes).''.

    (b) Effective Date.--The amendment made 
by this section shall apply to remuneration for services performed after 
December 31, 2006.

SEC. 865. GRANDFATHER RULE FOR CHURCH PLANS 
            WHICH SELF-ANNUITIZE.

    (a) In General.--In the case of any plan year ending after the date 
of the enactment of this Act, annuity payments provided with respect to 
any account maintained for a participant or beneficiary under a 
qualified church plan shall not fail to satisfy the requirements of 
section 401(a)(9) of the Internal Revenue Code of 1986 merely because 
the payments are not made under an annuity contract purchased from an 
insurance company if such payments would not fail such requirements if 
provided with respect to a retirement income account described in 
section 403(b)(9) of such Code.
    (b) Qualified Church Plan.--For purposes of this section, the term 
``qualified church plan'' means any money purchase pension plan 
described in section 401(a) of such Code which--
            (1) is a church plan (as defined in section 414(e) of such 
        Code) with respect to which the election provided by section 
        410(d) of such Code has not been made, and
            (2) was in existence on April 17, 2002.

SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED REAL ESTATE HELD BY CHURCH 
            PLANS.

    (a) In General.--Section 514(c)(9)(C) of the Internal Revenue Code 
of 1986 is amended by striking ``or'' after clause 
(ii), by striking the period at the end of clause (iii) and inserting 
``; or'', and by inserting after clause (iii) the following:
                          ``(iv) a retirement income account described 
                      in section 403(b)(9).''.

    (b) Effective Date.--The amendment made 
by subsection (a) shall apply to taxable years beginning on or after the 
date of enactment of this Act.

SEC. 867. CHURCH PLAN RULE.

    (a) In General.--Paragraph (11) of section 415(b) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following: 
``Subparagraph (B) of paragraph (1) shall not apply to a plan maintained 
by an organization described in section 3121(w)(3)(A) except with 
respect to highly compensated benefits. For purposes of this paragraph, 
the term `highly compensated benefits' means any benefits accrued for an 
employee in any year on or after the first year in which such employee 
is a highly compensated employee (as defined in section 414(q)) of the 
organization described in section 3121(w)(3)(A). For purposes of 
applying paragraph (1)(B) to highly compensated benefits, all benefits 
of the employee otherwise taken into account (without regard to this 
paragraph) shall be taken into account.''.
    (b) Effective Date.--The amendment made 
by this section shall apply to years beginning after December 31, 2006.

SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EMPLOYEES.

    (a) In General.--Subparagraph (E) of section 664(g)(3) of the 
Internal Revenue Code of 1986 is amended by inserting ``(determined on 
the basis of fair market value of securities when allocated to 
participants)'' after ``paragraph (7)''.
    (b) Effective Date.--The amendment made 
by this section shall take effect on the date of the enactment of this 
Act.

TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND 
                        OTHER PENSION PROVISIONS

SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE EMPLOYEES WITH 
            FREEDOM TO INVEST THEIR PLAN ASSETS.

