Title I - Pension Funding

Internal Revenue Servlce

1 1. SHORTTTITS,

2

This Act may be cited

as

the "Pension Funding Eq-

3 uity Act of 2004".

4
5

6

7

TXTLE I-PENSION FUNDING
SEC. 101. ~O~

REPIACEMEWX' OF 30-TFAR TREASURY RATE,

(a) EMPJ~OITE
P ~

~ EINCOME
~ N SECURITP
T
ACT

(A) h G E ~ ~ . - - C (ii)
~ ~ofU section
SB

3 02(b)( 5 )(B) of the Elmployee Retirement

111-

come Secwity Act of 1974 is amended by rc-

m d by inserting after sl--clause (31) the following new subclause:

"(u)SPW.~ULBbT,E FOIt YEARS
2005.-In

2004

the case of plan years be-

gjnnhg after December 31, 2005, m d be-

fore 3 m u q 1, 2006, the term 'pcrmis-

21

sible range' mcans a rate of interest which

is not allme, and not m c than 10 percent
below, the weighted average of the ratcs of

intcrest on amounts invested coxlservativcly

in long-term investment grade corporate
bonds during the $-year period ending o n

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of section 412 of the Internal Revenue Code of 1986
t o plan years beeinning after December 31, 2003,

the amendments made by t h i s section may bc ap-

plied

as

if such amendments had been in effect for

aJ prior plan years. The

Secretary of the

Tream*

may prescribe simplified assumptions wlGch miLy be

used in applying the amendments made by this set8
9

tion t o such prior plan years.

(3) TE~ANSITKON
EULE FOR,

SECTION 41.5 LIbfl-

of any. participant

hene-

10

T A ~ O N . - ~ ihc case

11

ficiary receiving a distribution after December 31,

12

2003 and before January 1, 2005, thc amour~tpay-

13

able rmder my farm of benefit subject to section

14

417 ( e )(3) of the Int.ernal Revent~cCode of 1 9 % and

15

subject t o adjustmerlt under section 415 (b)(2) (B) of

16

m-ch Code sliall not, solely by reason of

17

ment madc by subsection (b)(4), be less than the

nr

the

amend-

a m o r - that would have been so payable had the
amount payable been cleterrained using the &pplica.-

ble interest rate in effect as of the last day of t h e
last plan year beginning before January 1, 2004.
SEC. 102. ELECTION OF AL'IZ"RNAm DEFTCm REDUCTION

CONTRXISUTION*
( h ) -N~-NT

OF EPJSA.-Section

302 (d) of the

Employee RRtirement Incolae Security Actt of 1974 (29

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1 1T.S.C. 1085(d)) is amended by adding at the end the fol-

2 lowing new paragraph:
3

"(12) ELECTION
FOP.

~ E T A I HPLANS.-

4

"(A) IN GENERBL+-In
the case of a de-

5

fined benefit plan established and rnainkhed

6

by an applcdble employer, if tbis subsectim did

7

not apply t o t-he plan for the plan year begin-

8

ning

9

paragraph (6)1, then, at t11.c:clection of t h e em-

in 2000 (determined without regard

to

10

pIoyer, die increased amount un dcr p a . r & ~ ~ a p h

II

(1) for any applicable plan year s h d be the

12

greater of-

"(i)

13

20 percent

of t h e incrca,sed

14

m o u n t under paragaph ( I ) dctclmined

15

withont rega,rd t o this pazcwaph, o r
(

the hwcased m o u n t which

would be dctermined mder paragraph

(I)

if thc d&cit reduction contribution ur~dcr
paragraph ( 2 ) for the applicable plan year

=

were dctermined without regard to sub-

Is),and (D)of puagralph

21

puapaphs (A),

_

22

(2).

=

23

"(B) KESTHCTIONS

I_I

24

-s.--No

25

Jiabilities of the plan by rcason of any ine~case

-

I

--

=

-Fi_

=__
--

===
=
-

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ON

B E N E ~ m-

amendment which increases t h e

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in benefits, my change in the acczud of
fits, or any change in the rate at which benefits
become nonforfeikble under the plan shall be

adopted during any applicable plan yew,

unless"(i) the pltzn's emolled a c t c l ~ r ycer-

tifies (in such form and muxulcr prescribed
by t h e $ecretary of the Treasury) that t h e
amendment pro-rides for an increase in mnnal contributions which will exceed f i c increaee in mud charges t o the fimch~g

stmda3.d account attril-utable t o s~ze'n

~rner~dment,
or
lC(ii)the arnaldment is required by a

colIeetivc bargaining agreement which is in

effect on the date of enactment of this subparagraph.

