PROHIBITION ON BENEFIT INCREASES WHERE PLAN SPONSOR IS IN BANKRUPTCY.

SEC. 766. PROHIBITION ON BENEFIT INCREASES WHERE PLAN SPONSOR IS IN BANKRUPTCY. (a) Amendment to the Employee Retirement Income Security Act of 1974.—Section 204 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054) is amended by redesignating subsection (i) as (j) and inserting after subsection (h) the following new subsection: “(i)(1) In the case of a plan described in paragraph (3) which is maintained by an employer that is a debtor in a case under title 11, United States Code, or similar Federal or State law, no amendment of the plan which increases the liabilities of the plan by reason of— “(A) any increase in benefits, “(B) any change in the accrual of benefits, or “(C) any change in the rate at which benefits become non-forfeitable under the plan, with respect to employees of the debtor, shall be effective prior to the effective date of such employees plan of reorganization. “(2) Paragraph (1) shall not apply to any plan amendment that— “(A) the Secretary of the Treasury determines to be reasonable and that provides for only de minimis increases in the liabilities of the plan with respect to employees of the debtor, “(B) only repeals an amendment described in section 302(c)(8), “(C) is required as a condition of qualification under part I of subchapter D of chapter 1 of the Internal Revenue Code of 1986, or “(D) was adopted prior to, or pursuant to a collective bargaining agreement entered into prior to, the date on which the employer became a debtor in a case under title 11, United States Code, or similar Federal or State law. “(3) This subsection shall apply only to plans (other than multi-employer plans) covered under section 4021 of this Act for which the funded current liability percentage (within the meaning of section 302(d)(8) of this Act) is less than 100 percent after taking into account the effect of the amendment. “(4) For purposes of this subsection, the term ‘employer’ has the meaning set forth in section 302(c)(11)(A), without regard to section 302(c)(11)(B).” 108 STAT. 5037 (b) Amendment to Internal Revenue Code of 1986.—Section 401(a), as amended by section 751 of this Act, is further amended by adding at the end the following new paragraph: “(33) Prohibition on benefit increases while sponsor is in bankruptcy.— “(A) In general.— A trust which is part of a plan to which this paragraph applies shall not constitute a qualified trust under this section if an amendment to such plan is adopted while the employer is a debtor in a case under title 11, United States Code, or similar Federal or State law, if such amendment increases liabilities of the plan by reason of— “(i) any increase in benefits, “(ii) any change in the accrual of benefits, or “(iii) any change in the rate at which benefits become non-forfeitable under the plan, with respect to employees of the debtor, and such amendment is effective prior to the effective date of such employer’s plan of reorganization. “(B) Exceptions.— This paragraph shall not apply to any plan amendment if— “(i) the plan, were such amendment to take effect, would have a funded current liability percentage (as defined in section 412(1)(8)) of 100 percent or more, “(ii) the Secretary determines that such amendment is reasonable and provides for only de minimis increases in the liabilities of the plan with respect to employees of the debtor, “(iii) such amendment only repeals an amendment described in subsection 412(c)(8), or “(iv) such amendment is required as a condition of qualification under this part “(C) Plans to which this paragraph applies.—This paragraph shall apply only to plans (other than multiemployer plans) covered under section 4021 of the Employee Retirement Income Security Act of 1974. “(D) Employer.—For purposes of this paragraph, the term ‘employed’ means the employer referred to in section 412(c)(11) (without regard to subparagraph (B) thereof).” (c) Effective Date of Plan Amendment.—Section 4022 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1322) is amended by inserting at the end the following new subsection: “(f) For purposes of this section, the effective date of a plan amendment described in section 204(i)(1) shall be the effective date of the plan of reorganization of the employer described in section 204(i)(1) or, if later, the effective date stated in such amendment.” (d) Effective Date.—The amendments made by this section shall apply to plan amendments adopted on or after the date of enactment of this Act.