MINIMUM FUNDING REQUIREMENTS.

SEC. 761. MINIMUM FUNDING REQUIREMENTS. (a) Amendments to Additional Funding Requirements for Single-Employer Plans.— (1) Limitations on additional funding requirement for certain plans.— (A) In general.—Paragraph (1) of section 302(d) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)) is amended by striking “which has an unfunded current liability” and inserting “to which this subsection applies under paragraph (9)”. (B) Plans to which requirement applies.—Section 302(d) of such Act is amended by adding at the end the following new paragraph: “(9) Applicability of subsection.— “(A) In general.—Except as provided in paragraph (6)(A), this subsection shall apply to a plan for any plan year if its funded current liability percentage for such year is less than 90 percent. “(B) Exception for certain plans at least so percent funded.— Subparagraph (A) shall not apply to a plan for a plan year if— 108 STAT. 5025 “(i) the funded current liability percentage for the plan year is at least 80 percent, and “(ii) such percentage for each of the 2 immediately preceding plan years (or each of the 2d and 3d immediately preceding plan years) is at least 90 percent. “(C) Funded current liability percentage.— For purposes of subparagraphs (A) and (B), the term “funded current liability percentage’ has the meaning given such term by paragraph (8)(B), except that such percentage shall be determined for any plan year— “(i) without regard to paragraph (8)(E), and “(ii) by using the rate of interest which is the highest rate allowable for the plan year under paragraph (7)(C). “(D) Transition rules.— For purposes of this paragraph: “(i) Funded percentage for years before 1995.— The funded current liability percentage for any plan year beginning before January 1, 1995, shall be treated as not less than 90 percent only if for such plan year the plan met one of the following requirements (as in effect for such year): “(I) The full-funding limitation under subsection (c)(7) for the plan was zero. “(II) The plan had no additional funding requirement under this subsection (or would have had no such requirement if its funded current liability percentage had been determined under subparagraph (C)). “(III) The plan’s additional funding requirement under this subsection did not exceed the lesser of 0.5 percent of current liability or $5,000,000. “(ii) Special rule for 1995 and 1996.—For purposes of determining whether subparagraph (B) applies to any plan year beginning in 1995 or 1996, a plan shall be treated as meeting the requirements of subparagraph (B)(ii) if the plan met the requirements of clause (i) of this subparagraph for any two of the plan years beginning in 1992, 1993, and 1994 (whether or not consecutive).” (2) Relationship of additional funding requirement to funding standard account charges and credits.— (A) Clause (ii) of section 302(d)(1)(A) of such Act is amended to read as follows: “(ii) the sum of the charges for such plan year under subsection (b)(2), reduced by the sum of the credits for such plan year under subparagraph (B) of subsection (b)(3), plus”. (B) The last sentence in section 302(d)(1) of such Act is amended to read as follows: “Such increase shall not exceed the amount which, after taking into account charges (other than the additional charge under this subsection) and credits under subsection (b), is necessary to increase the funded current liability percentage (taking into account the expected increase in current liability due to benefits accruing during the plan year) to 100 percent.” 108 STAT. 5026 (3) Amendment to deficit reduction contribution.— Paragraph (2) of section 302(d) of such Act is amended— (A) by striking “plus” at the end of subparagraph (A); (B) by striking the period at the end of subparagraph (B) and inserting “, plus”, and (C) by adding at the end the following new subparagraph: “(C) the expected increase in current liability due to benefits accruing during the plan year.” (4) Increase in current liability due to change in required assumptions.— (A) Paragraph (3) of section 302(d) of such Act is amended by adding at the end the following new subparagraphs: “(D) Special rule for required changes in actuarial assumptions.— “(i) In general.—The unfunded old liability amount with respect to any plan for any plan year shall be increased by the amount necessary to amortize the amount of additional unfunded old liability under the plan in equal annual installments over a period of 12 plan years (beginning with the first plan year beginning after December 31, 1994). “(ii) Additional unfunded old liability.— For purposes of clause (i), the term ‘additional unfunded old liability’ means the amount (if any) by which— “(I) the current liability of the plan as of the beginning of the first plan year beginning after December 31, 1994, valued using the assumptions required by paragraph (7)(C) as in effect for plan years beginning after December 31, 1994, exceeds “(II) the current liability of the plan as of the beginning of such first plan year, valued using the same assumptions used under subclause (I) (other than the assumptions required by paragraph (7)(C)), using the prior interest rate, and using such mortality assumptions as were used to determine current liability for the first plan year beginning after December 31, 1992. “(iii) Prior interest rate.