If a plan is mended during an)- applichble plan
?car in violation of the preceding sentence, any
election under this paragraph slzall not apply t o
any applicable plan jrem ending on o r &,er t h e

date on u*hch.mch amendmeat i s adopted.
" (c) &PLICABLE EMPLOYER.-FO~
purposes of this paxagra.p'h, the t c m 'applicable

employer' means an employer which is-

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"(i) a commercial passenger airline,

" (ii) primarily engaged in the pmdnction. o r m m f a c t u r e of a steel mill product
or the processing of iron fire pellets, or

" (iii) an organization described in

sec-

tion 501(e)(5) of the Internal Revenue
Code of 1986 and which est&blifihcdthe

plun t o which this paragruph applies on

June 30, 1955.

"(D) APPLIWLE

PIAN

=&.-For

pur-

poses of this paragraphi1

(i) IN ~ ~ N E r n . - - ' $ h eterm 'applica-

ble plan yew' mems my plan year begin-

ning afkr December 2-7, 2003, and bcfore

Decemher 25, 2005, for w h i d ~ the em-

ployer clccts t h e application of this paragraph.

"(G) LIMITATIONO N

NUMUER OF

YEARS tvKICI-1 MAY BE ELECTED.-&

dec-

tion may not be made under this para-

graph with respect t o more than 2 plan
y e a s-

"(E;) NOTICE RXQUIXEREKNTS

FOR P U N S

ELECTING AtTERNATTVE DEFICTT RETXJCTION
CONTRIBUTIONS .-

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"(i)

IN G E ~ I U L . - -an
I ~employer

elects an dkrnutivc deficit rcduc~oncontribution m d e r tlis paragraph and section
412 (1)(12)of the Internal Bevenue Code of
1 9 8 6 for any year, the employer shall provide, witkin 30 days of' a

g ~e

election

for stlch year, written notice of the election
t o participants and beneficiaries .and t o the

Pension Benefit Gua;ra,~'~@
Corporation.
"(ii) N O T TT~O PARTICIPANTS AKD
B E N E ~ C M ?s.-The
~

notice undcr dame

(i) to pm-tieipants m d beneficiaries shall

include with respect t o m y election-

"(I) the due date of

the

dter-

native deficit reduction contribution

and the: amount by ~vhichs l c h contributinn

vas

reduced

from

the

m~ountwhich wodd h ~ v ebecn
,
owed

d the election were not made, and

"(TX)

a description of the benefits

under t h e plan which me eljgible t o be

guaranteed by the Pension Benefit
Guo;rmt;y Cuzporation axxd an expla-

nation of the

on the guar-

antee and the circmnstantcs under

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which such limitations apply, hclud-

ing the maximum guaranteed rnontHy
benefits which t l ~ cPension Benefit

Guarmty Corpora.rion would pay if
the plan terminated mhde underfunded.

"(iii) N ~ T I G E
TO PBQC.--T~~
notice
under clmsc (i) to t h e Fellsion &ncfit

G u u a n q Corporation shdl include"('I)
the information desrrihed in
clause (iij(I),

" (IX) t h e number of years it wiU
t a k e t o restore the plan to MI h d ing if tho employer otdy- ~n&cst h e re-

quired contribt~tions,m ~ i l

"(ILI) idorn~at~ion
as t o bow the

amount by which the plan is underfunded compares with the capitaliza-

tion of the empIoycr making the elec-

tion.

"(F) ~ ~ w I o N . - Belection
~
undcr this
pmagraph shaU be made at such time and in
such lrlamer as t h e Secretmy of the T r e a s q
may prescribe."

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16
1

(b) ~ D ~ W M E N OF
T 1986 CODE.-Section

412(1) of

2 the hternd Eevenue Code of 1986 (relating t o applica3 bility of subsection) is amended by addulg at the end the
4 f o l l o w i ~ ~new
g paragraph:

5
6

"(13) ELECTIONFOR

CZRTAIN PLANS.-

"(A) IN GENEEU,-IU

the case of

iz

de-

7

fined b encfit plan established ancl maintained

8

by an applicable employer, if t h i s subsection did

9

not apply to the: pTm for the plan ycar begin-

10

nhg in 2000 (detc~minedwithout regard t o

I1

paragraph (6)), then, at thc election of the em-

12

ployer, the increased amount rmder paragraph

13

(1) for ally npplicabIe plan year shall be the

14

greater of-

15

‘

16

20

percent

of the increased

amount under paragraph (1) dctcmzined
without regard t o tlis paragra.ph, o r
i

) the inerea.sed

amount which

would be determined under puagraph (1)

if the deficit reduehon con trhibutionunder
paragraph ( 2 ) for the applicable plar~year
were determined witliout regard t o sub-

puapaphs (A), (El, and (D) of puragaph

(2).