    (a) Amendments of Internal Revenue Code.--
            (1) Qualification requirement.--Section 401(a) of the 
        Internal Revenue Code of 1986 (relating to 
        qualified pension, profit-sharing, and stock bonus plans) is 
        amended by inserting after paragraph (34) the following new 
        paragraph:
            ``(35) Diversification requirements for certain defined 
        contribution plans.--
                    ``(A) In general.--A trust which is part of an 
                applicable defined contribution plan shall not be 
                treated as a qualified trust unless the plan meets the 
                diversification requirements of subparagraphs (B), (C), 
                and (D).
                    ``(B) Employee contributions and elective deferrals 
                invested in employer securities.--In the case of the 
                portion of an applicable individual's account 
                attributable to employee contributions and elective 
                deferrals which is invested in employer securities, a 
                plan meets the requirements of this subparagraph if the 
                applicable individual may elect to direct the plan to 
                divest any such securities and to reinvest an equivalent 
                amount in other investment options meeting the 
                requirements of subparagraph (D).
                    ``(C) Employer contributions invested in employer 
                securities.--In the case of the portion of the account 
                attributable to employer contributions other than 
                elective deferrals which is invested in employer 
                securities, a plan meets the requirements of this 
                subparagraph if each applicable individual who--
                          ``(i) is a participant who has completed at 
                      least 3 years of service, or
                          ``(ii) is a beneficiary of a participant 
                      described in clause (i) or of a deceased 
                      participant,
                may elect to direct the plan to divest any such 
                securities and to reinvest an equivalent amount in other 
                investment options meeting the requirements of 
                subparagraph (D).
                    ``(D) Investment options.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if the plan offers not less 
                      than 3 investment options, other than employer 
                      securities, to which an applicable individual may 
                      direct the proceeds from the divestment of 
                      employer securities pursuant to this paragraph, 
                      each of which is diversified and has materially 
                      different risk and return characteristics.
                          ``(ii) Treatment of certain restrictions and 
                      conditions.--
                                    ``(I) Time for making investment 
                                choices.--A plan shall not be treated as 
                                failing to meet the requirements of this 
                                subparagraph merely because the plan 
                                limits the time for divestment and 
                                reinvestment to periodic, reasonable 
                                opportunities occurring no less 
                                frequently than quarterly.
                                    ``(II) Certain restrictions and 
                                conditions not allowed.--Except as 
                                provided in regulations, a plan shall 
                                not meet the requirements of this 
                                subparagraph if the plan imposes 
                                restrictions or conditions with respect 
                                to the investment of employer securities 
                                which are not imposed on the investment 
                                of other assets of the plan. This 
                                subclause shall not apply to any 
                                restrictions or conditions imposed by 
                                reason of the application of securities 
                                laws.
                    ``(E) Applicable defined contribution plan.--For 
                purposes of this paragraph--
                          ``(i) In general.--The term `applicable 
                      defined contribution plan' means any defined 
                      contribution plan which holds any publicly traded 
                      employer securities.
                          ``(ii) Exception for certain esops.--Such term 
                      does not include an employee stock ownership plan 
                      if--
                                    ``(I) there are no contributions to 
                                such plan (or earnings thereunder) which 
                                are held within such plan and are 
                                subject to subsection (k) or (m), and
                                    ``(II) such plan is a separate plan 
                                for purposes of section 414(l) with 
                                respect to any other defined benefit 
                                plan or defined contribution plan 
                                maintained by the same employer or 
                                employers.
                          ``(iii) Exception for one participant plans.--
                      Such term does not include a one-participant 
                      retirement plan.
                          ``(iv) One-participant retirement plan.--For 
                      purposes of clause (iii), the term `one-
                      participant retirement plan' means a retirement 
                      plan that--
                                    ``(I) on the first day of the plan 
                                year covered only one individual (or the 
                                individual and the individual's spouse) 
                                and the individual owned 100 percent of 
                                the plan sponsor (whether or not 
                                incorporated), or covered only one or 
                                more partners (or partners and their 
                                spouses) in the plan sponsor,
                                    ``(II) meets the minimum coverage 
                                requirements of section 410(b) without 
                                being combined with any other plan of 
                                the business that covers the employees 
                                of the business,
                                    ``(III) does not provide benefits to 
                                anyone except the individual (and the 
                                individual's spouse) or the partners 
                                (and their spouses),
                                    ``(IV) does not cover a business 
                                that is a member of an affiliated 
                                service group, a controlled group of 
                                corporations, or a group of businesses 
                                under common control, and
                                    ``(V) does not cover a business that 
                                uses the services of leased employees 
                                (within the meaning of section 414(n)).
                      For purposes of this clause, the term `partner' 
                      includes a 2-percent shareholder (as defined in 
                      section 1372(b)) of an S corporation.
                    ``(F) Certain plans treated as holding publicly 
                traded employer securities.--
                          ``(i) In general.--Except as provided in 
                      regulations or in clause (ii), a plan holding 
                      employer securities which are not publicly traded 
                      employer securities shall be treated as holding 
                      publicly traded employer securities if any 
                      employer corporation, or any member of a 
                      controlled group of corporations which includes 
                      such employer corporation, has issued a class of 
                      stock which is a publicly traded employer 
                      security.
                          ``(ii) Exception for certain controlled groups 
                      with publicly traded securities.--Clause (i) shall 
                      not apply to a plan if--
                                    ``(I) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any publicly 
                                traded employer security, and
                                    ``(II) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any special 
                                class of stock which grants particular 
                                rights to, or bears particular risks 
                                for, the holder or issuer with respect 
                                to any corporation described in clause 
                                (i) which has issued any publicly traded 
                                employer security.
                          ``(iii) Definitions.--For purposes of this 
                      subparagraph, the term--
                                    ``(I) `controlled group of 
                                corporations' has the meaning given such 
                                term by section 1563(a), except that `50 
                                percent' shall be substituted for `80 
                                percent' each place it appears,
                                    ``(II) `employer corporation' means 
                                a corporation which is an employer 
                                maintaining the plan, and
                                    ``(III) `parent corporation' has the 
                                meaning given such term by section 
                                424(e).
                    ``(G) Other definitions.--For purposes of this para- 
                graph--
                          ``(i) Applicable individual.--The term 
                      `applicable individual' means--
                                    ``(I) any participant in the plan, 
                                and
                                    ``(II) any beneficiary who has an 
                                account under the plan with respect to 
                                which the beneficiary is entitled to 
                                exercise the rights of a participant.
                          ``(ii) Elective deferral.--The term `elective 
                      deferral' means an employer contribution described 
                      in section 402(g)(3)(A).
                          ``(iii) Employer security.--The term `employer 
                      security' has the meaning given such term by 
                      section 407(d)(1) of the Employee Retirement 
                      Income Security Act of 1974.
                          ``(iv) Employee stock ownership plan.--The 
                      term `employee stock ownership plan' has the 
                      meaning given such term by section 4975(e)(7).
                          ``(v) Publicly traded employer securities.--
                      The term `publicly traded employer securities' 
                      means employer securities which are readily 
                      tradable on an established securities market.
                          ``(vi) Year of service.--The term `year of 
                      service' has the meaning given such term by 
                      section 411(a)(5).
                    ``(H) Transition rule for securities attributable to 
                employer contributions.--
                          ``(i) Rules phased in over 3 years.--
                                    ``(I)  In 
                                general.--In the case of the portion of 
                                an account to which subparagraph (C) 
                                applies and which consists of employer 
                                securities acquired in a plan year 
                                beginning before January 1, 2007, 
                                subparagraph (C) shall only apply to the 
                                applicable percentage of such 
                                securities. This subparagraph shall be 
                                applied separately with respect to each 
                                class of securities.
                                    ``(II) Exception for certain 
                                participants aged 55 or over.--Subclause 
                                (I) shall not apply to an applicable 
                                individual who is a participant who has 
                                attained age 55 and completed at least 3 
                                years of service before the first plan 
                                year beginning after December 31, 2005.
                          ``(ii) Applicable percentage.--For purposes of 
                      clause (i), the applicable percentage shall be 
                      determined as follows:

              ``Plan year to wThe applicable............................
                subparagraph (percentage is:............................
    applies:

                      1st.........................................   33 
                      2d..........................................   66 
                      3d and following...........................100.''.

