ADDITIONAL TAX IF NO REPLACEMENT PLAN.

SEC. 12002. ADDITIONAL TAX IF NO REPLACEMENT PLAN. (a) In General.— Section 4980 is amended by adding at the end thereof the following new subsection: “(d) Increase in Tax for Failure to Establish Replacement Plan or Increase Benefits.— “(1) In general.— Subsection (a) shall be applied by substituting ‘50 percent’ for ‘20 percent’ with respect to any employer reversion from a qualified plan unless— “(A) the employer establishes or maintains a qualified replacement plan, or “(B) the plan provides benefit increases meeting the requirements of paragraph (3). “(2) Qualified replacement plan.— For purposes of this subsection, the term ‘qualified replacement plan’ means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the ‘replacement plan’) with respect to which the following requirements are met: “(A) Participation requirement.—At least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan. “(B) Asset transfer requirement.— “(i) 25 percent cushion.— A direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of— “(I) 25 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, over “(II) the amount determined under clause (ii). “(ii) Reduction for increase in benefits.— The amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which— “(I) is adopted during the 60-day period ending on the date of termination of the qualified plan, and “(II) takes effect immediately on the termination date. “(iii) Treatment of amount transferred.— In the case of the transfer of any amount under clause (i)— 104 STAT. 1388–563 “(I) such amount shall not be includible in the gross income of the employer, “(II) no deduction shall be allowable with respect to such transfer, and “(III) such transfer shall not be treated as an employer reversion for purposes of this section. “(C) Allocation requirements.— “(i) In general.— In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is— “(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or “(II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer, “(ii) Coordination with section 415 limitation.— If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(H) may not be allocated to a participant before the close of the 7-year period under such clause— “(I) such amount shall be allocated to the accounts of other participants, and “(II) if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415. “(iii) Treatment of income.— Any income on any amount credited to a suspense account under clause (i)(II) shall be allocated to accounts of participants no less rapidly than ratably over the remainder of the period determined under such clause (after application of clause (ii)). “(iv) Unallocated amounts at termination.— If any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan— “(I) such amount shall be allocated to the accounts of participants as of such date, except that any amount which may not be allocated by reason of any limitation under section 415 shall be allocated to the accounts of other participants, and “(II) if any portion of such amount may not be allocated to other participants under subclause (I) by reason of such limitation, such portion shall be treated as an employer reversion to which this section applies. “(3) Pro rata benefit increases.— “(A) In general.— The requirements of this paragraph are met if a plan amendment to the terminated plan is adopted in connection with the termination of the plan which provides pro rata increases in the accrued benefits of all qualified participants which— “(i) have an aggregate present value not less than 20 percent of the maximum amount which the employer 104 STAT. 1388–564could receive as an employer reversion without regard to this subsection, and “(ii) take effect immediately on the termination date. “(B) Pro rata increase.— For purposes of subparagraph (A), a pro rata increase is an increase in the present value of the accrued benefit of each qualified participant in an amount which bears the same ratio to the aggregate amount determined under subparagraph (A)(i) as— “(i) the present value of such participant’s accrued benefit (determined without regard to this subsection), bears to “(ii) the aggregate present value of accrued benefits of the terminated plan (as so determined). Notwithstanding the preceding sentence, the aggregate in-creases in the present value of the accrued benefits of qualified participants who are not active participants shall not exceed 40 percent of the aggregate amount determined under subparagraph (A)(i) by substituting ‘equal to’ for ‘not less than’. “(4) Coordination with other provisions.— “(A) Limitations.— A benefit may not be increased under paragraph (2)(B)(ii) or (3)(A), and an amount may not be allocated to a participant under paragraph (2)(C), if such increase or allocation would result in a failure to meet any requirement under section 401(a)(4) or 415. “(B) Treatment as employer contributions.— Any in-crease in benefits under paragraph (2)(B)(ii) or (3)( A), or any allocation of any amount (or income allocable thereto) to any account under paragraph (2)(C), shall be treated as an annual benefit or annual addition for purposes of section 415. “(C) 10-year participation requirement.