AMENDMENTS RELATED TO PENSION PROTECTION ACT.

SEC. 7881. AMENDMENTS RELATED TO PENSION PROTECTION ACT. (a) Amendments Related to Section 9303.— (1)(A) Subclause (II) of section 412(l)(3)(C)(ii) is amended by inserting “(but not below zero)” after “reducing”. (B) Subclause (II) of section 302(d)(3)(C)(ii) of ERISA is amended by inserting “(but not below zero)” after “reducing”. (2)(A) Clause (i) of section 412(1)(4)(8) is amended by inserting “and the unamortized portion of the unfunded existing benefit increase liability” after “liability”. (B) Clause (i) of section 302(d)(4)(B) of ERISA is amended by inserting “and the unamortized portion of the unfunded existing benefit increase liability” after “liability”. (3)(A) Section 412(l)(5)(C) is amended by striking “October 17, 1987” and inserting “the first plan year beginning after December 31, 1988”. (B) Section 302(d)(5)(C) of ERISA is amended by striking “October 17, 1987” and inserting “the first plan year beginning after December 31, 1988”. (4)(A) Section 412(1)(7)(D) is amended— (i) by striking “and” at the end of clause (iii)(I), by striking the period at the end of clause (iii)(II) and inserting “, and”, and by adding at the end of clause (iii) the following new subclause: 103 STAT. 2436 “(III) has years of service greater than the minimum years of service necessary for eligibility to participate in the plan.”, and (ii) by adding at the end thereof the following new clause: “(iv) Election.—An employer may elect not to have this subparagraph apply. Such an election, once made, may be revoked only with the consent of the Secretary.”. (B) Section 302(d)(7)(D) of ERISA is amended— (i) by striking “and” at the end of clause (iii)(I), by striking the period at the end of clause (iii)(II) and inserting “, and”, and by adding at the end of clause (iii) the following new subclause: “(III) has years of service greater than the minimum years of service necessary for eligibility to participate in the plan.”, and (ii) by adding at the end thereof the following new clause: “(iv) Election.—An employer may elect not to have this subparagraph apply. Such an election, once made, may be revoked only with the consent of the Secretary of the Treasury.”. (5)(A) Section 412(1)(8) is amended— (i) by striking “reduced by any credit balance in the funding standard account” in subparagraph (A)(ii), and (ii) by adding at the end thereof the following new subparagraph: “(E) Deduction for credit balances.—For purposes of this subsection, the amount determined under subparagraph (A)(ii) shall be reduced by any credit balance in the funding standard account. The Secretary may provide for such reduction for purposes of any other provision which references this subsection.”. (B) Section 302(d)(8) of ERISA is amended— (i) by striking “reduced by any credit balance in the funding standard account” in subparagraph (A)(ii), and (ii) by adding at the end thereof the following new subparagraph: “(E) Deduction for credit balances.—For purposes of this subsection, the amount determined under subparagraph (A)(ii) shall be reduced by any credit balance in the funding standard account. The Secretary of the Treasury may provide for such reduction for purposes of any other provision which references this subsection.”. (6)(A) Section 412(c)(9) is amended— (i) by striking “3 years” and inserting “year”, and (ii) by striking “3-year” in the heading and inserting “Annual”. (B) Section 302(c)(9) of ERISA is amended by striking “3 years” and inserting “year”. (7) Subclause (II) of section 9303(e)(3)(C)(ii) of the Pension Protection Act is amended by inserting “(and any income allocable to such amount)” after “clause (i)”. (b) Amendments Related to Section 9304.— (1)(A) Subparagraph (A) of section 412(c)(10) is amended— (i) by inserting “defined benefit” before “plan other”, and (ii) by striking “Plans” in the heading and inserting “Defined benefit plans”. 