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115th Congress } { Rept. 115-1011
HOUSE OF REPRESENTATIVES
2d Session } { Part 1
======================================================================
SAVE COMMUNITY NEWSPAPER ACT OF 2018
_______
November 6, 2018.--Ordered to be printed
_______
Mr. Brady of Texas, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 6377]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 6377) to amend the Internal Revenue Code of 1986 and
the Employee Retirement Income Security Act of 1974 to provide
alternative minimum funding rules for certain single-employer
plans maintained by a community newspaper, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................4
A. Purpose and Summary................................. 4
B. Background and Need for Legislation................. 5
C. Legislative History................................. 5
II. EXPLANATION OF THE BILL..........................................5
A. Election To Apply Alternative Minimum Funding
Standards to Certain Single-Employer Community
Newspaper Plans.................................... 5
III. VOTES OF THE COMMITTEE...........................................9
IV. BUDGET EFFECTS OF THE BILL.......................................9
A. Committee Estimate of Budgetary Effects............. 9
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 9
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 9
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......12
A. Committee Oversight Findings and Recommendations.... 12
B. Statement of General Performance Goals and
Objectives......................................... 12
C. Information Relating to Unfunded Mandates........... 13
D. Applicability of House Rule XXI 5(b)................ 13
E. Tax Complexity Analysis............................. 13
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 13
G. Duplication of Federal Programs..................... 13
H. Disclosure of Directed Rule Makings................. 14
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........14
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 14
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Save Community Newspaper Act of
2018''.
SEC. 2. SPECIAL RULES FOR MINIMUM FUNDING STANDARDS FOR COMMUNITY
NEWSPAPER PLANS.
(a) Amendment to Internal Revenue Code of 1986.--Section 430 of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(m) Special Rules for Community Newspaper Plans.--
``(1) In general.--The plan sponsor of a community newspaper
plan under which no participant has had the participant's
accrued benefit increased (whether because of service or
compensation) after December 31, 2017, may elect to have the
alternative standards described in paragraph (3) apply to such
plan, and any plan sponsored by any member of the same
controlled group, for purposes of this section for plan years
beginning with any plan year in effect on or beginning after
the date of the enactment of this subsection. For purposes of
this paragraph, the term `controlled group' means all persons
treated as a single employer under subsection (b), (c), (m), or
(o) of section 414.
``(2) Election.--An election under paragraph (1) shall be
made at such time and in such manner as prescribed by the
Secretary. Such election, once made with respect to a plan
year, shall apply to all subsequent plan years unless revoked
with the consent of the Secretary.
``(3) Alternative minimum funding standards.--The alternative
standards described in this paragraph are the following:
``(A) Interest rates.--
``(i) In general.--Notwithstanding subsection
(h)(2)(C) and except as provided in clause
(ii), the first, second, and third segment
rates in effect for any month for purposes of
this section shall be 8 percent.
``(ii) New benefit accruals.--Notwithstanding
subsection (h)(2), for purposes of determining
the funding target and normal cost of a plan
for any plan year, the present value of any
benefits accrued or earned under the plan for a
plan year with respect to which an election
under paragraph (1) is in effect shall be
determined on the basis of the U.S. Treasury
obligation yield curve for the day that is the
valuation date of such plan for such plan year.
``(iii) U.S. treasury obligation yield
curve.--For purposes of this subsection, the
term `U.S. Treasury obligation yield curve'
means, with respect to any day, a yield curve
which shall be prescribed by the Secretary for
such day on interest-bearing obligations of the
United States.
``(B) Shortfall amortization base.--
``(i) Previous shortfall amortization
bases.--The shortfall amortization bases
determined under subsection (c)(3) for all plan
years preceding the first plan year to which
the election under paragraph (1) applies (and
all shortfall amortization installments
determined with respect to such bases) shall be
reduced to zero under rules similar to the
rules of subsection (c)(6).
``(ii) New shortfall amortization base.--
Notwithstanding subsection (c)(3), the
shortfall amortization base for the first plan
year to which the election under paragraph (1)
applies shall be the funding shortfall of such
plan for such plan year (determined using the
interest rates as modified under subparagraph
(A)).
``(C) Determination of shortfall amortization
installments.--
``(i) 30-year period.--Subparagraphs (A) and
(B) of subsection (c)(2) shall be applied by
substituting `30-plan-year' for `7-plan-year'
each place it appears.
``(ii) No special election.--The election
under subparagraph (D) of subsection (c)(2)
shall not apply to any plan year to which the
election under paragraph (1) applies.
``(D) Exemption from at-risk treatment.--Subsection
(i) shall not apply.
``(4) Community newspaper plan.--For purposes of this
subsection--
``(A) In general.--The term `community newspaper
plan' means a plan to which this section applies
maintained by an employer which, as of December 31,
2017--
``(i) publishes and distributes daily, either
electronically or in printed form, 1 or more
community newspapers in a single State,
``(ii) is not a company the stock of which is
publicly traded (on a stock exchange or in an
over-the-counter market), and is not
controlled, directly or indirectly, by such a
company,
``(iii) is controlled, directly or
indirectly--
``(I) by 1 or more persons residing
primarily in the State in which the
community newspaper is published,
``(II) for not less than 30 years by
individuals who are members of the same
family,
``(III) by a trust created or
organized in the State in which the
community newspaper is published, the
sole trustees of which are persons
described in subclause (I) or (II),
``(IV) by an entity which is
described in section 501(c)(3) and
exempt from taxation under section
501(a), which is organized and operated
in the State in which the community
newspaper is published, and the primary
purpose of which is to benefit
communities in such State, or
``(V) a combination of persons
described in subclause (I), (III), or
(IV), and
``(iv) does not control, directly or
indirectly, any newspaper in any other State.
``(B) Community newspaper.--The term `community
newspaper' means a newspaper which primarily serves a
metropolitan statistical area, as determined by the
Office of Management and Budget, with a population of
not less than 100,000.
``(C) Control.--A person shall be treated as
controlled by another person if such other person
possesses, directly or indirectly, the power to direct
or cause the direction and management of such person
(including the power to elect a majority of the members
of the board of directors of such person) through the
ownership of voting securities.''.
