TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.

SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE. (a) Employee Retirement Income Security Act of 1974.— (1) Determination of permissible range.— (A) [29 U.S.C. 1082] In general.—Clause (ii) of section 302(b)(5)(B) of the Employee Retirement Income Security Act of 1974 is amended by redesignating subclause (II) as subclause (III) and by inserting after subclause (I) the following new subclause: “(II) Special rule for years 2004 and 2005. In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the term ‘permissible range’ means a rate of interest which is not above, and not more than 10 percent below, the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year. Such rates shall be determined by the Secretary of the Treasury on the basis of 2 or more indices that are selected periodically by the Secretary of the Treasury and that are in the top 3 quality levels available. The Secretary of the Treasury shall make the permissible range, and the indices and methodology used to determine the average rate, publicly available.” . (B) Secretarial authority.—Subclause (III) of section 302(b)(5)(B)(ii) of such Act, as redesignated by subparagraph (A), is amended— (i) by inserting “or (II)” after “subclause (I)” the first place it appears, and (ii) by striking “subclause (I)” the second place it appears and inserting “such subclause”. (C) [29 U.S.C. 1082] Conforming amendment.—Subclause (I) of section 302(b)(5)(B)(ii) of such Act is amended by inserting “or (III)” after “subclause (II)”. (2) Determination of current liability.—Clause (i) of section 302(d)(7)(C) of such Act is amended by adding at the end the following new subclause: “(IV) Special rule for 2004 and 2005. For plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used to determine current liability under this subsection shall be the rate of interest under subsection (b)(5).” . (3) Conforming amendment.—Paragraph (7) of section 302(e) of such Act is amended to read as follows: “(7) Special rule for 2002. In any case in which the interest rate used to determine current liability is determined under subsection (d)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined under subsection (d)(7)(C)(i)(II).” . (4) [29 U.S.C. 1306] PBGC.—Clause (iii) of section 4006(a)(3)(E) of such Act is amended by adding at the end the following new subclause: “(V) In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the annual yield taken into account under subclause (II) shall be the annual rate of interest determined by the Secretary of the Treasury on amounts invested conservatively in long-term investment grade corporate bonds for the month preceding the month in which the plan year begins. For purposes of the preceding sentence, the Secretary of the Treasury shall determine such rate of interest on the basis of 2 or more indices that are selected periodically by the Secretary of the Treasury and that are in the top 3 quality levels available. The Secretary of the Treasury shall make the permissible range, and the indices and methodology used to determine the rate, publicly available.” . (b) Internal Revenue Code of 1986.— (1) Determination of permissible range.— (A) [26 U.S.C. 412] In general.—Clause (ii) of section 412(b)(5)(B) of the Internal Revenue Code of 1986 is amended by redesignating subclause (II) as subclause (III) and by inserting after subclause (I) the following new subclause: “(II) Special rule for years 2004 and 2005. In the case of plan years beginning after December 31, 2003, and before January 1, 2006, the term ‘permissible range’ means a rate of interest which is not above, and not more than 10 percent below, the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year. Such rates shall be determined by the Secretary on the basis of 2 or more indices that are selected periodically by the Secretary and that are in the top 3 quality levels available. The Secretary shall make the permissible range, and the indices and methodology used to determine the average rate, publicly available.” . (B) [26 U.S.C. 412] Secretarial authority.—Subclause (III) of section 412(b)(5)(B)(ii) of such Code, as redesignated by subparagraph (A), is amended— (i) by inserting “or (II)” after “subclause (I)” the first place it appears, and (ii) by striking “subclause (I)” the second place it appears and inserting “such subclause”. (C) Conforming amendment.—Subclause (I) of section 412(b)(5)(B)(ii) of such Code is amended by inserting “or (III)” after “subclause (II)”. (2) Determination of current liability.—Clause (i) of section 412(l)(7)(C) of such Code is amended by adding at the end the following new subclause: “(IV) Special rule for 2004 and 2005. For plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used to determine current liability under this subsection shall be the rate of interest under subsection (b)(5).” . (3) Conforming amendment.—Paragraph (7) of section 412(m) of such Code is amended to read as follows: “(7) Special rule for 2002. In any case in which the interest rate used to determine current liability is determined under subsection (l)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined under subsection (l)(7)(C)(i)(II).” . (4) [26 U.S.C. 415] Limitation on certain assumptions.—Section 415(b)(2)(E)(ii) of such Code is amended by inserting “, except that in the case of plan years beginning in 2004 or 2005, ‘5.5 percent’ shall be substituted for ‘5 percent’ in clause (i)” before the period at the end. (5) [26 U.S.C. 404] Election to disregard modification for deduction purposes.—Section 404(a)(1) of such Code is amended by adding at the end the following new subparagraph: “(F) Election to disregard modified interest rate. An employer may elect to disregard subsections (b)(5)(B)(ii)(II) and (l)(7)(C)(i)(IV) of section 412 solely for purposes of determining the interest rate used in calculating the maximum amount of the deduction allowable under this paragraph.” . (c) [26 U.S.C. 411 note] Provisions Relating to Plan Amendments.— (1) In general.—If this subsection applies to any plan or annuity contract amendment— (A) such plan or contract shall be treated as being operated in accordance with the terms of the plan or contract during the period described in paragraph (2)(B)(i), and (B) except as provided by the Secretary of the Treasury, such plan shall not fail to meet the requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974 by reason of such amendment. (2) Amendments to which section applies.— (A) In general.—This subsection shall apply to any amendment to any plan or annuity contract which is made— (i) pursuant to any amendment made by this section, and (ii) on or before the last day of the first plan year beginning on or after January 1, 2009. (B) Conditions.—This subsection shall not apply to any plan or annuity contract amendment unless— (i) during the period beginning on the date the amendment described in subparagraph (A)(i) takes effect and ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in effect; and (ii) such plan or contract amendment applies retroactively for such period. (d) [26 U.S.C. 404 note] Effective Dates.— (1) In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to plan years beginning after December 31, 2003. (2) Lookback rules.—For purposes of applying subsections (d)(9)(B)(ii) and (e)(1) of section 302 of the Employee Retirement Income Security Act of 1974 and subsections (l)(9)(B)(ii) and (m)(1) of section 412 of the Internal Revenue Code of 1986 to plan years beginning after December 31, 2003, the amendments made by this section may be applied as if such amendments had been in effect for all prior plan years. The Secretary of the Treasury may prescribe simplified assumptions which may be used in applying the amendments made by this section to such prior plan years. (3) Transition rule for section 415 limitation.—In the case of any participant or beneficiary receiving a distribution after December 31, 2003 and before January 1, 2005, the amount payable under any form of benefit subject to section 417(e)(3) of the Internal Revenue Code of 1986 and subject to adjustment under section 415(b)(2)(B) of such Code shall not, solely by reason of the amendment made by subsection (b)(4), be less than the amount that would have been so payable had the amount payable been determined using the applicable interest rate in effect as of the last day of the last plan year beginning before January 1, 2004.