103 STAT. 2437 (B) Subparagraph (A) of section 302(c)(10) of ERISA is amended by inserting “defined benefit” before “plan other”. (2)(A) Subparagraph (B) of section 412(c)(10) is amended— (i) by striking “multiemployer plan” and inserting “plan not described in subparagraph (A)”, and (ii) by striking “Multiemployer” in the heading and inserting “Other”. (B) Subparagraph (B) of section 302(c)(10) of ERISA is amended by striking “multiemployer plan” and inserting “plan not described in subparagraph (A)”. (3)(A) Section 412(m)(1) is amended by inserting “defined benefit” before “plan (other”. (B) Section 302(e)(1) of ERISA is amended by inserting “defined benefit” before “plan (other”. (4)(A) Subparagraph (D) of section 412(m)(4) is amended to read as follows: “(D) Special rules for unpredictable contingent event benefits.—In the case of a plan to which subsection (1) applies for any calendar year and which has any unpredictable contingent event benefit liabilities— “(i) Liabilities not taken into account.—Such liabilities shall not be taken into account in computing the required annual payment under subparagraph (B). “(ii) Increase in installments.—Each required installment shall be increased by the greater of— “(I) the unfunded percentage of the amount of benefits described in subsection (l)(5)(A)(i) paid during the 3-month period preceding the month in which the due date for such installment occurs, or “(II) 25 percent of the amount determined under subsection (l)(5)(A)(ii) for the plan year. “(iii) Unfunded percentage.—For purposes of clause (ii)(I), the term ‘unfunded percentage’ means the percentage determined under subsection d)(5)(A)(i)(I) for the plan year. “(iv) Limitation on increase.—In no event shall the increases under clause (ii) exceed the amount necessary to increase the funded current liability percentage (within the meaning of subsection (1)(8)(B)) for the plan year to 100 percent.”. (B) Subparagraph (D) of section 302(e)(4) of ERISA is amended to read as follows: “(D) Special rules for unpredictable contingent event benefits.—In the case of a plan to which subsection (d) applies for any calendar year and which has any unpredictable contingent event benefit liabilities— “(i) Liabilities not taken into account.—Such liabilities shall not be taken into account in computing the required annual payment under subparagraph (B). “(ii) Increase in installments.—Each required installment shall be increased by the greater of— “(I) the unfunded percentage of the amount of benefits described in subsection (d)(5)(A)(i) paid curing the 3-month period preceding the month in which the due date for such installment occurs, or “(II) 25 percent of the amount determined under subsection (d)(5)(A)(ii) for the plan year. 103 STAT. 2438 “(iii) Unfunded percentage.—For purposes of clause (ii)(I), the term ‘unfunded percentage’ means the percentage determined under subsection (d)(5)(A)(i)(I) for the plan year. “(iv) Limitation on increase.—In no event shall the increases under clause (ii) exceed the amount necessary to increase the funded current liability percentage (within the meaning of subsection (d)(8)(B)) for the plan year to 100 percent.”. (5)(A) Section 101(d)(1) of ERISA is amended by striking “an employer of a plan” and inserting “an employer maintaining a plan”. (B) Section 502(c) of ERISA is amended by adding at the end thereof the following new paragraph: “(3) Any employer maintaining a plan who fails to meet the notice requirement of section 101(d) with respect to any participant or beneficiary may in the court’s discretion be liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure, and the court may in its discretion order such other relief as it deems proper.”. (C) Section 9304(d) of the Pension Protection Act is amended by striking “Section” and inserting “Effective with respect to plan years beginning after December 31, 1987, section”. (6)(A)(i) Subparagraph (B) of section 412(m)(1) is amended to read as follows: “(B) the rate of interest used under the plan in determining costs (including adjustments under subsection (b)(5)(B)).”. (ii) Clause (ii) of section 412(d)(1)(A) is amended by inserting “(including adjustments under subsection (b)(5)(B))” after “costs”. (B)(i) Subparagraph (B) of section 302(e)(1) of ERISA is amended to read as follows: “(B) the rate of interest used under the plan in determining costs (including adjustments under subsection (b)(5)(B)).”