(b) Amendment to Employee Retirement Income Security Act of 1974.--
Section 303 of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1083) is amended by adding at the end the following new
subsection:
``(m) Special Rules for Community Newspaper Plans.--
``(1) In general.--The plan sponsor of a community newspaper
plan under which no participant has had the participant's
accrued benefit increased (whether because of service or
compensation) after December 31, 2017, may elect to have the
alternative standards described in paragraph (3) apply to such
plan, and any plan sponsored by any member of the same
controlled group, for purposes of this section for plan years
beginning with any plan year in effect on or beginning after
the date of the enactment of this subsection.
``(2) Election.--An election under paragraph (1) shall be
made at such time and in such manner as prescribed by the
Secretary of the Treasury. Such election, once made with
respect to a plan year, shall apply to all subsequent plan
years unless revoked with the consent of the Secretary of the
Treasury.
``(3) Alternative minimum funding standards.--The alternative
standards described in this paragraph are the following:
``(A) Interest rates.--
``(i) In general.--Notwithstanding subsection
(h)(2)(C) and except as provided in clause
(ii), the first, second, and third segment
rates in effect for any month for purposes of
this section shall be 8 percent.
``(ii) New benefit accruals.--Notwithstanding
subsection (h)(2), for purposes of determining
the funding target and normal cost of a plan
for any plan year, the present value of any
benefits accrued or earned under the plan for a
plan year with respect to which an election
under paragraph (1) is in effect shall be
determined on the basis of the U.S. Treasury
obligation yield curve for the day that is the
valuation date of such plan for such plan year.
``(iii) U.S. treasury obligation yield
curve.--For purposes of this subsection, the
term `U.S. Treasury obligation yield curve'
means, with respect to any day, a yield curve
which shall be prescribed by the Secretary for
such day on interest-bearing obligations of the
United States.
``(B) Shortfall amortization base.--
``(i) Previous shortfall amortization
bases.--The shortfall amortization bases
determined under subsection (c)(3) for all plan
years preceding the first plan year to which
the election under paragraph (1) applies (and
all shortfall amortization installments
determined with respect to such bases) shall be
reduced to zero under rules similar to the
rules of subsection (c)(6).
``(ii) New shortfall amortization base.--
Notwithstanding subsection (c)(3), the
shortfall amortization base for the first plan
year to which the election under paragraph (1)
applies shall be the funding shortfall of such
plan for such plan year (determined using the
interest rates as modified under subparagraph
(A)).
``(C) Determination of shortfall amortization
installments.--
``(i) 30-year period.--Subparagraphs (A) and
(B) of subsection (c)(2) shall be applied by
substituting `30-plan-year' for `7-plan-year'
each place it appears.
``(ii) No special election.--The election
under subparagraph (D) of subsection (c)(2)
shall not apply to any plan year to which the
election under paragraph (1) applies.
``(D) Exemption from at-risk treatment.--Subsection
(i) shall not apply.
``(4) Community newspaper plan.--For purposes of this
subsection--
``(A) In general.--The term `community newspaper
plan' means a plan to which this section applies
maintained by an employer which, as of December 31,
2017--
``(i) publishes and distributes daily, either
electronically or in printed form--
``(I) a community newspaper, or
``(II) 1 or more community newspapers
in the same State,
``(ii) is not a company the stock of which is
publicly traded (on a stock exchange or in an
over-the-counter market), and is not
controlled, directly or indirectly, by such a
company,
``(iii) is controlled, directly or
indirectly--
``(I) by 1 or more persons residing
primarily in the State in which the
community newspaper is published,
``(II) for not less than 30 years by
individuals who are members of the same
family,
``(III) by a trust created or
organized in the State in which the
community newspaper is published, the
sole trustees of which are persons
described in subclause (I) or (II),
``(IV) by an entity which is
described in section 501(c)(3) of the
Internal Revenue Code of 1986 and
exempt from taxation under section
501(a) of such Code, which is organized
and operated in the State in which the
community newspaper is published, and
the primary purpose of which is to
benefit communities in such State, or
``(V) a combination of persons
described in subclause (I), (III), or
(IV), and
``(iv) does not control, directly or
indirectly, any newspaper in any other State.
``(B) Community newspaper.--The term `community
newspaper' means a newspaper which primarily serves a
metropolitan statistical area, as determined by the
Office of Management and Budget, with a population of
not less than 100,000.
``(C) Control.--A person shall be treated as
controlled by another person if such other person
possesses, directly or indirectly, the power to direct
or cause the direction and management of such person
(including the power to elect a majority of the members
of the board of directors of such person) through the
ownership of voting securities.
``(5) Effect on premium rate calculation.--Notwithstanding
any other provision of law or any regulation issued by the
Pension Benefit Guaranty Corporation, in the case of a
community newspaper plan which elects the application of the
alternative standards described in paragraph (3), the
additional premium under section 4006(a)(3)(E) shall be
determined as if such election had not been made.''.
(c) Effective Date.--The amendments made by this section shall apply
to plan years in effect on or beginning after the date of the enactment
of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 6377, as reported by the Committee on Ways
and Means, amends the required funding rules for certain
community newspaper pension plans in order to give those
employers more time to fund their pension plans.
B. Background and Need for Legislation
Due to technological and other developments, there have
been widespread changes in the media sector, which have led to
financial difficulties for some community newspapers. Allowing
additional time for these companies to fund their defined-
benefit pension liabilities will provide them with the
opportunity to work through this period of business transition
and realignment while meeting their obligations to employees
covered by such pension plans.
C. Legislative History
Background
H.R. 6377 was introduced on July 16, 2018, and was referred
to the Committee on Education and the Workforce and the
Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 6377, the
``Save Community Newspaper Act of 2018,'' on July 18, 2018, and
ordered the bill, as amended, favorably reported (with a quorum
being present).
Committee hearings
On September 7, 2014, the Subcommittee on Select Revenue
Measures of the Committee on Ways and Means held a public
hearing on private sector defined benefit pension plans.
II. EXPLANATION OF THE BILL
A. Election To Apply Alternative Minimum Funding Standards to Certain
Single-Employer Community Newspaper Plans
PRESENT LAW
The Internal Revenue Code of 1986 (``Code'') and the
Employee Retirement Income Security Act of 1974 (``ERISA'')
apply minimum funding requirements\1\ to defined benefit
retirement plans maintained by private-sector employers for
their employees (referred to as ``single-employer'' plans), for
purposes of which employers that are members of a controlled
group are considered a single employer.