            (2) Conforming amendments.--
                    (A) Section 401(a)(28)(B) of such Code (relating to additional requirements relating 
                to employee stock ownership plans) is amended by adding 
                at the end the following new clause:
                          ``(v) Exception.--This subparagraph shall not 
                      apply to an applicable defined contribution plan 
                      (as defined in paragraph (35)(E)).''.
                    (B) Section 409(h)(7) of such Code is amended by 
                inserting ``or subparagraph (B) or (C) of section 
                401(a)(35)'' before the period at the end.
                    (C) Section 4980(c)(3)(A) of such Code is amended by 
                striking ``if--'' and all that follows and inserting 
                ``if the requirements of subparagraphs (B), (C), and (D) 
                are met.''.

    (b) Amendments of ERISA.--
            (1) In general.--Section 204 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1054) is amended by 
        redesignating subsection (j) as subsection (k) and by inserting 
        after subsection (i) the following new subsection:

    ``(j) Diversification Requirements for Certain Individual Account 
Plans.--
            ``(1) In general.--An applicable individual account plan 
        shall meet the diversification requirements of paragraphs (2), 
        (3), and (4).
            ``(2) Employee contributions and elective deferrals invested 
        in employer securities.--In the case of the portion of an 
        applicable individual's account attributable to employee 
        contributions and elective deferrals which is invested in 
        employer securities, a plan meets the requirements of this 
        paragraph if the applicable individual may elect to direct the 
        plan to divest any such securities and to reinvest an equivalent 
        amount in other investment options meeting the requirements of 
        paragraph (4).
            ``(3) Employer contributions invested in employer 
        securities.--In the case of the portion of the account 
        attributable to employer contributions other than elective 
        deferrals which is invested in employer securities, a plan meets 
        the requirements of this paragraph if each applicable individual 
        who--
                    ``(A) is a participant who has completed at least 3 
                years of service, or
                    ``(B) is a beneficiary of a participant described in 
                subparagraph (A) or of a deceased participant,
        may elect to direct the plan to divest any such securities and 
        to reinvest an equivalent amount in other investment options 
        meeting the requirements of paragraph (4).
            ``(4) Investment options.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the plan offers not less than 3 
                investment options, other than employer securities, to 
                which an applicable individual may direct the proceeds 
                from the divestment of employer securities pursuant to 
                this subsection, each of which is diversified and has 
                materially different risk and return characteristics.
                    ``(B) Treatment of certain restrictions and 
                conditions.--
                          ``(i) Time for making investment choices.--A 
                      plan shall not be treated as failing to meet the 
                      requirements of this paragraph merely because the 
                      plan limits the time for divestment and 
                      reinvestment to periodic, reasonable opportunities 
                      occurring no less frequently than quarterly.
                          ``(ii) Certain restrictions and conditions not 
                      allowed.--Except as provided in regulations, a 
                      plan shall not meet the requirements of this 
                      paragraph if the plan imposes restrictions or 
                      conditions with respect to the investment of 
                      employer securities which are not imposed on the 
                      investment of other assets of the plan. This 
                      subparagraph shall not apply to any restrictions 
                      or conditions imposed by reason of the application 
                      of securities laws.
            ``(5) Applicable individual account plan.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `applicable individual 
                account plan' means any individual account plan (as 
                defined in section 3(34)) which holds any publicly 
                traded employer securities.
                    ``(B) Exception for certain esops.--Such term does 
                not include an employee stock ownership plan if--
                          ``(i) there are no contributions to such plan 
                      (or earnings thereunder) which are held within 
                      such plan and are subject to subsection (k) or (m) 
                      of section 401 of the Internal Revenue Code of 
                      1986, and
                          ``(ii) such plan is a separate plan (for 
                      purposes of section 414(l) of such Code) with 
                      respect to any other defined benefit plan or 
                      individual account plan maintained by the same 
                      employer or employers.
                    ``(C) Exception for one participant plans.--Such 
                term shall not include a one-participant retirement plan 
                (as defined in section 101(i)(8)(B)).
                    ``(D) Certain plans treated as holding publicly 
                traded employer securities.--
                          ``(i) In general.--Except as provided in 
                      regulations or in clause (ii), a plan holding 
                      employer securities which are not publicly traded 
                      employer securities shall be treated as holding 
                      publicly traded employer securities if any 
                      employer corporation, or any member of a 
                      controlled group of corporations which includes 
                      such employer corporation, has issued a class of 
                      stock which is a publicly traded employer 
                      security.
                          ``(ii) Exception for certain controlled groups 
                      with publicly traded securities.--Clause (i) shall 
                      not apply to a plan if--
                                    ``(I) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any publicly 
                                traded employer security, and
                                    ``(II) no employer corporation, or 
                                parent corporation of an employer 
                                corporation, has issued any special 
                                class of stock which grants particular 
                                rights to, or bears particular risks 
                                for, the holder or issuer with respect 
                                to any corporation described in clause 
                                (i) which has issued any publicly traded 
                                employer security.
                          ``(iii) Definitions.--For purposes of this 
                      subparagraph, the term--
                                    ``(I) `controlled group of 
                                corporations' has the meaning given such 
                                term by section 1563(a) of the Internal 
                                Revenue Code of 1986, except that `50 
                                percent' shall be substituted for `80 
                                percent' each place it appears,
                                    ``(II) `employer corporation' means 
                                a corporation which is an employer 
                                maintaining the plan, and
                                    ``(III) `parent corporation' has the 
                                meaning given such term by section 
                                424(e) of such Code.
            ``(6) Other definitions.--For purposes of this paragraph--
                    ``(A) Applicable individual.--The term `applicable 
                individual' means--
                          ``(i) any participant in the plan, and
                          ``(ii) any beneficiary who has an account 
                      under the plan with respect to which the 
                      beneficiary is entitled to exercise the rights of 
                      a participant.
                    ``(B) Elective deferral.--The term `elective 
                deferral' means an employer contribution described in 
                section 402(g)(3)(A) of the Internal Revenue Code of 
                1986.
                    ``(C) Employer security.--The term `employer 
                security' has the meaning given such term by section 
                407(d)(1).
                    ``(D) Employee stock ownership plan.--The term 
                `employee stock ownership plan' has the meaning given 
                such term by section 4975(e)(7) of such Code.
                    ``(E) Publicly traded employer securities.--The term 
                `publicly traded employer securities' means employer 
                securities which are readily tradable on an established 
                securities market.
                    ``(F) Year of service.--The term `year of service' 
                has the meaning given such term by section 203(b)(2).
            ``(7) Transition rule for securities attributable to 
        employer contributions.--
                    ``(A) Rules phased in over 3 years.--
                          ``(i) In general.--In 
                      the case of the portion of an account to which 
                      paragraph (3) applies and which consists of 
                      employer securities acquired in a plan year 
                      beginning before January 1, 2007, paragraph (3) 
                      shall only apply to the applicable percentage of 
                      such securities. This subparagraph shall be 
                      applied separately with respect to each class of 
                      securities.
                          ``(ii) Exception for certain participants aged 
                      55 or over.--Clause (i) shall not apply to an 
                      applicable individual who is a participant who has 
                      attained age 55 and completed at least 3 years of 
                      service before the first plan year beginning after 
                      December 31, 2005.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