. (ii) Section 303(a)(1)(B) of ERISA (as redesignated by subsection (e)(2)) is amended by inserting “(including adjustments under section 302(b)(5)(B))” after “costs”. (7) Section 303(a) of ERISA (as amended by section 9306(c)(2)(A) of the Pension Protection Act) is amended— (A) by redesignating subparagraphs (A) and (B) as paragraphs (1) and (2), respectively, and by adjusting the left-hand margination thereof 4 ems to the left; (B) in paragraph (1) (as redesignated), by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively; and (C) in paragraph (2) (as redesignated), by inserting “of such Code” after “section 6621(b)”. (8) Subsection (f) of section 303 of ERISA (as so redesignated by section 9306(a)(2) of the Pension Protection Act) is transferred to immediately after subsection (e) of such section. (c) Amendments Related to Section 9306.— (1) The last sentence of section 412(f)(4)(A) is amended by striking “the benefit liabilities” and inserting “for benefit liabilities”. 103 STAT. 2439 (2) The last sentence of section 303(e)(1) of ERISA is amended by striking “the benefit liabilities” and inserting “for benefit liabilities”. (3) Section 9306(f)(3) of the Pension Protection Act is amended to read as follows: “(3) Subsection (b).—The amendments made by subsection (b) shall apply to waivers for plan years beginning after December 31, 1987. For purposes of applying such amendments, the number of waivers which may be granted for plan years after December 31, 1987, shall be determined without regard to any waivers granted for plan years beginning before January 1, 1988.”. (d) Amendments Related to Section 9307.— (1)(A) Clause (iii) of section 412(b)(5)(B) is amended by striking “for purposes of this section and for purposes of determining current liability,”. (B) Clause (iii) of section 302(b)(5)(B) of ERISA is amended by striking “for purposes of this section and for purposes of determining current liability,”. (2)(A) Section 302(b)(5)(B) of ERISA is amended by inserting the following matter after the heading and before clause (i): “For purposes of determining a plan’s current liability and for purposes of determining a plan’s required contribution under section 302(d) for any plan year—”. (B) Section 302(b)(5) of ERISA is amended by striking the matter following the heading thereof and preceding subparagraph (A). (C) Subclause (I) of section 302(b)(5)(B)(ii) of ERISA is amended by striking “average rate” and inserting “the weighted average of the rates”. (3) Section 9307(f) of the Pension Protection Act is amended to read as follows: “(f) Effective Date.— “(1) In general.—Except as provided in paragraph (2), the amendments made by this section shall apply to years beginning after December 31, 1987. “(2) Amortization of gains and losses.—Sections 412(b)(2)(B)(iv) and 412(b)(3)(B)(ii) of the Internal Revenue Code of 1986 and sections 302(b)(2)(B)(iv) and 302(b)(3)(B)(ii) of the Employee Retirement Income Security Act of 1974 (as amended by paragraphs (1)(A) and (2)(A) of subsection (a)) shall apply to gains and losses established in years beginning after December 31, 1987. For purposes of the preceding sentence, any gain or loss determined by a valuation occurring as of January 1, 1988, shall be treated as established in years beginning before 1988, or at the election of the employer, shall be amortized in accordance with Internal Revenue Service Notice 89–52.”. (4) Subparagraphs (A) and (B) of section 302(c)(3) of ERISA are each amended by adjusting the left-hand margination thereof, and of each subdivision thereof, 2 ems to the left. (e) Amendments Related to Section 9311.— (1) Section 9311(a)(2) of the Pension Protection Act is amended by striking “plan assets to the employer for purposes of section 4044(d)(1)(C) of the Employee Retirement Income Security Act of 1974” and inserting “residual plan assets upon termination”. (2) Section 9311(d) of the Pension Protection Act is amended— 103 STAT. 2440 (A) by striking “section 4041(c)” and inserting “section 4041” in paragraph (1), and (B) by adding at the end thereof the following new flush sentence: “Except as provided in subsection (a)(2), the amendments made by subsection (a) shall, apply to any provision of the plan or plan amendment adopted after December 17, 1987.”. (3) Section 9311(b)(2) of the Pension Protection Act is amended by striking “subsection (c)(1)” and inserting “subsection (a)(1)”. (4) Section 9311(a)(2) of the Pension Protection Act is amended— (A) by striking “1 year after the effective date of such amendments made by paragraph (1)” and inserting “December 17, 1988”; and (B) by striking the last sentence. (f) Amendments Related to Section 9312.