---------------------------------------------------------------------------
\1\Special funding rules may apply to certain categories of single-
employer plans. For example, special rules apply to certain plans
maintained by commercial airlines, under section 402 of the Pension
Protection Act of 2006, as amended.
---------------------------------------------------------------------------
Under these rules, a minimum contribution is required for a
plan year if the value of the plan's assets is less than the
plan's ``funding target,'' that is, the present value,
determined actuarially, of all benefits earned as of the
beginning of the year. If the value of plan assets is less than
the plan's funding target, such that the plan has a funding
shortfall, the shortfall is generally required to be funded by
contributions, with interest, over seven years, taking into
account the remaining installments attributable to shortfalls
from preceding years. In addition, if participants earn
additional benefits for the year,\2\ the required contribution
must include the amount of the plan's ``target normal cost,''
that is, the present value, determined actuarially, of benefits
expected to be earned for the year. In the case of a plan
funded below a certain level, referred to as an ``at-risk''
plan, specified assumptions must be used in determining the
plan's funding target and target normal cost.\3\
---------------------------------------------------------------------------
\2\In some cases, a plan may be ``frozen'' as to service and/or
compensation. When a plan is frozen with respect to both service and
compensation, participants are entitled to previously earned benefits
but do not accrue or earn additional benefits.
\3\For an at-risk plan, the specified assumptions generally are as
follows: All employees who are not otherwise assumed to retire as of
the valuation date but who will be eligible to elect benefits during
the plan year and the next 10 plan years must be assumed to retire at
the earliest retirement date under the plan but not before the end of
the plan year for which the ``at-risk funding target'' and ``at-risk
normal cost'' are being determined. Also, all employees must be assumed
to elect the retirement benefit available under the plan at the assumed
retirement age (determined as above) that would result in the highest
present value of benefits. The at-risk funding target is the present
value of all benefits accrued or earned under the plan as of the
beginning of the plan year using the actuarial assumptions set forth in
the Code and regulations for single-employer plans, with the addition
of a loading factor which arises when the plan has been in at-risk
status for at least two of the four preceding plan years. This loading
factor is equal to the sum of (1) $700 multiplied by the number of
participants in the plan and (2) four percent of the funding target
(determined without regard to the definition of at-risk funding
target). The at-risk normal cost for a plan year generally represents
the excess of the sum of (1) the present value of all benefits which
are expected to accrue or to be earned under the plan during the plan
year using the at-risk assumptions described above plus (2) the amount
of plan related expenses expected to be paid from plan assets during
the plan year, over (3) the amount of mandatory employee contributions
expected to be made during the plan year. In addition, where the plan
has been in at-risk status for at least two of the four preceding plan
years, a loading factor is added, which is equal to four percent of the
target normal cost (the excess of the sum of (1) the present value of
all benefits which are expected to accrue or to be earned under the
plan during the plan year plus (2) the amount of plan-related expenses
expected to be aid from plan assets during the plan year, over (3) the
amount of mandatory employee contributions expected to be made during
the plan year) with respect to the plan for the plan year.
---------------------------------------------------------------------------
The minimum funding rules enacted in the Pension Protection
Act of 2006 (``PPA'')\4\ specify the interest rates used to
determine a plan's funding target and target normal cost for a
year, consisting of three ``segment'' rates, each of which
applies to benefit payments expected to be made from the plan
during a certain period.\5\ The first segment rate applies to
benefits reasonably determined to be payable during the five-
year period beginning on the first day of the year; the second
segment rate applies to benefits reasonably determined to be
payable during the 15-year period following the initial five-
year period; and the third segment rate applies to benefits
reasonably determined to be payable at the end of the 15-year
period. The first, second, and third segment rates are based on
the corresponding portion of a corporate bond yield curve with
certain adjustments.
---------------------------------------------------------------------------
\4\Pub. L. No. 109-280.
\5\Each segment rate is a single interest rate determined monthly
by the Secretary of the Treasury, on the basis of a corporate bond
yield curve, taking into account only the portion of the yield curve
based on corporate bonds maturing during the particular segment rate
period. The corporate bond yield curve used for this purpose reflects
the average, for the 24-month period ending with the preceding month,
of yields on investment grade corporate bonds with varying maturities
and that are in the top three quality levels available. Solely for
purposes of determining minimum required contributions, in lieu of the
segment rates, an employer may elect to use interest rates on a yield
curve based on the yields on investment grade corporate bonds for the
month preceding the month in which the plan year begins (that is,
without regard to the 24-month averaging described above) (``monthly
yield curve''). If an election to use a monthly yield curve is made, it
cannot be revoked without Internal Revenue Service approval.
---------------------------------------------------------------------------
Under the Moving Ahead for Progress in the 21st Century
Act,\6\ for plan years beginning after December 31, 2011, a
segment rate determined under the PPA rules is adjusted if it
falls outside a specified percentage range of the average
segment rates for a preceding period. In particular, if a
segment rate determined under the PPA rules is less than the
applicable minimum percentage in the specified range, the
segment rate is adjusted upward to match the minimum
percentage. If a segment rate determined under the PPA rules is
more than the applicable maximum percentage in the specified
range, the segment rate is adjusted downward to match the
maximum percentage.
---------------------------------------------------------------------------
\6\Pub. L. No. 112-141. The Highway Transportation and Funding Act
of 2014 (Pub. L. No. 113-159) made changes to the applicable minimum
and maximum percentage ranges for determining whether a segment rate
must be adjusted upward or downward, as well as the periods for
determining such segment rates.
---------------------------------------------------------------------------
The specified percentage range (that is, the range from the
applicable minimum percentage to the applicable maximum
percentage of average segment rates), as most recently modified
in the Bipartisan Budget Act of 2015,\7\ for determining
whether a segment rate must be adjusted upward or downward for
a plan year is determined by reference to the calendar year in
which the plan year begins as follows:
---------------------------------------------------------------------------
\7\Pub. L. No. 114-74.
---------------------------------------------------------------------------
90 percent to 110 percent for 2012 through
2020,
85 percent to 115 percent for 2021,
80 percent to 120 percent for 2022,
75 percent to 125 percent for 2023, and
70 percent to 130 percent for 2024 or later.