          ``Plan year to whichThe applicable............................
            paragraph (3) applpercentage is:............................

                  1st.............................................   33 
                  2d..............................................   66 
                  3d.............................................100.''.

            (2) Conforming amendment.--Section 407(b)(3) of such Act (29 
        U.S.C. 1107(b)(3)) is amended by adding at the end the 
        following:
            ``(D) For diversification requirements for qualifying 
        employer securities held in certain individual account plans, 
        see section 204(j).''.

    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to plan 
        years beginning after December 31, 2006.
            (2) Special rule for collectively 
        bargained agreements.--In the case of a plan maintained pursuant 
        to 1 or more collective bargaining agreements between employee 
        representatives and 1 or more employers ratified on or before 
        the date of the enactment of this Act, paragraph (1) shall be 
        applied to benefits pursuant to, and individuals covered by, any 
        such agreement by substituting for ``December 31, 2006'' the 
        earlier of--
                    (A) the later of--
                          (i) December 31, 2007, or
                          (ii) the date on which the last of such 
                      collective bargaining agreements terminates 
                      (determined without regard to any extension 
                      thereof after such date of enactment), or
                    (B) December 31, 2008.
            (3) Special rule for certain employer securities held in an 
        esop.--
                    (A) In general.--In the case of employer securities 
                to which this paragraph applies, the amendments made by 
                this section shall apply to plan years beginning after 
                the earlier of--
                          (i) December 31, 2007, or
                          (ii) the first date on which the fair market 
                      value of such securities exceeds the guaranteed 
                      minimum value described in subparagraph (B)(ii).
                    (B) Applicable securities.--This paragraph shall 
                apply to employer securities which are attributable to 
                employer contributions other than elective deferrals, 
                and which, on September 17, 2003--
                          (i) consist of preferred stock, and
                          (ii) are within an employee stock ownership 
                      plan (as defined in section 4975(e)(7) of the 
                      Internal Revenue Code of 1986), the terms of which 
                      provide that the value of the securities cannot be 
                      less than the guaranteed minimum value specified 
                      by the plan on such date.
                    (C) Coordination with transition rule.--In applying 
                section 401(a)(35)(H) of the Internal Revenue Code of 
                1986 and section 204(j)(7) of the Employee Retirement 
                Income Security Act of 1974 (as added by this section) 
                to employer securities to which this paragraph applies, 
                the applicable percentage shall be determined without 
                regard to this paragraph.

SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION 
            ARRANGEMENTS.

