To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to ensure the adequate funding of pension plans, and for other purposes.

September 11, 2003

Mr. BAYH (for himself and Mr. KERRY) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to ensure the adequate funding of pension plans, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Defined Benefit Pension Plan Reform Act of 2003'.

SEC. 2. MULTIEMPLOYER PLAN EMERGENCY INVESTMENT LOSS RULE.

(a) Amendment to the Internal Revenue Code of 1986- Section 412(b)(7) of the Internal Revenue Code of 1986 (relating to special rules for multiemployer plans) is amended by adding at the end the following:

`(F) EMERGENCY INVESTMENT LOSS METHOD-

`(i) IN GENERAL- In lieu of amortizing net experience loss as prescribed in paragraph (2)(B)(iv), a multiemployer plan may elect to use the emergency investment loss method described in this subparagraph, starting with the first plan year in which there is an emergency investment loss.

`(ii) EMERGENCY INVESTMENT LOSS- An emergency investment loss for any plan year beginning on or after July 1, 1999, and ending before January 1, 2004, is the amount (if any) by which--

`(I) the fair market value of the plan's assets as of the last day of the plan year, is less than

`(II) the fair market value which would have been determined if the plan's earnings for the plan year had been equal to the projected investment return based on the actuarial interest rate under paragraph (5)(A) for the plan year, applied to the fair market value of assets as of the beginning of the year and noninvestment cash flows during the year.

`(iii) AMORTIZATION OF EMERGENCY INVESTMENT LOSS- The funding standard account shall be charged with the amounts necessary to amortize in equal annual installments (until fully amortized) the plan's emergency investment loss over a period of 30 plan years.

`(iv) TREATMENT OF ADJUSTED NET ACTUARIAL EXPERIENCE- If an election is in effect for any plan year described in clause (ii)--

`(I) any net experience gain otherwise determined for such year under paragraph (2)(B)(iv) shall be increased by an amount equal to the emergency investment loss for such year, and

`(II) any net experience loss otherwise determined for such year under paragraph (3)(B)(ii) shall be reduced by the emergency investment loss for such year, except that if such emergency investment loss exceeds such net experience loss, the excess shall be treated as a net experience gain for such year for purposes of paragraph (2)(B)(iv).'

(b) AMENDMENT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974- Section 302(b)(7) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(b)(7)) is amended by adding at the end the following:

`(F)(i) In lieu of amortizing net experience loss as prescribed in paragraph (2)(B)(iv), a multiemployer plan may elect to use the emergency investment loss method described in this subparagraph, starting with the first plan year in which there is an emergency investment loss.

`(ii) An emergency investment loss for any plan year beginning on or after July 1, 1999, and ending before January 1, 2004, is the amount (if any) by which--

`(I) the fair market value of the plan's assets as of the last day of the plan year, is less than

`(II) the fair market value which would have been determined if the plan's earnings for the plan year had been equal to the projected investment return based on the actuarial interest rate under paragraph (5)(A) for the plan year, applied to the fair market value of assets as of the beginning of the year and noninvestment cash flows during the year.

`(iii) The funding standard account shall be charged with the amounts necessary to amortize in equal annual installments (until fully amortized) the plan's emergency investment loss over a period of 30 plan years.

`(iv) If an election is in effect for any plan year described in clause (ii)--

`(I) any net experience gain otherwise determined for such year under paragraph (2)(B)(iv) shall be increased by an amount equal to the emergency investment loss for such year, and

`(II) any net experience loss otherwise determined for such year under paragraph (3)(B)(ii) shall be reduced

by the emergency investment loss for such year, except that if such emergency investment loss exceeds such net experience loss, the excess shall be treated as a net experience gain for such year for purposes of paragraph (2)(B)(iv).'

(c) ELECTION PROCEDURE-

(1) IN GENERAL- The Secretary of the Treasury shall prescribe a procedure under which multiemployer plans that elect to use the emergency investment loss method described in section 412(b)(7)(F) of the Internal Revenue Code of 1986 and section 302(b)(7)(F) of the Employee Retirement Income Security Act of 1974 may do so either by starting the special amortization periods in the actuarial valuations for each of the affected plan years or by starting with a cumulative emergency investment loss and adjusted net actuarial experience (based on the outstanding balance of the experience gain bases for the affected plan years, reduced by the cumulative emergency investment loss) in the actuarial valuation for the last plan year ending before January 1, 2004.

(2) FILING PERIOD- The procedures described in paragraph (1) shall provide a period of not less than 210 days after the date of enactment of this Act for multiemployer plans to file Schedule Bs (relating to actuarial information under the plan) to the Form 5500 Annual Reports for the plan years for which the emergency investment loss method is elected, including amended Schedule Bs for annual reports previously filed.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after June 30, 1999.