For August 2018, the first, second, and third segment rates
after adjustment are 3.10 percent, 4.15 percent, and 4.46
percent, respectively.\8\
---------------------------------------------------------------------------
\8\Notice 2018-73, 2018-40 I.R.B 526 (October 1, 2018). These rates
are determined and published monthly by the Internal Revenue Service by
notice and on its website. See https://www.irs.gov/retirement-plans/
minimum-present-value-segment-rates.
---------------------------------------------------------------------------
REASONS FOR CHANGE
The Committee believes that providing funding relief to
sponsors of community newspaper pension plans with funding
shortfalls will allow sponsors of such plans to meet plan
obligations to covered employees.
EXPLANATION OF PROVISION
Under the provision, an employer maintaining a ``community
newspaper plan'' (as defined below) under which no participant
has had the participant's accrued benefit increased (whether
because of service or compensation) after December 31, 2017,
may elect to apply certain alternative funding rules to the
plan and any other plan sponsored by any member of the
employer's controlled group.\9\ The election is intended to be
available only to a plan under which all participant benefits
are ``frozen'' after December 31, 2017. An election under the
provision to apply the alternative funding rules is to be made
at such time and in such manner as prescribed by the Secretary
of the Treasury, and once made with respect to a plan year,
applies to all subsequent years unless revoked with the consent
of the Secretary of the Treasury.
---------------------------------------------------------------------------
\9\For this purpose, the controlled group means all persons treated
as a single employer under subsection (b), (c), (m), or (o) of Code
section 414.
---------------------------------------------------------------------------
Under the alternative funding rules, an interest rate of
eight percent is used to determine a plan's funding target and
target normal cost, rather than the first, second, and third
segment rates. However, if new benefits are accrued or earned
under a plan for a plan year in which the election is in
effect, the present value of such benefits must be determined
on the basis of the U.S. Treasury obligation yield curve for
the day that is the valuation date of such plan for such plan
year. In addition, if the value of plan assets is less than the
plan's funding target, such that the plan has a funding
shortfall, the shortfall is required to be funded by
contributions, with interest, over 30 years, rather than over
seven years. The shortfall amortization bases determined\10\
for all plan years preceding the first plan year to which the
election applies (and all related shortfall amortization
installments) are reduced to zero. Further, the assumptions
applicable to an ``at-risk'' plan do not apply.
---------------------------------------------------------------------------
\10\Under Code section 430(c)(3).
---------------------------------------------------------------------------
Under the provision, a ``community newspaper plan'' is a
plan to which the new provision applies, which is maintained by
an employer that, as of December 31, 2017,
publishes and distributes daily, either
electronically or in printed form, one or more
community newspapers (as defined below) in a single
State,
is not a company the stock of which is
publicly traded on a stock exchange or in an over-the-
counter market, and is not controlled, directly or
indirectly, by such a company,
is controlled, directly or indirectly (a) by
one or more persons residing primarily in the State in
which the community newspaper is published; (b) for at
least 30 years by individuals who are members of the
same family; (c) by a trust created or organized in the
State in which the community newspaper is published,
the sole trustees of which are persons described in (a)
or (b); (d) by an entity described in Code section
501(c)(3) and exempt from tax under Code section 501(a)
that is organized and operated in the State in which
the community newspaper is published, and the primary
purpose of which is to benefit communities in the
State; or (e) by a combination of persons described in
(a), (c), or (d), and
does not control, directly or indirectly,
any newspaper in any other State.
A ``community newspaper'' means a newspaper that primarily
serves a metropolitan statistical area, as determined by the
Office of Management and Budget, with a population of not less
than 100,000. For purposes of the provision, a person (the
``first'' person) is treated as controlled by another person if
the other person possesses, directly or indirectly, the power
to direct or cause the direction and management of the first
person (including the power to elect a majority of the members
of the board of directors of the first person) through the
ownership of voting securities.
The provision makes the above-described amendments to both
the Code and ERISA,\11\ other than the definition of
``controlled group'' described above\12\ which amends the Code
only.
---------------------------------------------------------------------------
\11\By adding a new subsection (m) to Code section 430, and a new
subsection (m) to Code section 303 of ERISA. The basis for calculating
underfunding in a plan for purposes of Pension Benefit Guaranty
Corporation variable rate premiums is not changed by the provision.
\12\See footnote 10, supra.
---------------------------------------------------------------------------
EFFECTIVE DATE
The provision applies the amendments to plan years in
effect on or beginning after the date of enactment.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 6377, the ``Save Community Newspaper Act
of 2018,'' on July 18, 2018.
The bill, H.R. 6377, as amended, was ordered favorably
reported to the House of Representatives by a voice vote (with
a quorum being present).
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 6377, as
reported.
The bill, as reported, is estimated to have the following
effect on Federal fiscal year budget receipts for the period
2019-2028:
FISCAL YEARS
[Millions of Dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019- 2019-
Item 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2023 2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
Permit election to apply alternative minimum funding 1 1 1 1 1 1 2 2 2 1 5 13
standards to certain single-employer community newspaper
plans[1][2]................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[1] Estimate does not include effects on PBGC premiums, which are estimated by the Congressional Budget Office.
[2] Estimate contains negligible off-budget revenue effects.
Pursuant to clause 8 of rule XIII of the Rules of the House
of Representatives, the following statement is made by the
Joint Committee on Taxation with respect to the provisions of
the bill amending the Internal Revenue Code of 1986: The gross
budgetary effect (before incorporating macroeconomic effects)
in any fiscal year is less than 0.25 percent of the current
projected gross domestic product of the United States for that
fiscal year; therefore, the bill is not ``major legislation''
for purposes of requiring that the estimate include the
budgetary effects of changes in economic output, employment,
capital stock and other macroeconomic variables.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that the revenue-increasing tax
provision involves no new tax expenditure.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 10, 2018.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 6377, the Save
Community Newspaper Act of 2018.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Noah
Meyerson.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 6377--Save Community Newspaper Act of 2018
Summary: H.R. 6377 would permit certain community
newspapers to choose alternative minimum funding standards for
the defined benefit pension plans that they maintain,
effectively reducing the amounts they are required to
contribute to those plans. Because employers can deduct pension
fund contributions from taxable income, those smaller
contributions would increase the newspapers' taxable corporate
income and thus increase federal revenues. Pension plans pay
premiums to the Pension Benefit Guaranty Corporation (PBGC)
that are based partly on the amount by which a plan is
underfunded. Smaller contributions from employers would
increase funding shortfalls and increase federal premium
receipts, which are recorded as reductions in direct spending.