    (a) In General.--Section 401(k) of the Internal Revenue Code of 
1986  (relating to cash or deferred arrangement) is 
amended by adding at the end the following new paragraph:
            ``(13) Alternative method for automatic contribution 
        arrangements to meet nondiscrimination requirements.--
                    ``(A) In general.--A qualified automatic 
                contribution arrangement shall be treated as meeting the 
                requirements of paragraph (3)(A)(ii).
                    ``(B) Qualified automatic contribution 
                arrangement.--For purposes of this paragraph, the term 
                `qualified automatic contribution arrangement' means any 
                cash or deferred arrangement which meets the 
                requirements of subparagraphs (C) through (E).
                    ``(C) Automatic deferral.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if, under the arrangement, 
                      each employee eligible to participate in the 
                      arrangement is treated as having elected to have 
                      the employer make elective contributions in an 
                      amount equal to a qualified percentage of 
                      compensation.
                          ``(ii) Election out.--The election treated as 
                      having been made under clause (i) shall cease to 
                      apply with respect to any employee if such 
                      employee makes an affirmative election--
                                    ``(I) to not have such contributions 
                                made, or
                                    ``(II) to make elective 
                                contributions at a level specified in 
                                such affirmative election.
                          ``(iii) Qualified percentage.--For purposes of 
                      this subparagraph, the term `qualified percentage' 
                      means, with respect to any employee, any 
                      percentage determined under the arrangement if 
                      such percentage is applied uniformly, does not 
                      exceed 10 percent, and is at least--
                                    ``(I) 3 percent during the period 
                                ending on the last day of the first plan 
                                year which begins after the date on 
                                which the first elective contribution 
                                described in clause (i) is made with 
                                respect to such employee,
                                    ``(II) 4 percent during the first 
                                plan year following the plan year 
                                described in subclause (I),
                                    ``(III) 5 percent during the second 
                                plan year following the plan year 
                                described in subclause (I), and
                                    ``(IV) 6 percent during any 
                                subsequent plan year.
                          ``(iv) Automatic deferral for current 
                      employees not required.--Clause (i) may be applied 
                      without taking into account any employee who--
                                    ``(I) was eligible to participate in 
                                the arrangement (or a predecessor 
                                arrangement) immediately before the date 
                                on which such arrangement becomes a 
                                qualified automatic contribution 
                                arrangement (determined after 
                                application of this clause), and
                                    ``(II) had an election in effect on 
                                such date either to participate in the 
                                arrangement or to not participate in the 
                                arrangement.
                    ``(D) Matching or nonelective contributions.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if, under the arrangement, 
                      the employer--
                                    ``(I) makes matching contributions 
                                on behalf of each employee who is not a 
                                highly compensated employee in an amount 
                                equal to the sum of 100 percent of the 
                                elective contributions of the employee 
                                to the extent that such contributions do 
                                not exceed 1 percent of compensation 
                                plus 50 percent of so much of such 
                                compensation as exceeds 1 percent but 
                                does not exceed 6 percent of 
                                compensation, or
                                    ``(II) is required, without regard 
                                to whether the employee makes an 
                                elective contribution or employee 
                                contribution, to make a contribution to 
                                a defined contribution plan on behalf of 
                                each employee who is not a highly 
                                compensated employee and who is eligible 
                                to participate in the
                                arrangement in an amount equal to at 
                                least 3 percent of the employee's 
                                compensation.
                          ``(ii) Application of rules for matching 
                      contributions.--The rules of clauses (ii) and 
                      (iii) of paragraph (12)(B) shall apply for 
                      purposes of clause (i)(I).
                          ``(iii) Withdrawal and vesting restrictions.--
                      An arrangement shall not be treated as meeting the 
                      requirements of clause (i) unless, with respect to 
                      employer contributions (including matching 
                      contributions) taken into account in determining 
                      whether the requirements of clause (i) are met--
                                    ``(I) any employee who has completed 
                                at least 2 years of service (within the 
                                meaning of section 411(a)) has a 
                                nonforfeitable right to 100 percent of 
                                the employee's accrued benefit derived 
                                from such employer contributions, and
                                    ``(II) the requirements of 
                                subparagraph (B) of paragraph (2) are 
                                met with respect to all such employer 
                                contributions.
                          ``(iv) Application of certain other rules.--
                      The rules of subparagraphs (E)(ii) and (F) of 
                      paragraph (12) shall apply for purposes of 
                      subclauses (I) and (II) of clause (i).
                    ``(E) Notice requirements.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if, within a reasonable 
                      period before each plan year, each employee 
                      eligible to participate in the arrangement for 
                      such year receives written notice of the 
                      employee's rights and obligations under the 
                      arrangement which--
                                    ``(I) is sufficiently accurate and 
                                comprehensive to apprise the employee of 
                                such rights and obligations, and
                                    ``(II) is written in a manner 
                                calculated to be understood by the 
                                average employee to whom the arrangement 
                                applies.
                          ``(ii) Timing and content requirements.--A 
                      notice shall not be treated as meeting the 
                      requirements of clause (i) with respect to an 
                      employee unless--
                                    ``(I) the notice explains the 
                                employee's right under the arrangement 
                                to elect not to have elective 
                                contributions made on the employee's 
                                behalf (or to elect to have such 
                                contributions made at a different 
                                percentage),
                                    ``(II) in the case of an arrangement 
                                under which the employee may elect among 
                                2 or more investment options, the notice 
                                explains how contributions made under 
                                the arrangement will be invested in the 
                                absence of any investment election by 
                                the employee, and
                                    ``(III) the employee has a 
                                reasonable period of time after receipt 
                                of the notice described in subclauses 
                                (I) and (II) and before the first 
                                elective contribution is made to make 
                                either such election.''.

    (b) Matching Contributions.--Section 401(m) of such Code (relating to nondiscrimination test for matching 
contributions and employee contributions) is amended by redesignating 
paragraph
(12) as paragraph (13) and by inserting after paragraph (11) the 
following new paragraph:
            ``(12) Alternative method for automatic contribution 
        arrangements.--A defined contribution plan shall be treated as 
        meeting the requirements of paragraph (2) with respect to 
        matching contributions if the plan--
                    ``(A) is a qualified automatic contribution 
                arrangement (as defined in subsection (k)(13)), and
                    ``(B) meets the requirements of paragraph 
                (11)(B).''.

    (c) Exclusion From Definition of Top-Heavy Plans.--
            (1) Elective contribution rule.--Clause (i) of section 
        416(g)(4)(H) of such Code is amended by 
        inserting ``or 401(k)(13)'' after ``section 401(k)(12)''.
            (2) Matching contribution rule.--Clause (ii) of section 
        416(g)(4)(H) of such Code is amended by inserting ``or 
        401(m)(12)'' after ``section 401(m)(11)''.

    (d) Treatment of Withdrawals of Contributions During First 90 
Days.--
            (1) In general.--Section 414 of the Internal Revenue Code of 
        1986 is amended by adding at the end the following new 
        subsection:

    ``(w) Special Rules for Certain Withdrawals From Eligible Automatic 
Contribution Arrangements.--
            ``(1) In general.--If an eligible automatic contribution 
        arrangement allows an employee to elect to make permissible 
        withdrawals--
                    ``(A) the amount of any such withdrawal shall be 
                includible in the gross income of the employee for the 
                taxable year of the employee in which the distribution 
                is made,
                    ``(B) no tax shall be imposed under section 72(t) 
                with respect to the distribution, and
                    ``(C) the arrangement shall not be treated as 
                violating any restriction on distributions under this 
                title solely by reason of allowing the withdrawal.
        In the case of any distribution to an employee by reason of an 
        election under this paragraph, employer matching contributions 
        shall be forfeited or subject to such other treatment as the 
        Secretary may prescribe.
            ``(2) Permissible withdrawal.--For purposes of this sub- 
        section--
                    ``(A) In general.--The term `permissible withdrawal' 
                means any withdrawal from an eligible automatic 
                contribution arrangement meeting the requirements of 
                this paragraph which--
                          ``(i) is made pursuant to an election by an 
                      employee, and
                          ``(ii) consists of elective contributions 
                      described in paragraph (3)(B) (and earnings 
                      attributable thereto).
                    ``(B) Time for making election.--Subparagraph (A) 
                shall not apply to an election by an employee unless the 
                election is made no later than the date which is 90 days 
                after the date of the first elective contribution with 
                respect to the employee under the arrangement.
                    ``(C) Amount of distribution.--Subparagraph (A) 
                shall not apply to any election by an employee unless 
                the amount of any distribution by reason of the election
                is equal to the amount of elective contributions made 
                with respect to the first payroll period to which the 
                eligible automatic contribution arrangement applies to 
                the employee and any succeeding payroll period beginning 
                before the effective date of the election (and earnings 
                attributable thereto).
            ``(3) Eligible automatic contribution arrangement.--For 
        purposes of this subsection, the term `eligible automatic 
        contribution arrangement' means an arrangement under an 
        applicable employer plan--
                    ``(A) under which a participant may elect to have 
                the employer make payments as contributions under the 
                plan on behalf of the participant, or to the participant 
                directly in cash,
                    ``(B) under which the participant is treated as 
                having elected to have the employer make such 
                contributions in an amount equal to a uniform percentage 
                of compensation provided under the plan until the 
                participant specifically elects not to have such 
                contributions made (or specifically elects to have such 
                contributions made at a different percentage),
                    ``(C) under which, in the absence of an investment 
                election by the participant, contributions described in 
                subparagraph (B) are invested in accordance with 
                regulations prescribed by the Secretary of Labor under 
                section 404(c)(5) of the Employee Retirement Income 
                Security Act of 1974, and
                    ``(D) which meets the requirements of paragraph (4).
            ``(4) Notice requirements.--
                    ``(A) In general.--The administrator of a plan 
                containing an arrangement described in paragraph (3) 
                shall, within a reasonable period before each plan year, 
                give to each employee to whom an arrangement described 
                in paragraph (3) applies for such plan year notice of 
                the employee's rights and obligations under the 
                arrangement which--
                          ``(i) is sufficiently accurate and 
                      comprehensive to apprise the employee of such 
                      rights and obligations, and
                          ``(ii) is written in a manner calculated to be 
                      understood by the average employee to whom the 
                      arrangement applies.
                    ``(B) Time and form of notice.--A notice shall not 
                be treated as meeting the requirements of subparagraph 
                (A) with respect to an employee unless--
                          ``(i) the notice includes an explanation of 
                      the employee's right under the arrangement to 
                      elect not to have elective contributions made on 
                      the employee's behalf (or to elect to have such 
                      contributions made at a different percentage),
                          ``(ii) the employee has a reasonable period of 
                      time after receipt of the notice described in 
                      clause (i) and before the first elective 
                      contribution is made to make such election, and
                          ``(iii) the notice explains how contributions 
                      made under the arrangement will be invested in the 
                      absence of any investment election by the 
                      employee.
            ``(5) Applicable employer plan.--For purposes of this 
        subsection, the term `applicable employer plan' means--
                    ``(A) an employees' trust described in section 
                401(a) which is exempt from tax under section 501(a),
                    ``(B) a plan under which amounts are contributed by 
                an individual's employer for an annuity contract 
                described in section 403(b), and
                    ``(C) an eligible deferred compensation plan 
                described in section 457(b) which is maintained by an 
                eligible employer described in section 457(e)(1)(A).
            ``(6) Special rule.--A withdrawal described in paragraph (1) 
        (subject to the limitation of paragraph (2)(C)) shall not be 
        taken into account for purposes of section 401(k)(3).''.
            (2) Vesting conforming amendments.--
                    (A) Section 411(a)(3)(G) of such Code is amended by inserting ``an erroneous automatic 
                contribution under section 414(w),'' after 
                ``402(g)(2)(A),''.
                    (B) The heading of section 411(a)(3)(G) of such Code 
                is amended by inserting ``or erroneous automatic 
                contribution'' before the period.
                    (C) Section 401(k)(8)(E) of such Code is amended by 
                inserting ``an erroneous automatic contribution under 
                section 414(w),'' after ``402(g)(2)(A),''.
                    (D) The heading of section 401(k)(8)(E) of such Code 
                is amended by inserting ``or erroneous automatic 
                contribution'' before the period.
                    (E) Section 203(a)(3)(F) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1053(a)(3)(F)) is 
                amended by inserting ``an erroneous automatic 
                contribution under section 414(w) of such Code,'' after 
                ``402(g)(2)(A) of such Code,''.

    (e) Excess Contributions.--
            (1) Expansion of corrective distribution period for 
        automatic contribution arrangements.--Subsection (f) of section 
        4979 of the Internal Revenue Code of 1986 is amended--
                    (A) by inserting ``(6 months in the case of an 
                excess contribution or excess aggregate contribution to 
                an eligible automatic contribution arrangement (as 
                defined in section 414(w)(3)))'' after ``2\1/2\ months'' 
                in paragraph (1), and
                    (B) by striking ``2\1/2\ Months of'' in the heading 
                and inserting ``Specified Period After''.
            (2) Year of inclusion.--Paragraph (2) of section 4979(f) of 
        such Code is amended to read as follows:
            ``(2) Year of inclusion.--Any amount distributed as provided 
        in paragraph (1) shall be treated as earned and received by the 
        recipient in the recipient's taxable year in which such 
        distributions were made.''.
            (3) Simplification of allocable earnings.--
                    (A) Section 4979.--Paragraph (1) of section 4979(f) 
                of such Code is amended by adding ``through the end of 
                the plan year for which the contribution was made'' 
                after ``thereto''.
                    (B) Section 401(k) and 401(m).--
                          (i) Clause (i) of section 401(k)(8)(A) of such 
                      Code is amended by adding ``through the end of 
                      such year'' after ``such contributions''.
                          (ii) Subparagraph (A) of section 401(m)(6) of 
                      such Code is amended by 
                      adding ``through the end of such year'' after ``to 
                      such contributions''.