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I n t e r n a l R e ~ e n u eSer-rice

"(B) R E S T ~ C T I O NON
~

E E ~ F T T IN-

~ A S E S . - N Oamendment which increases the
liabilities of t h e plan by remon. of any inmease
in benefits, m y change in the accrual of bene-

fits, or any change in the rate at whkh benefits

become nonforfeitable under the pTxn slha.ll be
adopted during any applicable plan yea,

dess"(i)t h e plan's enrolled a c t u q ctr-

t.ifies (in such form and manner prescribed
by the. Secretary) Gl1a.t the mendment provides for an increase in a . m d contril~utiwm which will mceed the increme in an-

ma1 charges t o the fmding standard acconnt afdributable t o such tmendment , or
('(ii} t].>,eamendment is required by a
collective b a r g d n g agreemeat which is in
effect on the date of enactment of this sub-

paragraph-

lf a plan is amended during my applicalnle plan
y e a in violation of t h e preceding sentenm, my

election uniler t h i s puragraph shall not apply to
a.liy appieablc plat1 year ending ou or after t h c

date on which such amendment is a.dopted.

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( C ) ~ Y L I C A E L E EMPLoYEB.-Fo~ pUr-

poses of this paragraph, the- term 'applicxhle
employer' means an emplo37er mhch is-

"(i) a commercial passenger airhc,
"(ii) primarily engaged in the produetion or nzmafachwe of a, steel mil1 product

or t h e processing of iron ore pellets, or
"(iii) an orgmization describcil in see-

tion 501(c)(5) and wkch esbahlisl~ed the
which t h s paragraph applies on

plan

June 30, 1955.

"(D) A.PE)LIC,GLE

P

T

m&.-F~r
~
pur-

poses of this parag-rhph"(i)

IN ~ ~ m . m ~ . - T hterm
e:

ble plan year' means

tg?r

plan

'applica-

begin-

ning after December 27, 2003, and before
December 28, 2005, for wllich the cm-

ploycr elects the applic~~tion
of this para,gra,ph.

"(ii) TJWTATSON

ON

NUbIBER OF

YEARS W C R MAT RE EW~;CTED.-J~

elec-

tiou m y not be made undcr this pma,-ra?h with respect t o more than 2 plan
*Y'e$tTS.

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1

"

(E) ELECTION.--~~
election under t h i s

2

paragraph slzall be made at such t i m e and in

3

such manner as the Secretary may prescribe."

4

(c) EFFECT OF ELECTION.-An election under sec-

tion 302 (d)(12)of the Employee Retirement Il~comeSccurity Act of 1974 or section 412(1)(12) of the Internd Revenne Code of 1986 (as added by this section) with respect

t o a plan shall not invalidate any obligation (pwsumt t o
a cobectivc barg~uinga,peemeat in effect on the date of

the election) t o proviile benefits, t o .&ahge the ac:c.n~aiof

benefits, or to chmge the rate at which benefits beconzc
nonforfcitable m d c r the plan.

{d) PENALTY
FOR FBL~TNG
TO P R O - I ~
NOTTCE.E
Section 502(e)(3) of t I ~ eEn~ployeeRetirement Income Security Act o f 1974 (29 U.S.C. 1132(e)(3)) is amended by
inserting "or who fails t o meet the requirements of section
3 02 (d)(12) (E) with rcspect

t o any person' ' after

"101 ( e )( 2 ) with respect to any person".
SEC.103. MXLTEMFLOYER R

(a)

W FUNDWG NOmCES.

IX G ~ ~ ~ n a ~ . - $ e c t i101
a n of the Employee Re-

tirement Income Security Act of 1974 (29 U.8.C. 1023.)
i s amended by inserting after subsection (el t h e following

new snbsection:

' f M ~ T L T ~ ~ L O SD
Ew
R m n BE~TEF'JT
P L ~

F m m NOTICES.~