As a result, CBO and the staff of the Joint Committee on
Taxation (JCT) estimate that enacting the legislation would
increase revenues by $13 million and reduce direct spending by
$21 million over the 2019-2028 period.
Because enacting H.R. 6377 would affect direct spending and
revenues, pay-as-you-go procedures apply.
CBO and JCT estimate that enacting H.R. 6377 would not
increase net direct spending by more than $2.5 billion or on-
budget deficits by more than $5 billion in any of the four
consecutive 10-year periods beginning in 2029.
CBO and JCT have determined that H.R. 6377 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary effect of H.R. 6377 is shown in the following table.
The costs of the legislation fall within budget function 600
(income security).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2019- 2019-
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2023 2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
DECREASES IN DIRECT SPENDING
Estimated Budget Authority.......................... 0 0 0 -1 -1 -2 -2 -3 -3 -4 -5 -4 -21
Estimated Outlays................................... 0 0 0 -1 -1 -2 -2 -3 -3 -4 -5 -4 -21
INCREASES IN REVENUES
Estimated Revenues.................................. 0 1 1 1 1 1 1 2 2 2 1 5 13
NET DECREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Effect on the Deficit................................ 0 -1 -1 -2 -2 -3 -3 -5 -5 -6 -6 -9 -34
--------------------------------------------------------------------------------------------------------------------------------------------------------
Basis of estimate: For this estimate, CBO and JCT assume
that H.R. 6377 will be enacted by the end of 2018.
Current law specifies minimum funding requirements for
single-employer private pension plans. In general, employers
must contribute an amount that is at least equal to the present
value of future benefits expected to be accrued that year
(called the normal cost) plus a portion of the plan's funding
shortfall.\1\ The funding shortfall is the difference between
the plan's assets and the funding target--a measure of the
present value of future benefits--which generally must be
funded over a seven-year period. The funding target and the
normal cost are computed using a complex discounting formula in
which different interest rates--currently below 5 percent--are
used for benefits that are expected to be paid out over
different future periods.
---------------------------------------------------------------------------
\1\A present value expresses a flow of future payments as a single
amount at a specific time. The value depends on the rate of interest,
known as the discount rate, used to translate future cash flows into
current dollars.
---------------------------------------------------------------------------
H.R. 6377 would allow community newspapers to reduce the
amounts they contribute to their pension plans by choosing a
higher discount rate. The plans could elect to use a discount
rate of 8 percent to determine the present value of future
benefits, thus reducing the funding target and the normal cost
and, therefore, the funding shortfall. The bill also would
allow plans to fund the shortfall over a period of 30 years
rather than 7 years.
To be eligible to reduce their pension contributions,
newspapers would need to meet several conditions, including the
following: They would need to publish a daily paper in a single
state, they could not control newspapers in other states, and
they could not be publicly traded companies. The pension plans
also would have to be frozen after 2017 so that participants
would not be earning new benefits.
CBO and JCT estimate that about 20 community newspaper
plans would meet the eligibility criteria and a subset of those
would choose to make smaller contributions. On average, annual
contributions would decline by $10 million. Employers can
deduct their pension fund contributions from taxable income,
and JCT estimates that the reduction in contributions would
result in $13 million in increased revenues from corporate
income tax collections over the 2019-2028 period.
Most single-employer pension plans are underfunded and pay
variable-rate premiums to PBGC that are based on the amount by
which the plans are underfunded. For 2018, the premium rate is
3.8 percent of a plan's funding shortfall. Lower contributions
would result in greater shortfalls and higher variable-rate
premiums. (Variable-rate premiums would be based on the funding
shortfall computed using current-law interest rates, not the
higher rates that would be used to compute minimum
contributions.) CBO estimates that receipts from variable-rate
premiums would increase by $21 million over the 2019-2028
period because of the increase in underfunding.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 6377, THE SAVE COMMUNITY NEWSPAPER ACT OF 2018, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND
MEANS ON JULY 18, 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2018-2023 2018-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN THE DEFICIT
Statutory Pay-As-You-Go Effect....................... 0 -1 -1 -2 -2 -3 -3 -5 -5 -6 -6 -9 -34
Memorandum:
Changes in Outlays............................... 0 0 0 -1 -1 -2 -2 -3 -3 -4 -5 -4 -21
Changes in Revenues.............................. 0 1 1 1 1 1 1 2 2 2 1 5 13
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in long-term direct spending and deficits: The
reduced contributions to pension funds that would be permitted
under H.R. 6377 would slightly increase the likelihood that
affected plans would fail and that PBGC would have to pay a
portion of plan benefits. The long-term effect on federal
outlays, however, is likely to be very small. CBO and JCT
estimate that enacting H.R. 6377 would not increase net direct
spending by more than $2.5 billion or on-budget deficits by
more than $5 billion in any of the four consecutive 10-year
periods beginning in 2029.
Mandates: CBO and JCT have determined that H.R. 6377
contains no intergovernmental or private-sector mandates as
defined in UMRA.
Estimate prepared by: Federal Costs: Noah Meyerson; Federal
Revenues: Staff of the Joint Committee on Taxation; Mandates:
Andrew Laughlin.
Estimate reviewed by: Sheila Dacey, Chief, Income Security
Cost Estimating Unit; H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated into
the description portions of this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code of 1986 and has widespread applicability
to individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code of 1986 and that have ``widespread applicability'' to
individuals or small businesses, within the meaning of the
rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program, (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139, or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to section 6104 of
title 31, United States Code.