— (1) Section 9312(b)(3)(B)(i) of the Pension Protection Act is amended— (A) by striking “section 4022(c)(1)” in subclause (I) and inserting “section 4022(c)(3)”, and (B) by striking “subparagraph (B) of section 4022(c)(1)” and inserting “subparagraph (C) of section 4022(c)(3)”. (2) Section 4062(a) of ERISA is amended— (A) by inserting “and” at the end of paragraph (1); (B) by striking paragraph (2); (C) by redesignating paragraph (3) as paragraph (2); and (D) in paragraph (2) (as so redesignated), by striking “subsection (d)” and inserting “subsection (c)”. (3)(A) Section 4064(b) of ERISA is amended by striking “and clauses (i)(II) and (ii) of section 4062(b)(1)(A)” and inserting “and section 4068(a)”. (B) Section 4068(a) of ERISA is amended by striking the last sentence. (4) Section 4022(c)(1) of ERISA is amended by striking “(in the case of a deceased participant)”. (5) Section 4022(c)(3)(B)(ii) of ERISA is amended by inserting “, and during the 5-Federal fiscal year period ending with the fiscal year preceding the fiscal year in which occurs the date of the notice of intent to terminate with respect to the plan termination for which the recovery ratio is being determined” after “1987”. (6) Section 9312(b)(3)(B) of the Pension Protection Act is amended by striking clause (ii). (7) Section 4041(c) of ERISA is amended— (A) fay striking “(or its designee under section 4049(b))” in paragraph (2)(A)(iii)(H), (B) by striking “section 4049” in paragraph (2)(A)(iii)(II) and inserting “section 4022(c)”, and (C) by striking the last sentence of paragraph (3)(C)(i). (8) Section 4070(a) of ERISA is amended by striking “4049,”. (9) Section 9312(d)(1) of the Pension Protection Act is amended by striking “section 4041(c)” and inserting “section 4041”. (10)(A) Section 4062(b)(2)(B) of ERISA is amended by striking “the liability under paragraph (1)(A)(ii)” and inserting “so much of the liability under paragraph (1)(A) as exceeds 30 percent of the collective net worth of all persons described in subsection (a) (including interest)”. 103 STAT. 2441 (B) Section 9312(b)(2)(B)(ii) of the Pension Protection Act is amended to read as follows: “(ii) Section 4062(d) of ERISA (as redesignated by paragraph (1)(B)) is amended by striking out paragraph (3).”. (C) Section 4068 of ERISA is amended by adding at the end the following new subsection: “(f) Definitions.—For purposes of this section— “(1) The collective net worth of persons subject to liability in connection with a plan termination shall be determined as provided in section 4062(d)(1). “(2) The term ‘pre-tax profits’ has the meaning provided in section 4062(d)(2).”. (11) Section 4022(c)(1) of ERISA is amended by striking “section 4044(a), to such participant” and inserting “section 4044(a). Such payment shall be made to such participant”. (12) Subsection (a) of section 4068 of ERISA is amended— (A) by striking “to the extent such amount does not exceed 30 percent of the collective net worth of all persons described in section 4062(a)” the first place it appears; and (B) by striking “to the extent such amount does not exceed 30 percent of the collective net worth of all persons described in section 4062(a)” the second place it appears and all that follows and inserting the following: “in the amount of such liability (including interest) upon all property and rights to property, whether real or personal, belonging to such person, except that such lien may not be in an amount in excess of 30 percent of the collective net worth of all persons described in section 4062(a)”. (13) The table of contents in section 1 of ERISA is amended by striking the item relating to section 4049. (g) Amendments Related to Section 9313.