—For purposes of clause (ii), the term ‘prior interest rate’ means the rate of interest that is the same percentage of the weighted average under subsection (b)(5)(B)(ii)(I) for the first plan year beginning after December 31, 1994, as the rate of interest used by the plan to determine current liability for the first plan year beginning after December 31, 1992, is of the weighted average under subsection (b)(5)(B)(ii)(I) for such first plan year beginning after December 31, 1992. “(E) Optional rule for additional unfunded old liability.— “(i) In general.— If an employer makes an election under clause (ii), the additional unfunded old liability for purposes of subparagraph (D) shall be the amount (if any) by which— “(I) the unfunded current liability of the plan as of the beginning of the first plan year beginning 108 STAT. 5027after December 31, 1994, valued using the assumptions required by paragraph (7)(C) as in effect for plan years beginning after December 31, 1994, exceeds “(II) the unamortized portion of the unfunded old liability under the plan as of the beginning of the first plan year beginning after December 31, 1994. “(ii) Election.— “(I) An employer may irrevocably elect to apply the provisions of this subparagraph as of the beginning of the first plan year beginning after December 31, 1994. “(II) If an election is made under this clause, the increase under paragraph (1) for any plan year beginning after December 31, 1994, and before January 1, 2002, to which this subsection applies (without regard to this subclause) shall not be less than the increase that would be required under paragraph (1) if the provisions of this title as in effect for the last plan year beginning before January 1, 1995, had remained in effect” (B) Clause (i) of section 302(d)(4)(B) of such Act is amended by inserting “, the unamortized portion of the additional unfunded old liability,” after “old liability”. (5) Applicable percentage for determining unfunded new liability amount.— Subparagraph (C) of section 302(d)(4) of such Act is amended— (A) by striking “.25” and inserting “40”, and (B) by striking “35” and inserting “60”. (6) Unpredictable contingent event amount.— (A) Subparagraph (A) of section 302(d)(5) of such Act is amended— (i) by striking “greater of” and inserting “greatest of” before clause (i); (ii) by striking “or” at the end of clause (i); (iii) by striking the period at the end of clause (ii) and inserting “, or”; and (iv) by adding after clause (ii) the following new clause: “(iii) the additional amount that would be determined under paragraph (4)(A) if the unpredictable contingent event benefit liabilities were included in unfunded new liability notwithstanding paragraph (4)(B)(ii).” (B) Paragraph (5) of section 302(d) of such Act is amended by adding at the end the following new subparagraph: “(E) Limitation.—The present value of the amounts described in subparagraph (A) with respect to any one event shall not exceed the unpredictable contingent event benefit liabilities attributable to that event” (C) Clause (ii) of section 302(e)(4)(D) of such Act is amended— (i) by striking “greater of” and inserting “greatest of” before subclause (I); 108 STAT. 5028 (ii) by striking “or” at the end of subclause (I); (iii) by striking the period at the end of subclause (II) and inserting “, or”; and (iv) by adding after subclause (II) the following new clause: “(III) 25 percent of the amount determined under subsection (d)(5)(A)(iii) for the plan year.” (7) Required interest rate and mortality assumptions for determining current liability.— (A) In general.—Subparagraph (C) of section 302(d)(7) of such Act is amended to read as follows: “(C) Interest rate and mortality assumptions used.— Effective for plan years beginning after December 31, 1994— “(i) Interest rate.— “(I) In general.—The rate of interest used to determine current liability under this subsection shall be the rate of interest used under subsection (b)(5), except that the highest rate in the permissible range under subparagraph (B)(ii) thereof shall not exceed the specified percentage under subclause (II) of the weighted average referred to in such subparagraph. “(II) Specified percentage.—For purposes of subclause (I), the specified percentage snail be determined as follows: “In the case of plan years beginning in calendar year: The specified percentage is: 1995 109 1996 106 1997 107 1998 106 1999 and thereafter 105. “(ii) 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 subsection 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, the Secretary of the Treasury shall take into account results of available independent studies of mortality of individuals covered by pension plans. 108 STAT. 5029 “(III) Periodic review.—The Secretary of the Treasury shall periodically (at least every 5 years) review any tables in effect under this subsection and shall, to the extent the Secretary determines necessary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experience. “(iii) Separate mortality tables for the disabled.