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(i) of H. Res. 5 (115th Congress),
the following statement is made concerning directed rule
makings: The Committee advises that the bill requires no
directed rule makings within the meaning of such section.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
A. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law proposed
by the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter D--Deferred Compensation, Etc
* * * * * * *
PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT
LIMITATIONS
* * * * * * *
Subpart A--Minimum Funding Standards for Pension Plans
* * * * * * *
SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) Minimum required contribution.--For purposes of this
section and section 412(a)(2)(A), except as provided in
subsection (f), the term ``minimum required contribution''
means, with respect to any plan year of a defined benefit plan
which is not a multiemployer plan--
(1) in any case in which the value of plan assets of
the plan (as reduced under subsection (f)(4)(B)) is
less than the funding target of the plan for the plan
year, the sum of--
(A) the target normal cost of the plan for
the plan year,
(B) the shortfall amortization charge (if
any) for the plan for the plan year determined
under subsection (c), and
(C) the waiver amortization charge (if any)
for the plan for the plan year as determined
under subsection (e);
(2) in any case in which the value of plan assets of
the plan (as reduced under subsection (f)(4)(B)) equals
or exceeds the funding target of the plan for the plan
year, the target normal cost of the plan for the plan
year reduced (but not below zero) by such excess.
(b) Target normal cost.--For purposes of this section:
(1) In general.--Except as provided in subsection
(i)(2) with respect to plans in at-risk status, the
term ``target normal cost'' means, for any plan year,
the excess of--
(A) the sum of--
(i) the present value of all benefits
which are expected to accrue or to be
earned under the plan during the plan
year, plus
(ii) the amount of plan-related
expenses expected to be paid from plan
assets during the plan year, over (B)
the amount of mandatory employee
contributions expected to be made
during the plan year.
(2) Special rule for increase in compensation.--For
purposes of this subsection, if any benefit
attributable to services performed in a preceding plan
year is increased by reason of any increase in
compensation during the current plan year, the increase
in such benefit shall be treated as having accrued
during the current plan year.
(c) Shortfall amortization charge.--
(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan
year is the aggregate total (not less than zero) of the
shortfall amortization installments for such plan year
with respect to any shortfall amortization base which
has not been fully amortized under this subsection.
(2) Shortfall amortization installment.--For purposes
of paragraph (1)--
(A) Determination.--The shortfall
amortization installments are the amounts
necessary to amortize the shortfall
amortization base of the plan for any plan year
in level annual installments over the 7-plan-
year period beginning with such plan year.
(B) Shortfall installment.--The shortfall
amortization installment for any plan year in
the 7-plan-year period under subparagraph (A)
with respect to any shortfall amortization base
is the annual installment determined under
subparagraph (A) for that year for that base.
(C) Segment rates.--In determining any
shortfall amortization installment under this
paragraph, the plan sponsor shall use the
segment rates determined under subparagraph (C)
of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of
subsection (h)(2).
(D) Special election for eligible plan
years.--
(i) In general.--If a plan sponsor
elects to apply this subparagraph with
respect to the shortfall amortization
base of a plan for any eligible plan
year (in this subparagraph and
paragraph (7) referred to as an
``election year''), then,
notwithstanding subparagraphs (A) and
(B)--
(I) the shortfall
amortization installments with
respect to such base shall be
determined under clause (ii) or
(iii), whichever is specified
in the election, and
(II) the shortfall
amortization installment for
any plan year in the 9-plan-
year period described in clause
(ii) or the 15-plan-year period
described in clause (iii),
respectively, with respect to
such shortfall amortization
base is the annual installment
determined under the applicable
clause for that year for that
base.
(ii) 2 plus 7 amortization
schedule.--The shortfall amortization
installments determined under this
clause are--
(I) in the case of the first
2 plan years in the 9-plan-year
period beginning with the
election year, interest on the
shortfall amortization base of
the plan for the election year
(determined using the effective
interest rate for the plan for
the election year), and
(II) in the case of the last
7 plan years in such 9-plan-
year period, the amounts
necessary to amortize the
remaining balance of the
shortfall amortization base of
the plan for the election year
in level annual installments
over such last 7 plan years
(using the segment rates under
subparagraph (C) for the
election year).
(iii) 15-year amortization.--The
shortfall amortization installments
determined under this subparagraph are
the amounts necessary to amortize the
shortfall amortization base of the plan
for the election year in level annual
installments over the 15-plan-year
period beginning with the election year
(using the segment rates under
subparagraph (C) for the election
year).
(iv) Election.--
(I) In general.--The plan
sponsor of a plan may elect to
have this subparagraph apply to
not more than 2 eligible plan
years with respect to the plan,
except that in the case of a
plan described in section 106
of the Pension Protection Act
of 2006, the plan sponsor may
only elect to have this
subparagraph apply to a plan
year beginning in 2011.
(II) Amortization schedule.--
Such election shall specify
whether the amortization
schedule under clause (ii) or
(iii) shall apply to an
election year, except that if a
plan sponsor elects to have
this subparagraph apply to 2
eligible plan years, the plan
sponsor must elect the same
schedule for both years.
(III) Other rules.--Such
election shall be made at such
time, and in such form and
manner, as shall be prescribed
by the Secretary, and may be
revoked only with the consent
of the Secretary. The Secretary
shall, before granting a
revocation request, provide the
Pension Benefit Guaranty
Corporation an opportunity to
comment on the conditions
applicable to the treatment of
any portion of the election
year shortfall amortization
base that remains unamortized
as of the revocation date.
(v) Eligible plan year.--For purposes
of this subparagraph, the term
``eligible plan year'' means any plan
year beginning in 2008, 2009, 2010, or
2011, except that a plan year shall
only be treated as an eligible plan
year if the due date under subsection
(j)(1) for the payment of the minimum
required contribution for such plan
year occurs on or after the date of the
enactment of this subparagraph.
(vi) Reporting.--A plan sponsor of a
plan who makes an election under clause
(i) shall--
(I) give notice of the
election to participants and
beneficiaries of the plan, and
(II) inform the Pension
Benefit Guaranty Corporation of
such election in such form and
manner as the Director of the
Pension Benefit Guaranty
Corporation may prescribe.
(vii) Increases in required
installments in certain cases.--For
increases in required contributions in
cases of excess compensation or
extraordinary dividends or stock
redemptions, see paragraph (7).
(3) Shortfall amortization base.--For purposes of
this section, the shortfall amortization base of a plan
for a plan year is--
(A) the funding shortfall of such plan for
such plan year, minus
(B) the present value (determined using the
segment rates determined under subparagraph (C)
of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of
subsection (h)(2)) of the aggregate total of
the shortfall amortization installments and
waiver amortization installments which have
been determined for such plan year and any
succeeding plan year with respect to the
shortfall amortization bases and waiver
amortization bases of the plan for any plan
year preceding such plan year.