SEC. 3. MORTALITY TABLE ADJUSTMENT.

(a) AMENDMENT TO THE INTERNAL REVENUE CODE OF 1986- Section 412(l)(7)(C) of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`(iv) SEPARATE MORTALITY TABLES FOR BLUE-COLLAR AND WHITE-COLLAR WORKERS-

`(I) IN GENERAL- Notwithstanding clause (ii), in the case of plan years beginning after December 31, 2003, the Secretary shall establish separate mortality tables for blue-collar workers and white-collar workers which may be used (in lieu of the tables under clause (ii)) to determine current liability under this subsection. For this purpose, the Secretary shall take into account the Society of Actuaries RP-2000 Mortality Table, as adjusted to take into account the collar adjustment prescribed in such table to reflect the workforce covered by the plan.

`(II) CLASSIFICATION OF WORKERS- For purposes of this clause, individuals shall be classified as blue-collar or white-collar workers under rules prescribed by the Secretary. In prescribing such rules, the Secretary shall treat professional employees (within the meaning of section 410) as white-collar workers.

`(III) CONSISTENT USE- If an employer elects to use the tables prescribed under subclause (I) for any plan established or maintained by the employer, the employer shall use the tables for all such plans other than a plan for which use of the tables is prohibited under regulations prescribed by the Secretary.'.

(b) AMENDMENT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974- Section 302(d)(7)(C) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)(7)(C)) is amended by adding at the end the following:

`(iv) SEPARATE MORTALITY TABLES FOR BLUE-COLLAR AND WHITE-COLLAR WORKERS-

`(I) IN GENERAL- Notwithstanding clause (ii), in the case of plan years beginning after December 31, 2003, the Secretary of the Treasury shall establish separate mortality tables for blue-collar workers and white-collar workers which may be used (in lieu of the tables under clause (ii)) to determine current liability under this subsection. For this purpose, the Secretary of the Treasury shall take into account the Society of Actuaries RP-2000 Mortality Table, as adjusted to take into account the collar adjustment prescribed in such table to reflect the workforce covered by the plan.

`(II) CLASSIFICATION OF WORKERS- For purposes of this clause, individuals shall be classified as blue-collar or white-collar workers under rules prescribed by the Secretary of the Treasury. In prescribing such rules, the Secretary of the Treasury shall treat professional employees (within the meaning of section 410 of the Internal Revenue Code of 1986) as white-collar workers.

`(III) CONSISTENT USE- If an employer elects to use the tables prescribed under subclause (I) for any plan established or maintained by the employer, the employer shall use the tables for all such plans other than a plan for which use of the tables is prohibited under regulations prescribed by the Secretary of the Treasury.'.

(c) EFFECTIVE DATE- The amendments made by this section shall be effective as of the date of the enactment of this Act.

SEC. 4. MODIFICATION OF FULL-FUNDING LIMITATION FOR PURPOSES OF DEDUCTION LIMITS ON EMPLOYER PENSION CONTRIBUTIONS.

(a) IN GENERAL- Section 404(a)(1)(A) of the Internal Revenue Code of 1986 (relating to limitation on deductibility of employer contributions) is amended by adding at the end the following: `In determining the full funding limitation for purposes of the preceding sentence for any year beginning after December 31, 2003, the amount determined under section 412(c)(7)(A)(i) shall in no event be treated as being less than 130 percent of current liability (including the expected increase in current liability due to benefits accruing during the year).'

(b) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 2003.

SEC. 5. REQUIRED NOTIFICATION OF PARTICIPANTS AND BENEFICIARIES OF PLAN TERMINATIONS BY PENSION BENEFIT GUARANTY CORPORATION.

(a) IN GENERAL- Section 4042(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1342(b)) is amended by adding at the end the following:

`(4)(A) Not later than 30 days after the corporation notifies a plan administrator under this subsection regarding the commencement of proceedings to terminate a plan under this section, the corporation shall provide notice of such proceedings to affected parties as provided in this paragraph. The notice shall state that such termination is intended, the proposed termination date, and the procedure for such termination under this section.

`(B) Upon notice to the plan of the commencement of proceedings, the plan administrator shall provide the corporation with a list of the names and addresses of all participants and beneficiaries of the plan.

`(C) The corporation shall provide--

`(i) written notice to each affected party of the plan; and

`(ii) notice in the 2 newspapers with the largest circulation in the area of the majority of the affected parties.'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply to proceedings commenced after the date of enactment of this Act.

END