OTHER FUNDING CHANGES.

SEC. 9307. OTHER FUNDING CHANGES. (a) Amortization Periods.— (1) Amendments to 1986 code.— (A) Paragraphs (2)(B)(iv), (2)(C), and (3)(B)(ii) of section 412(b) of the 1986 Code are each amended by striking out “15 plan years” and inserting in lieu thereof “5 plan years (15 plan years in the case of a multiemployer plan)”. (B) Paragraphs (2)(B)(v) and (3)(B)(iii) of section 412(b) of the 1986 Code are each amended by striking out “30 plan years” and inserting in lieu thereof “10 plan years (30 plan years in the case of a multiemployer plan)”. (2) Amendments to erisa.— (A) Paragraphs (2)(B)(iv), (2)(C), and (3)(B)(ii) of section 302(b) of ERISA (29 U.S.C. 1082(b)) are each amended by striking out “15 plan years” and inserting in lieu thereof “5 plan years (15 plan years in the case of a multiemployer plan)”. (B) Paragraphs (2)(B)(v) and (3)(B)(iii) of section 3020)) of ERISA (29 U.S.C. 1082(b)) are each amended by striking out “30 plan years” and inserting in lieu thereof’ 10 plan years (30 plan years in the case of a multiemployer plan)”. (b) Actuarial Assumptions Must Be Reasonable.— (1) Amendment to 1986 code.— Paragraph (3) of section 412(c) of the 1986 Code is amended to read as follows: “(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) in the case of— “(i) a plan other than a multiemployer plan, each of which is reasonable (taking into account the experience of the plan and reasonable expectations) or which, in the aggregate, result in a total contribution equivalent to that which would be determined if each such assumption and method were reasonable, or “(ii) a multiemployer plan, which, in the aggregate, are reasonable (taking into account the experiences of the plan and reasonable expectations), and 101 STAT. 1330–357 “(B) which, in combination, offer the actuary’s best estimate of anticipated experience under the plan.” (2) Amendment to erisa.— Paragraph (3) of section 302(c) of ERISA (29 U.S.C. 1082(c)(3)) is amended to read as follows: “(3) 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) in the case of— “(i) a plan other than a multiemployer plan, each of which is reasonable (taking into account the experience of the plan and reasonable expectations) or which, in the aggregate, result in a total contribution equivalent to that which would be determined if each such assumption and method were reasonable, or “(ii) a multiemployer plan, which, in the aggregate, are reasonable (taking into account the experiences of the plan and reasonable expectations), and “(B) which, in combination, offer the actuary’s best estimate of anticipated experience under the plan.” (c) Limitation on Deduction for Contributions to Certain Plans Not Less Than Unfunded Current Liability.— Paragraph (1) of section 404(a) of the 1986 Code is amended by redesignating subparagraph (D) as subparagraph (E) and by inserting after subparagraph (C) the following new subparagraph: “(D) Special rule in case of certain plans.— In the case of any defined benefit plan (other than a multiemployer plan) which has more than 100 participants for the plan year, except as provided in regulations, the maximum amount deductible under the limitations of this paragraph shall not be less than the unfunded current liability determined under section 412(1) (without regard to any reduction by the credit balance in the funding standard account). For purposes of this subparagraph, all defined benefit plans maintained by the same employer (or any member of such employer’s controlled group (within the meaning of section 412(l)(8)(c))) shall be treated as 1 plan, but only employees of such member or employer shall be taken into account.” (d) Limitation on Amortization of Past Service Credits.— Clause (iii) of section 404(a)(1)(A) of the 1986 Code (relating to pension trusts) is amended by striking out “to amortize such credits” and inserting in lieu thereof “to amortize the unfunded costs attributable to such credits”. (e) Limitation on Interest Rate.— (1) Amendment to 1986 code.— Paragraph (5) of section 412(b)) of the 1986 Code (relating to interest) is amended to read as follows: “(5) Interest.— “(A) In general.— The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs. “(B) Required change of interest rate.— For purposes of determining a plan’s current liability and for purposes of determining a plan’s required contribution under section 412(1) for any plan year— 101 STAT. 1330–358 “(i) In general.— If any rate of interest used under the plan 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 10 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 subclause (I). “(iii) Assumptions.— Notwithstanding subsection (c)(3)(A)(i), for purposes of this section and for purposes of determining current liability, 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.”. (2) Amendment to erisa.— Paragraph (5) of section 302(b) of ERISA (relating to interest) (29 U.S.C. 1082(b)(5)) is amended to read as follows: “(5) Interest.— For purposes of determining a plan’s current liability and for purposes of determining a plan’s required contribution under section 412(1) for any plan year— “(A) In general.— 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. “(B) Required change of interest rate.— “(i) In general.— If any rate of interest used under the plan 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 10 percent above, and not more than 10 percent below, the average rate of interest on 30-year Treasury securities during the 4-year period ending on the last day before the beginning of the plan year. 101 STAT. 1330–359 “(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 subclause (I). “(iii) Assumptions.— Notwithstanding subsection (c)(3)(A)(i), for purposes of this section and for purposes of determining current liability, 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.”. (f) Effective Date.— The amendments made by this section shall apply to years beginning after December 31, 1987.