(4) Funding shortfall.--For purposes of this section,
the funding shortfall of a plan for any plan year is
the excess (if any) of--
(A) the funding target of the plan for the
plan year, over
(B) the value of plan assets of the plan (as
reduced under subsection (f)(4)(B)) for the
plan year which are held by the plan on the
valuation date.
(5) Exemption from new shortfall amortization base.--
In any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(A)) is equal
to or greater than the funding target of the plan for
the plan year, the shortfall amortization base of the
plan for such plan year shall be zero.
(6) Early deemed amortization upon attainment of
funding target.--In any case in which the funding
shortfall of a plan for a plan year is zero, for
purposes of determining the shortfall amortization
charge for such plan year and succeeding plan years,
the shortfall amortization bases for all preceding plan
years (and all shortfall amortization installments
determined with respect to such bases) shall be reduced
to zero.
(7) Increases in alternate required installments in
cases of excess compensation or extraordinary dividends
or stock redemptions.--
(A) In general.--If there is an installment
acceleration amount with respect to a plan for
any plan year in the restriction period with
respect to an election year under paragraph
(2)(D), then the shortfall amortization
installment otherwise determined and payable
under such paragraph for such plan year shall,
subject to the limitation under subparagraph
(B), be increased by such amount.
(B) Total installments limited to shortfall
base.--Subject to rules prescribed by the
Secretary, if a shortfall amortization
installment with respect to any shortfall
amortization base for an election year is
required to be increased for any plan year
under subparagraph (A)--
(i) such increase shall not result in
the amount of such installment
exceeding the present value of such
installment and all succeeding
installments with respect to such base
(determined without regard to such
increase but after application of
clause (ii)), and
(ii) subsequent shortfall
amortization installments with respect
to such base shall, in reverse order of
the otherwise required installments, be
reduced to the extent necessary to
limit the present value of such
subsequent shortfall amortization
installments (after application of this
paragraph) to the present value of the
remaining unamortized shortfall
amortization base.
(C) Installment acceleration amount.--For
purposes of this paragraph--
(i) In general.--The term
``installment acceleration amount''
means, with respect to any plan year in
a restriction period with respect to an
election year, the sum of--
(I) the aggregate amount of
excess employee compensation
determined under subparagraph
(D) with respect to all
employees for the plan year,
plus
(II) the aggregate amount of
extraordinary dividends and
redemptions determined under
subparagraph (E) for the plan
year.
(ii) Annual limitation.--The
installment acceleration amount for any
plan year shall not exceed the excess
(if any) of--
(I) the sum of the shortfall
amortization installments for
the plan year and all preceding
plan years in the amortization
period elected under paragraph
(2)(D) with respect to the
shortfall amortization base
with respect to an election
year, determined without regard
to paragraph (2)(D) and this
paragraph, over
(II) the sum of the shortfall
amortization installments for
such plan year and all such
preceding plan years,
determined after application of
paragraph (2)(D) (and in the
case of any preceding plan
year, after application of this
paragraph).
(iii) Carryover of excess installment
acceleration amounts.--
(I) In general.--If the
installment acceleration amount
for any plan year (determined
without regard to clause (ii))
exceeds the limitation under
clause (ii), then, subject to
subclause (II), such excess
shall be treated as an
installment acceleration amount
with respect to the succeeding
plan year.
(II) Cap to apply.--If any
amount treated as an
installment acceleration amount
under subclause (I) or this
subclause with respect any
succeeding plan year, when
added to other installment
acceleration amounts
(determined without regard to
clause (ii)) with respect to
the plan year, exceeds the
limitation under clause (ii),
the portion of such amount
representing such excess shall
be treated as an installment
acceleration amount with
respect to the next succeeding
plan year.
(III) Limitation on years to
which amounts carried for.--No
amount shall be carried under
subclause (I) or (II) to a plan
year which begins after the
first plan year following the
last plan year in the
restriction period (or after
the second plan year following
such last plan year in the case
of an election year with
respect to which 15-year
amortization was elected under
paragraph (2)(D)).
(IV) Ordering rules.--For
purposes of applying subclause
(II), installment acceleration
amounts for the plan year
(determined without regard to
any carryover under this
clause) shall be applied first
against the limitation under
clause (ii) and then carryovers
to such plan year shall be
applied against such limitation
on a first-in, first-out basis.
(D) Excess employee compensation.--For
purposes of this paragraph--
(i) In general.--The term ``excess
employee compensation'' means, with
respect to any employee for any plan
year, the excess (if any) of--
(I) the aggregate amount
includible in income under this
chapter for remuneration during
the calendar year in which such
plan year begins for services
performed by the employee for
the plan sponsor (whether or
not performed during such
calendar year), over
(II) $1,000,000.
(ii) Amounts set aside for
nonqualified deferred compensation.--If
during any calendar year assets are set
aside or reserved (directly or
indirectly) in a trust (or other
arrangement as determined by the
Secretary), or transferred to such a
trust or other arrangement, by a plan
sponsor for purposes of paying deferred
compensation of an employee under a
nonqualified deferred compensation plan
(as defined in section 409A) of the
plan sponsor, then, for purposes of
clause (i), the amount of such assets
shall be treated as remuneration of the
employee includible in income for the
calendar year unless such amount is
otherwise includible in income for such
year. An amount to which the preceding
sentence applies shall not be taken
into account under this paragraph for
any subsequent calendar year.
(iii) Only remuneration for certain
post-2009 services counted.--
Remuneration shall be taken into
account under clause (i) only to the
extent attributable to services
performed by the employee for the plan
sponsor after February 28, 2010.
(iv) Exception for certain equity
payments.--
(I) In general.--There shall
not be taken into account under
clause (i)(I) any amount
includible in income with
respect to the granting after
February 28, 2010, of service
recipient stock (within the
meaning of section 409A) that,
upon such grant, is subject to
a substantial risk of
forfeiture (as defined under
section 83(c)(1)) for at least
5 years from the date of such
grant.
(II) Secretarial authority.--
The Secretary may by regulation
provide for the application of
this clause in the case of a
person other than a
corporation.
(v) Other exceptions.--The following
amounts includible in income shall not
be taken into account under clause
(i)(I):
(I) Commissions.--Any
remuneration payable on a
commission basis solely on
account of income directly
generated by the individual
performance of the individual
to whom such remuneration is
payable.
