AMENDMENTS RELATED TO PENSION PROTECTION ACT AND FULL FUNDING LIMITATIONS.

SEC. 2005. AMENDMENTS RELATED TO PENSION PROTECTION ACT AND FULL FUNDING LIMITATIONS. (a) Amendment Related to Section 9303.— (1) Section 4972(c) of the 1986 Code is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: “(4) Special rule for self-employed individuals.— For purposes of paragraph (1), if— “(A) the amount which is required to be contributed to a plan under section 412 on behalf of an individual who is an employee (within the meaning of section 401(c)(1)), exceeds “(B) the earned income (within the meaning of section 404(a)(8)) of such individual derived from the trade or business with respect to which such plan is established, such excess shall be treated as an amount allowable as a deduction under section 404.” (2) (A) Subparagraph (C) of section 412(1)(3) of the 1986 Code is amended— (i) by striking out “October 17, 1987” in clause (i) and inserting in lieu thereof “October 29, 1987”, and (ii) by striking out “October 16, 1987” in clause (iii) and inserting in lieu thereof “October 28, 1987”. (B) Subparagraph (C) of section 302(d)(3) of the Employee Retirement Income Security Act of 1974 is amended— (i) by striking out “October 17, 1987” in clause (i) and inserting in lieu thereof “October 29, 1987”, and (ii) by striking out “October 16, 1987” in clause (iii) and inserting in lieu thereof “October 28, 1987”. (b) Amendments Related to Section 9307.— (1) The last sentence of section 404(a)(1)(D) of the 1986 Code is amended by striking out “For purposes of this subparagraph” and inserting in lieu thereof “For purposes of determining whether a plan has more than 100 participants”. (2) Section 404(a)(7)(A) of the 1986 Code is amended by adding at the end thereof the following new sentence: “For purposes of clause (ii), if paragraph (1)(D) applies to a defined benefit plan102 STAT. 3611 for any plan year, the amount necessary to satisfy the minimum funding standard provided by section 412 with respect to such plan for such plan year shall not be less than the unfunded current liability of such plan under section 412(1).”. (3) Section 404(a)(1)(D) of the 1986 Code is amended by striking out “(without regard to any reduction by the credit balance in the funding standard account)”. (c) Amendments Related to Section 9301.— (1) Section 414(1) of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(2) Allocation of assets in plan spin-offs, etc.— “(A) In general.— In the case of a plan spin-off of a defined benefit plan, a trust which forms part of— “(i) the original plan, or “(ii) any plan spun off from such plan, shall not constitute a qualified trust under this section unless the applicable percentage of excess assets are allocated to each of such plans. “(B) Applicable percentage.— For purposes of subparagraph (A), the term ‘applicable percentage’ means, with respect to each of the plans described in clauses (i) and (ii) of subparagraph (A), the percentage determined by dividing— “(i) the excess (if any) of— “(I) the amount determined under section 412(c)(7)(A)(i) with respect to the plan, over “(II) the amount of the assets required to be allocated to the plan after the spin-off (without regard to this paragraph), by “(ii) the sum of the excess amounts determined separately under clause (i) for all such plans. “(C) Excess assets.— For purposes of subparagraph (A), the term ‘excess assets’ means an amount equal to the excess (if any) of— “(i) the fair market value of the assets of the original plan immediately before the spin-off, over “(ii) the amount of assets required to be allocated after the spin-off to all plans (determined without regard to this paragraph). “(D) Certain spun-off plans not taken into account.— “(i) In general.— A plan involved in a spin-off which is described in clause (ii), (iii), or (iv) shall not be taken into account for purposes of this paragraph, except that the amount determined under subparagraph (C)(ii) shall be increased by the amount of assets allocated to such plan. “(ii) Plans transferred out of controlled groups.—A plan is described in this clause if, after such spin-off, such plan is maintained by an employer who is not a member of the same controlled group as the employer maintaining the original plan. “(iii) Plans transferred out of multiple employer plans.— A plan as described in this clause if, after the spin-off, any employer maintaining such plan (and any member of the same controlled group as such employer) does not maintain any other plan remaining after the spin-off which is also maintained by another employer (or member of the same controlled group as102 STAT. 3612such other employer) which maintained the plan in existence before the spin-off. “(iv) Terminated plans.— A plan is described in this clause if, pursuant to the transaction involving the spin-off, the plan is terminated. “(v) Controlled group.— For purposes of this subparagraph, the term ‘controlled group’ means any group treated as a single employer under subsection (b), (c), (m), or (o). “(E) Paragraph not to apply to multiemployer plans.— This paragraph does not apply to any multiemployer plan with respect to any spin-off to the extent that participants either before or after the spin-off are covered under a multiemployer plan to which title IV of the Employee Retirement Income Security Act of 1974 applies. “(F) Application to similar transaction.— Except as provided by the Secretary, rules similar to the rules of this paragraph shall apply to transactions similar to spin-offs.” (2) Section 414(1) of the 1986 Code is amended by striking out the heading and inserting in lieu thereof: “(l) Merger and Consolidations of Plans or Transfers of Plan Assets.— “(1) In general.—”. (3) (A) Except as provided in subparagraph (B), the amendments made by this subsection shall apply with respect to transactions occurring after July 26, 1988. (B) The amendments made by this subsection shall not apply to any transaction occurring after July 26, 1988, if on or before such date the board of directors of the employer, approves such transaction or the employer took similar binding action. (d) Other Provisions.— (1) Subparagraph (C) of section 412(1)(3) of the 1986 Code is amended— (A) by striking out “October 17, 1987” in clause (i) and inserting in lieu thereof “October 29, 1987”, and (B) by striking out “October 16, 1987” in clause (iii) and inserting in lieu thereof “October 28, 1987”. (2) Subparagraph (B) of section 302(d)(3) of the Employee Retirement Income Security Act of 1974 is amended— (A) by striking out “October 17, 1987” in clause (i) and inserting in lieu thereof “October 29, 1987”, and (B) by striking out “October 16, 1987” in clause (iii) and inserting in lieu thereof “October 28, 1987”. (e) Effective Date.— The amendments made by this section shall take effect as if included in the amendments made by the provisions of the Omnibus Budget Reconciliation Act of 1987 to which it relates.