— (1) Section 4041(d)(1) of ERISA is amended by striking “sufficient for benefit commitments” and inserting “sufficient for benefit liabilities”. (2) Section 4041(c)(2)(B) of ERISA is amended by inserting “proposed” before “termination” in the parenthetical in the second sentence. (3) Clause (ii) of section 4041(c)(2)(A) of ERISA is amended— (A) by inserting “unless the corporation determines the information is not necessary for purposes of paragraph (3)(A) or section 4062,” before “certification”, (B) by inserting “and, if applicable, the proposed distribution date” after “termination date” in subclause (I), and (C) by striking “date” and inserting “dates” in subclauses (II) through (V). (4) Subparagraph (B) of section 4041(b)(3) of ERISA is amended by adding a period at the end. (5) Section 9313(b)(3) of the Pension Protection Act is amended by inserting “each place it appears” before the period. (6) Section 4041(b)(2)(A) of ERISA is amended by adjusting the left-hand margination of the last sentence two ems to the right. (7) The first subsection (b) of section 9314 of the Pension Protection Act is amended by striking “Section 4042” and inserting “Section 4042(a)”, and by striking “third sentence” and inserting “last sentence”. 103 STAT. 2442 (8) Section 9314(c)(1) of the Pension Protection Act is amended by inserting “title IV of” after “Subtitle D of”. (h) Amendment Related to Section 9331.— (1) Subparagraph (E) of section 4006(a)(3) of ERISA is amended by adding at the end thereof the following new clause: “(v) No premium shall be determined under this subparagraph for any plan year if, as of the close of the preceding plan year, contributions to the plan for the preceding plan year were not less than the full funding limitation for the preceding plan year under section 412(c)(7) of the Internal Revenue Code of 1986.”. (2) Clause (iii) of section 4006(c)(1)(A) of ERISA is amended by adjusting the left-hand margination thereof 2 ems to the left. (i) Amendments Related to Section 9341.— (1)(A) Section 401(a)(29)(C)(i)(H) is amended by inserting “and any other plan amendments adopted after December 22, 1987, and before such plan amendment” after “amendment”. (B) Section 307(c)(1)(B) of ERISA is amended by inserting “and any other plan amendments adopted after December 22, 1987, and before such plan amendment”. (2) Section 307(d) of ERISA is amended by inserting “of the Treasury” after “Secretary”. (3)(A) Section 307 of ERISA is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Notice.—A contributing sponsor which is required to provide security under subsection (a) shall notify the Pension Benefit Guaranty Corporation within 30 days after the amendment requiring such security takes effect. Such notice shall contain such information as the Corporation may require.”. (B) Section 4071 of ERISA is amended— (i) by striking “or subtitle A B, or C” and inserting “, subtitle A B, or C, as section 302(f)(4) or 307(e)”, and (ii) by inserting “or such section” after “such subtitle”. (4)(A) Clause (i) of section 401(a)(29)(A) is amended by inserting “to which the requirements of section 412 apply” after “multiemployer plan)”. (B) Section 307(a)(1) of ERISA is amended by inserting “to which the requirements of section 302 apply” after “multiemployer plan)”. (5) Section 9341(c) of the Pension Protection Act is amended by inserting “(without regard to any extension, amendment, or modification of such agreements on or after such date of enactment)” after “ratified before the date of enactment”. (j) Amendments Related to Section 9342.— (1) Paragraph (11) of section 103(d) of ERISA is amended— (A) by striking “60 percent” and inserting “70 percent”, and (B) by striking “such percentage” and inserting “the percentage which such value is of such liability.”. (2) Section 502(a)(6) of ERISA is amended by striking “subsection (i)” and inserting “subsection (c)(2) or (i)”. (3) Section 502(c)(2) of ERISA is amended— (A) by inserting “against any plan administrator” after “civil penalty”, and (B) by striking “a plan administrator’s” and inserting “such plan administrator’s”. 103 STAT. 2443 (4) Paragraph (2) of section 413 of ERISA is amended by striking the comma. (k) Amendment Related to Section 9343.—Section 403(c) of ERISA is amended by striking paragraph (3) and by redesignating paragraph (4) as paragraph (3). (l) Amendments Related to Section 9345.