—Notwithstanding clause (ii)— “(I) In general.—In the case of plan years beginning after December 31, 1995, the Secretary of the Treasury shall establish mortality tables which may be used (in lieu of the tables under clause (ii)) 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. “(III) Plan years beginning in 1995.—In the case of any plan year beginning in 1995, a plan may use its own mortality assumptions for individuals who are entitled to benefits under the plan on account of disability.” (B) Amortization of unfunded mortality increase amount.— (i) In general.—Paragraph (2) of section 302(d) of such Act, as amended by paragraph (3), is amended by striking “plus” at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting “, and”, and by adding at the end the following new subparagraph: “(D) the aggregate of the unfunded mortality increase amounts.” (ii) Unfunded mortality increase amount.—Section 302(d) of such Act, as amended by paragraph (1), is amended by adding at the end the following new paragraph: “(10) Unfunded mortality increase amount.— “(A) In general.—The unfunded mortality increase amount with respect to each unfunded mortality increase is the amount necessary to amortize such increase in equal annual installments over a period of 10 plan years (beginning with the first plan year for which a plan uses any new mortality table issued under paragraph (7)(C)(ii)(II) or (III)). 108 STAT. 5030 “(B) Unfunded mortality increase.— For purposes of subparagraph (A), the term ‘unfunded mortality increase’ means an amount equal to the excess of— “(i) the current liability of the plan for the first plan year for which a plan uses any new mortality table issued under paragraph (7)(C)(ii)(II) or (III), over “(ii) the current liability of the plan for such plan year which would have been determined if the mortality table in effect for the preceding plan year had been used.” (iii) Conforming amendment.—Clause (i) of section 302(d)(4)(B) of such Act, as amended by paragraph (4)(B), is amended by inserting “the unamortized portion of each unfunded mortality increase,” after “additional unfunded old liability,”. (8) Transition rule.—Section 302(d) of such Act, as amended by paragraph (7), is amended by adding at the end the following new paragraph: “(11) Phase-in of increases in funding required by retirement protection act of 1994.— “(A) In general.— For any applicable plan year, at the election of the employer, the increase under paragraph (1) shall not exceed the greater of— “(i) the increase that would be required under paragraph (1) if the provisions of this title as in effect for plan years beginning before January 1, 1995, had remained in effect, or “(ii) the amount which, after taking into account charges (other than the additional charge under this subsection) and credits under subsection (b), is necessary to increase the funded current liability percentage (taking into account the expected increase in current liability due to benefits accruing during the plan year) for the applicable plan year to a percentage equal to the sum of the initial funded current liability percentage of the plan plus the applicable number of percentage points for such applicable plan year. “(B) Applicable number of percentage points.— “(i) Initial funded current liability percentage of 75 percent or less.—Except as provided in clause (ii), for plans with an initial funded current liability percentage of 75 percent or less, the applicable number of percentage points for the applicable plan year is: “In the case of applicable plan years beginning in: The applicable number of percentage points is: 1995 3 1996 6 1997 9 1998 12 1999 15 2000 19 2001 24. “(ii) Other cases.— In the case of a plan to which this clause applies, the applicable number of percent-108 STAT. 5031age points for any such applicable plan year is the sum of— “(I) 2 percentage points; “(II) the applicable number of percentage points (if any) under this clause for the preceding applicable plan year, “(III) the product of .10 multiplied by the excess (if any) of (a) 85 percentage points over (b) the sum of the initial funded current liability percentage and the number determined under subclause (II); “(IV) for applicable plan years beginning in 2000, 1 percentage point; and “(V) for applicable plan years beginning in 2001, 2 percentage points. “(iii) Plans to which clause (ii) applies.— “(I) In general.—Clause (ii) shall apply to a plan for an applicable plan year if the initial funded current liability percentage of such plan is more than 75 percent. “(II) Plans initially under clause(i).—In the case of a plan which (but for this subclause) has an initial funded current liability percentage of 75 percent or less, clause (ii) (and not clause (i)) shall apply to such plan with respect to applicable plan years beginning after the first applicable plan year for which the sum of the initial funded current liability percentage and the applicable number of percentage points (determined under clause (i)) exceeds 75 percent For purposes of applying clause (ii) to such a plan, the initial funded current liability percentage of such plan shall be treated as being the sum referred to in the preceding sentence. “(C) Definitions.