    (f) Preemption of Conflicting State Regulation.--
            (1) In general.--Section 514 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1144) is amended by 
        adding at the end the following new subsection:

    ``(e)(1) Notwithstanding any other provision of this section, this 
title shall supersede any law of a State which would directly or 
indirectly prohibit or restrict the inclusion in any plan of an 
automatic contribution arrangement. The Secretary may prescribe 
regulations which would establish minimum standards that such an 
arrangement would be required to satisfy in order for this subsection to 
apply in the case of such arrangement.
    ``(2) For purposes of this subsection, the term `automatic 
contribution arrangement' means an arrangement--
            ``(A) under which a participant may elect to have the plan 
        sponsor make payments as contributions under the plan on behalf 
        of the participant, or to the participant directly in cash,
            ``(B) under which a participant is treated as having elected 
        to have the plan sponsor make such contributions in an amount 
        equal to a uniform percentage of compensation provided under the 
        plan until the participant specifically elects not to have such 
        contributions made (or specifically elects to have such 
        contributions made at a different percentage), and
            ``(C) under which such contributions are invested in 
        accordance with regulations prescribed by the Secretary under 
        section 404(c)(5).

    ``(3)(A) The plan administrator of an automatic contribution 
arrangement shall, within a reasonable period before such plan year, 
provide to each participant to whom the arrangement applies for such 
plan year notice of the participant's rights and obligations under the 
arrangement which--
            ``(i) is sufficiently accurate and comprehensive to apprise 
        the participant of such rights and obligations, and
            ``(ii) is written in a manner calculated to be understood by 
        the average participant to whom the arrangement applies.

    ``(B) A notice shall not be treated as meeting the requirements of 
subparagraph (A) with respect to a participant unless--
            ``(i) the notice includes an explanation of the 
        participant's right under the arrangement not to have elective 
        contributions made on the participant's behalf (or to elect to 
        have such contributions made at a different percentage),
            ``(ii) the participant has a reasonable period of time, 
        after receipt of the notice described in clause (i) and before 
        the first elective contribution is made, to make such election, 
        and
            ``(iii) the notice explains how contributions made under the 
        arrangement will be invested in the absence of any investment 
        election by the participant.''.
            (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C. 
        1132(c)(4)) is amended by striking ``or section 
        302(b)(7)(F)(vi)'' inserting ``, section 302(b)(7)(F)(vi), or 
        section 514(e)(3)''.

    (g) Effective Date.--The amendments made 
by this section shall apply to plan years beginning after December 31, 
2007, except that the amendments made by subsection (f) shall take 
effect on the date of the enactment of this Act.

SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND 
            QUALIFIED CASH OR DEFERRED ARRANGEMENTS.

    (a) Amendments of Internal Revenue Code.--Section 414 of the 
Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new 
subsection:

    ``(x) Special Rules for Eligible Combined Defined Benefit Plans and 
Qualified Cash or Deferred Arrangements.--
            ``(1) General rule.--Except as 
        provided in this subsection, the requirements of this title 
        shall be applied to any defined benefit plan or applicable 
        defined contribution plan which are part of an eligible combined 
        plan in the same manner as if each such plan were not a part of 
        the eligible combined plan.
            ``(2) Eligible combined plan.--For purposes of this sub- 
        section--
                    ``(A) In general.--The term `eligible combined plan' 
                means a plan--
                          ``(i) which is maintained by an employer 
                      which, at the time the plan is established, is a 
                      small employer,
                          ``(ii) which consists of a defined benefit 
                      plan and an applicable defined contribution plan,
                          ``(iii) the assets of which are held in a 
                      single trust forming part of the plan and are 
                      clearly identified and allocated to the defined 
                      benefit plan and the applicable defined 
                      contribution plan to the extent necessary for the 
                      separate application of this title under paragraph 
                      (1), and
                          ``(iv) with respect to which the benefit, 
                      contribution, vesting, and nondiscrimination 
                      requirements of subparagraphs (B), (C), (D), (E), 
                      and (F) are met.
                For purposes of this subparagraph, the term `small 
                employer' has the meaning given such term by section 
                4980D(d)(2), except that such section shall be applied 
                by substituting `500' for `50' each place it appears.
                    ``(B) Benefit requirements.--
                          ``(i) In general.--The benefit requirements of 
                      this subparagraph are met with respect to the 
                      defined benefit plan forming part of the eligible 
                      combined plan if the accrued benefit of each 
                      participant derived from employer contributions, 
                      when expressed as an annual retirement benefit, is 
                      not less than the applicable percentage of the 
                      participant's final average pay. For purposes of 
                      this clause, final average pay shall be determined 
                      using the period of consecutive years (not 
                      exceeding 5) during which the participant had the 
                      greatest aggregate compensation from the employer.
                          ``(ii) Applicable percentage.--For purposes of 
                      clause (i), the applicable percentage is the 
                      lesser of--
                                    ``(I) 1 percent multiplied by the 
                                number of years of service with the 
                                employer, or
                                    ``(II) 20 percent.
                          ``(iii) Special rule for applicable defined 
                      benefit plans.--If the defined benefit plan under 
                      clause (i) is an applicable defined benefit plan 
                      as defined in section 411(a)(13)(B) which meets 
                      the interest credit requirements of section 
                      411(b)(5)(B)(i), the plan shall
                      be treated as meeting the requirements of clause 
                      (i) with respect to any plan year if each 
                      participant receives a pay credit for the year 
                      which is not less than the percentage of 
                      compensation determined in accordance with the 
                      following table:

              ``If the partici .........................................
    as of the 
                beginning of t The percentage is--......................
    is--

                      30 or less..................................    2 
                      Over 30 but less than 40....................    4 
                      40 or over but less than 50.................    6 
                      50 or over..................................    8.