— (1) Section 407(d)(3)(C) of ERISA is amended by adjusting the left-hand margination thereof 2 ems to the left. (2) Section 4O7(d)(9) of ERISA is amended— (A) by striking “such arrangement” and inserting “such individual account plan”; and (B) by adjusting the left-hand margination thereof 2 ems to the right. (3) Section 407(f) of ERISA is amended— (A) in paragraph (1), by striking “this subsection” and inserting “this paragraph”; and (B) by striking paragraph (3). (4) Section 407(f)(1) of ERISA is amended by inserting “, immediately following the acquisition of such stock” after “if”. (5) Section 408(b) of ERISA is amended by adding at the end the following new paragraph: “(12) The sale by a plan to a party in interest on or after December 18, 1987, of any stock, if— “(A) the requirements of paragraphs (1) and (2) of subsection (e) are met with respect to such stock, “(B) on the later of the date on which the stock was acquired by the plan, or January 1, 1975, such stock constituted a qualifying employer security (as defined in section 4O7(d)(5) as then in effect), and “(C) such stock does not constitute a qualifying employer security (as defined in section 407(d)(5) as in effect at the time of the sale).”. (m) Amendments Related to Section 9346.— (1)(A) Clause (iii) of section 411(c)(2)(C) is amended to read as follows: “(iii) interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually— “(I) at the rate of 120 percent of the Federal mid-term rate (as in effect under section 1274 for the 1st month of a plan year) for the period beginning with the 1st plan year to which subsection (a)(2) applies (by reason of the applicable effective date) and ending with the date on which the determination is being made, and “(II) at the interest rate which would be used under the plan under section 417(e)(3) (as of the determination date) for the period beginning with the determination date and ending on the date on which the employee attains normal retirement age.”, (B) Subparagraph (B) of section 411(c)(2) is amended to read as follows: “(B) Defined benefit plans.—In the case of a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is the amount equal to the employee’s accumulated contributions expressed as an annual benefit commencing at normal retirement age, using an interest rate which would be used 103 STAT. 2444under the plan under section 417(e)(3) (as of the determination date).”. (C) Section 411(c)(2) is amended by striking subparagraph (E). (D) Section 411(a)(7) is amended by adding at the end thereof the following new subparagraph: “(D) Accrued benefit attributable to employee contributions.—The accrued benefit of an employee shall not be less than the amount determined under subsection (c)(2)(B) with respect to the employee’s accumulated contributions.”. (2)(A) Clause (iii) of section 204(c)(2)(C) of ERISA is amended to read as follows: “(iii) interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually— “(I) at the rate of 120 percent of the Federal mid-term rate (as in effect under section 1274 of the Internal Revenue Code of 1986 for the 1st month of a plan year for the period beginning with the 1st plan year to which subsection (a)(2) applies by reason of the applicable effective date) and ending with the date on which the determination is being made, and “(II) at the interest rate which would be used under the plan under section 205(g)(3) (as of the determination date) for the period beginning with the determination date and ending on the date on which the employee attains normal retirement age.”. (B) Subparagraph (B) of section 204(c)(2) of ERISA is amended to read as follows: “(B) Defined benefit plans.—In the case of a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is the amount equal to the employee’s accumulated contributions expressed as an annual benefit commencing at normal retirement age, using an interest rate which would be used under the plan under section 205(g)(3) (as of the determination date).”. (C) Section 204(c)(2) of ERISA is amended by striking subparagraph (E). (D) Paragraph (23) of section 3 of ERISA is amended by adding at the end thereof the following new flush sentence: “The accrued benefit of an employee shall not be less than the amount determined under section 204(c)(2)(B) with respect to the employee’s accumulated contribution.”. (3) If— (A) during the period beginning December 22, 1987, and ending June 21, 1988, a plan was amended to reflect the amendments made by section 9346 of the Pension Protection Act, and (B) such plan is amended to reflect the amendments made by this subsection, any plan amendment described in subparagraph (B) shall not be treated as reducing accrued benefits for purposes of section 411(d)(6) of the Internal Revenue Code of 1986 or section 204(g) of ERISA.