— Except as provided by the Secretary, section 415(b)(5)(D) shall not apply to any increase in benefits by reason of this subsection to the extent that the application of this subparagraph does not discriminate in favor of highly compensated employees (as defined in section 414(q)). “(5) Definitions and special rules.— For purposes of this subsection— “(A) Qualified participant.— The term ‘qualified participant’ means an individual who— “(i) is an active participant, “(ii) is a participant or beneficiary in pay status as of the termination date, “(iii) is a participant not described in clause (i) or (ii)— “(I) who has a nonforfeitable right to an accrued benefit under the terminated plan as of the termination date, and “(II) whose service, which was creditable under the terminated plan, terminated during the period beginning 3 years before the termination date and ending with the date on which the final distribution of assets occurs, or “(iv) is a beneficiary of a participant described in clause (iii)(II) and has a nonforfeitable right to an 104 STAT. 1388–565accrued benefit under the terminated plan as of the termination date. “(B) Present value.— Present value shall be determined as of the termination date and on the same basis as liabilities of the plan are determined on termination. “(C) Reallocation of increase.— Except as provided in paragraph (2)(I), if any benefit increase is reduced by reason of the last sentence of paragraph (3)(A)(ii) or paragraph (4), the amount of such reduction shall be allocated to the remaining participants on the same basis as other increases (and shall be treated as meeting any allocation requirement of this subsection). “(D) Plans taken into account.— For purposes of determining whether there is a qualified replacement plan under paragraph (2), the Secretary may provide that— “(i) 2 or more plans may be treated as 1 plan, or “(ii) a plan of a successor employer may be taken into account. “(E) Special rule for participation requirement.— For purposes of paragraph (2)(A), all employers treated as 1 employer under section 414 (b), (c), (m), or (o) shall be treated as 1 employer. “(6) Subsection not to apply to employer in bankruptcy.— This subsection shall not apply to an employer who, as of the termination date of the qualified plan, is in bankruptcy liquidation under chapter 7 of title 11 of the United States Code or in similar proceedings under State law.” (b) Amendments to Employee Retirement Income Security Act.— (1) Fiduciary responsibility.— Section 404 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end thereof the following new subsection: “(d) (1) If, in connection with the termination of a pension plan which is a single-employer plan, there is an election to establish or maintain a qualified replacement plan, or to increase benefits, as provided under section 4980(d) of the Internal Revenue Code of 1986, a fiduciary shall discharge the fiduciary’s duties under this title and title IV in accordance with the following requirements: “(A) In the case of a fiduciary of the terminated plan, any requirement— “(i) under section 4980(d)(2)(B) of such Code with respect to the transfer of assets from the terminated plan to a qualified replacement plan, and “(ii) under section 4980(d)(2)(B)(ii) or 4980(d)(3) of such Code with respect to any increase in benefits under the terminated plan. “(B) In the case of a fiduciary of a qualified replacement plan, any requirement— “(i) under section 4980(d)(2)(A) of such Code with respect to participation in the qualified replacement plan of active participants in the terminated plan, “(ii) under section 4980(d)(2)(B) of such Code with respect to the receipt of assets from the terminated plan, and “(iii) under section 4980(d)(2)(C) of such Code with respect to the allocation of assets to participants of the qualified replacement plan. 104 STAT. 1388–566 “(2) For purposes of this subsection— “(A) any term used in this subsection which is also used in section 4980(d) of the Internal Revenue Code of 1986 shall have the same meaning as when used in such section, and “(B) any reference in this subsection to the Internal Revenue Code of 1986 shall be a reference to such Code as in effect immediately after the enactment of the Omnibus Budget Reconciliation Act of 1990.>” (2) Conforming amendments.— (A) Section 404(a)(l)(D) of such Act (29 U.S.C. 1104(a)(1)(D)) is amended by striking “or title IV” and inserting “and title IV”. (B) Section 4044(d) of such Act (29 U.S.C. 1344(d)) is amended by adding at the end thereof the following new paragraph: “(4) Nothing in this subsection shall be construed to limit the requirements of section 4980(d) of the Internal Revenue Code of 1986 (as in effect immediately after the enactment of the Omnibus Budget Reconciliation Act of 1990) or section 404(d) of this Act with respect to any distribution of residual assets of a single-employer plan to the employer.” (C) Section 3 of such Act (29 U.S.C. 1002) is amended by adding at the end thereof the following new paragraph: “(41) The term ‘single-employer plan’ means a plan which is not a multiemployer plan.”