                          ``(iv) Years of service.--For purposes of this 
                      subparagraph, years of service shall be determined 
                      under the rules of paragraphs (4), (5), and (6) of 
                      section 411(a), except that the plan may not 
                      disregard any year of service because of a 
                      participant making, or failing to make, any 
                      elective deferral with respect to the qualified 
                      cash or deferred arrangement to which subparagraph 
                      (C) applies.
                    ``(C) Contribution requirements.--
                          ``(i) In general.--The contribution 
                      requirements of this subparagraph with respect to 
                      any applicable defined contribution plan forming 
                      part of an eligible combined plan are met if--
                                    ``(I) the qualified cash or deferred 
                                arrangement included in such plan 
                                constitutes an automatic contribution 
                                arrangement, and
                                    ``(II) the employer is required to 
                                make matching contributions on behalf of 
                                each employee eligible to participate in 
                                the arrangement in an amount equal to 50 
                                percent of the elective contributions of 
                                the employee to the extent such elective 
                                contributions do not exceed 4 percent of 
                                compensation.
                      Rules similar to the 
                      rules of clauses (ii) and (iii) of section 
                      401(k)(12)(B) shall apply for purposes of this 
                      clause.
                          ``(ii) Nonelective contributions.--An 
                      applicable defined contribution plan shall not be 
                      treated as failing to meet the requirements of 
                      clause (i) because the employer makes nonelective 
                      contributions under the plan but such 
                      contributions shall not be taken into account in 
                      determining whether the requirements of clause 
                      (i)(II) are met.
                    ``(D) Vesting requirements.--The vesting 
                requirements of this subparagraph are met if--
                          ``(i) in the case of a defined benefit plan 
                      forming part of an eligible combined plan an 
                      employee who has completed at least 3 years of 
                      service has a nonforfeitable right to 100 percent 
                      of the employee's accrued benefit under the plan 
                      derived from employer contributions, and
                          ``(ii) in the case of an applicable defined 
                      contribution plan forming part of eligible 
                      combined plan--
                                    ``(I) an employee has a 
                                nonforfeitable right to any matching 
                                contribution made under the
                                qualified cash or deferred arrangement 
                                included in such plan by an employer 
                                with respect to any elective 
                                contribution, including matching 
                                contributions in excess of the 
                                contributions required under 
                                subparagraph (C)(i)(II), and
                                    ``(II) an employee who has completed 
                                at least 3 years of service has a 
                                nonforfeitable right to 100 percent of 
                                the employee's accrued benefit derived 
                                under the arrangement from nonelective 
                                contributions of the employer.
                      For purposes of this 
                      subparagraph, the rules of section 411 shall apply 
                      to the extent not inconsistent with this 
                      subparagraph.
                    ``(E) Uniform provision of contributions and 
                benefits.--In the case of a defined benefit plan or 
                applicable defined contribution plan forming part of an 
                eligible combined plan, the requirements of this 
                subparagraph are met if all contributions and benefits 
                under each such plan, and all rights and features under 
                each such plan, must be provided uniformly to all 
                participants.
                    ``(F) Requirements must be met without taking into 
                account social security and similar contributions and 
                benefits or other plans.--
                          ``(i) In general.--The requirements of this 
                      subparagraph are met if the requirements of 
                      clauses (ii) and (iii) are met.
                          ``(ii) Social security and similar 
                      contributions.--The requirements of this clause 
                      are met if--
                                    ``(I) the requirements of 
                                subparagraphs (B) and (C) are met 
                                without regard to section 401(l), and
                                    ``(II) the requirements of sections 
                                401(a)(4) and 410(b) are met with 
                                respect to both the applicable defined 
                                contribution plan and defined benefit 
                                plan forming part of an eligible 
                                combined plan without regard to section 
                                401(l).
                          ``(iii) Other plans and arrangements.--The 
                      requirements of this clause are met if the 
                      applicable defined contribution plan and defined 
                      benefit plan forming part of an eligible combined 
                      plan meet the requirements of sections 401(a)(4) 
                      and 410(b) without being combined with any other 
                      plan.
            ``(3) Nondiscrimination requirements for qualified cash or 
        deferred arrangement.--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement which is included in an applicable defined 
                contribution plan forming part of an eligible combined 
                plan shall be treated as meeting the requirements of 
                section 401(k)(3)(A)(ii) if the requirements of 
                paragraph (2)(C) are met with respect to such 
                arrangement.
                    ``(B) Matching contributions.--In applying section 
                401(m)(11) to any matching contribution with respect to 
                a contribution to which paragraph (2)(C) applies, the 
                contribution requirement of paragraph (2)(C) and the 
                notice requirements of paragraph (5)(B) shall be 
                substituted for the requirements otherwise applicable 
                under clauses (i) and (ii) of section 401(m)(11)(A).
            ``(4) Satisfaction of top-heavy rules.--A defined benefit 
        plan and applicable defined contribution plan forming part of an 
        eligible combined plan for any plan year shall be treated as 
        meeting the requirements of section 416 for the plan year.
            ``(5) Automatic contribution arrangement.--For purposes of 
        this subsection--
                    ``(A) In general.--A qualified cash or deferred 
                arrangement shall be treated as an automatic 
                contribution arrangement if the arrangement--
                          ``(i) provides that each employee eligible to 
                      participate in the arrangement is treated as 
                      having elected to have the employer make elective 
                      contributions in an amount equal to 4 percent of 
                      the employee's compensation unless the employee 
                      specifically elects not to have such contributions