— For purposes of this paragraph— “(i) The term ‘applicable plan year’ means a plan year beginning after December 31, 1994, and before January 1, 2002. “(ii) The term ‘initial funded current liability percentage’ means the funded current liability percentage as of the first day of the first plan year beginning after December 31, 1994.” (9) Liquidity requirement.— (A) In general.—Section 302(e) of such Act is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph: “(5) Liquidity requirement.— “(A) In general.—A plan to which this paragraph applies shall be treated as failing to pay the full amount of any required installment 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 defined benefit plan (other than 108 STAT. 5032a multiemployer plan or a plan described in subsection (d)(6)(A)) which— “(i) is required to pay installments under this subsection 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 (1), 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 funded current liability percentage (taking into account the expected increase in current liability due to benefits accruing 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 the base amount with respect to such quarter over 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 clause (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 funded current liability percentage (as defined in subsection (d)(8)) for the plan year, and “(II) the sum of the purchases of annuities, payments of single sums, and such other disburse-108 STAT. 5033ments 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.” (B) Limitation on distributions other than life annuities paid by the plan.— (i) 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: “(e) Limitation on Distributions Other Than Life Annuities Paid By The Plan.— “(1) In general.—Notwithstanding any other provision of this part, the fiduciary of a pension plan that is subject to the additional funding requirements of section 302(d) shall not permit a prohibited payment to be made from a plan during a period in which such plan has a liquidity shortfall (as defined in section 302(e)(5)). “(2) Prohibited payment.— For purposes of paragraph (1), 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 204(b)(1)(G)), to a participant or beneficiary whose annuity starting date (as defined in section 205(h)(2)), that occurs during the period referred to in paragraph (1), “(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 of the Treasury by regulations. “(3) Period of shortfall.—For purposes of this subsection, a plan has a liquidity shortfall during the period that there is an underpayment of an installment under section 302(e) by reason of paragraph (5)(A) thereof. “(4) Coordination with other provisions.—Compliance with this subsection shall not constitute a violation of any other provision of this Act” (ii) Section 502 of such Act is amended by adding at the end a new subsection (m) to read as follows: “(m) In the case of a distribution to a pension plan participant or beneficiary in violation of section 206(e) by a plan fiduciary, the Secretary shall assess a penalty against such fiduciary in an amount equal to the value of the distribution. Such penalty shall not exceed $10,000 for each such distribution.” (10) Amendment to definition of full-funding limitation.— (A) Subparagraph (A) of section 302(c)(7) of such Act is amended by inserting “(including the expected increase 108 STAT. 5034in current liability due to benefits accruing during the plan year)” after “current liability” in clause (i). (B) Section 302(c)(7) of such Act is amended by adding at the end the following new subparagraph: “(E) 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) Current liability; assets.— For purposes of clause (i)— “(I) the term ‘current liability’ has the meaning given such term by subsection (d)(7) (without regard to subparagraph (D) thereof), and “(II) assets shall not be reduced by any credit balance in the funding standard account” (C) Subparagraph (B) of section 302(c)(7) of such Act is amended to read as follows: “(B) Current liability.—For purposes of subparagraph (D) and subclause (I) of subparagraph (A)(i), the term ‘current liability’ has the meaning given such term by subsection (d)(7) (without regard to subparagraphs (C) and (D) thereof) and using the rate of interest used under subsection (b)(5)(B).” (11) Definition of contributing sponsor.—Paragraph (13) of section 4001(a) of such Act (29 U.S.C. 1301(a)(13)) is amended by striking “means a person—” and all that follows and inserting “means a person described in section 302(c)(11)(A) of this Act (without regard to section 302(c)(11)(B) of this Act) or section 412(c)(11)(A) of the Internal Revenue Code of 1986 (without regard to section 412(c)(11)(B) of such Code).” (b) Effective Dates.— (1) In general.—Except as provided in paragraph (2), the amendments made by this section shall apply to plan years beginning after December 31, 1994. (2) Contributing sponsor.—The amendment made by subsection (a)(11) shall be effective as if included in the Pension Protection Act