(II) Certain payments under
existing contracts.--Any
remuneration consisting of
nonqualified deferred
compensation, restricted stock,
stock options, or stock
appreciation rights payable or
granted under a written binding
contract that was in effect on
March 1, 2010, and which was
not modified in any material
respect before such
remuneration is paid.
(vi) Self-employed individual treated
as employee.--The term ``employee''
includes, with respect to a calendar
year, a self-employed individual who is
treated as an employee under section
401(c) for the taxable year ending
during such calendar year, and the term
``compensation'' shall include earned
income of such individual with respect
to such self-employment.
(vii) Indexing of amount.--In the
case of any calendar year beginning
after 2010, the dollar amount under
clause (i)(II) shall be increased by an
amount equal to--
(I) such dollar amount,
multiplied by
(II) the cost-of-living
adjustment determined under
section 1(f)(3) for the
calendar year, determined by
substituting ``calendar year
2009'' for ``calendar year
2016'' in subparagraph (A)(ii)
thereof.
If the amount of any increase under
clause (i) is not a multiple of $1,000,
such increase shall be rounded to the
next lowest multiple of $1,000.
(E) Extraordinary dividends and
redemptions.--
(i) In general.--The amount
determined under this subparagraph for
any plan year is the excess (if any) of
the sum of the dividends declared
during the plan year by the plan
sponsor plus the aggregate amount paid
for the redemption of stock of the plan
sponsor redeemed during the plan year
over the greater of--
(I) the adjusted net income
(within the meaning of section
4043 of the Employee Retirement
Income Security Act of 1974) of
the plan sponsor for the
preceding plan year, determined
without regard to any reduction
by reason of interest, taxes,
depreciation, or amortization,
or
(II) in the case of a plan
sponsor that determined and
declared dividends in the same
manner for at least 5
consecutive years immediately
preceding such plan year, the
aggregate amount of dividends
determined and declared for
such plan year using such
manner.
(ii) Only certain post-2009 dividends
and redemptions counted.--For purposes
of clause (i), there shall only be
taken into account dividends declared,
and redemptions occurring, after
February 28, 2010.
(iii) Exception for intra-group
dividends.--Dividends paid by one
member of a controlled group (as
defined in section 412(d)(3)) to
another member of such group shall not
be taken into account under clause (i).
(iv) Exception for certain
redemptions.--Redemptions that are made
pursuant to a plan maintained with
respect to employees, or that are made
on account of the death, disability, or
termination of employment of an
employee or shareholder, shall not be
taken into account under clause (i).
(v) Exception for certain preferred
stock.--
(I) In general.--Dividends
and redemptions with respect to
applicable preferred stock
shall not be taken into account
under clause (i) to the extent
that dividends accrue with
respect to such stock at a
specified rate in all events
and without regard to the plan
sponsor's income, and interest
accrues on any unpaid dividends
with respect to such stock.
(II) Applicable preferred
stock.--For purposes of
subclause (I), the term
``applicable preferred stock''
means preferred stock which was
issued before March 1, 2010 (or
which was issued after such
date and is held by an employee
benefit plan subject to the
provisions of title I of the
Employee Retirement Income
Security Act of 1974).
(F) Other definitions and rules.--For
purposes of this paragraph--
(i) Plan sponsor.--The term ``plan
sponsor'' includes any member of the
plan sponsor's controlled group (as
defined in section 412(d)(3)).
(ii) Restriction period.--The term
``restriction period'' means, with
respect to any election year--
(I) except as provided in
subclause (II), the 3-year
period beginning with the
election year (or, if later,
the first plan year beginning
after December 31, 2009), and
(II) if the plan sponsor
elects 15-year amortization for
the shortfall amortization base
for the election year, the 5-
year period beginning with the
election year (or, if later,
the first plan year beginning
after December 31, 2009).
(iii) Elections for multiple plans.--
If a plan sponsor makes elections under
paragraph (2)(D) with respect to 2 or
more plans, the Secretary shall provide
rules for the application of this
paragraph to such plans, including
rules for the ratable allocation of any
installment acceleration amount among
such plans on the basis of each plan's
relative reduction in the plan's
shortfall amortization installment for
the first plan year in the amortization
period described in subparagraph (A)
(determined without regard to this
paragraph).
(iv) Mergers and acquisitions.--The
Secretary shall prescribe rules for the
application of paragraph (2)(D) and
this paragraph in any case where there
is a merger or acquisition involving a
plan sponsor making the election under
paragraph (2)(D).
(d) Rules relating to funding target.--For purposes of this
section--
(1) Funding target.--Except as provided in subsection
(i)(1) with respect to plans in at-risk status, the
funding target of a plan for a plan year is the present
value of all benefits accrued or earned under the plan
as of the beginning of the plan year.
(2) Funding target attainment percentage.--The
``funding target attainment percentage'' of a plan for
a plan year is the ratio (expressed as a percentage)
which--
(A) the value of plan assets for the plan
year (as reduced under subsection (f)(4)(B)),
bears to
(B) the funding target of the plan for the
plan year (determined without regard to
subsection (i)(1)).
(e) Waiver amortization charge.--
(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any
plan year is the aggregate total of the waiver
amortization installments for such plan year with
respect to the waiver amortization bases for each of
the 5 preceding plan years.
(2) Waiver amortization installment.--For purposes of
paragraph (1)--
(A) Determination.--The waiver amortization
installments are the amounts necessary to
amortize the waiver amortization base of the
plan for any plan year in level annual
installments over a period of 5 plan years
beginning with the succeeding plan year.
(B) Waiver installment.--The waiver
amortization installment for any plan year in
the 5-year period under subparagraph (A) with
respect to any waiver amortization base is the
annual installment determined under
subparagraph (A) for that year for that base.
(3) Interest rate.--In determining any waiver
amortization installment under this subsection, the
plan sponsor shall use the segment rates determined
under subparagraph (C) of subsection (h)(2), applied
under rules similar to the rules of subparagraph (B) of
subsection (h)(2).
(4) Waiver amortization base.--The waiver
amortization base of a plan for a plan year is the
amount of the waived funding deficiency (if any) for
such plan year under section 412(c).
(5) Early deemed amortization upon attainment of
funding target.--In any case in which the funding
shortfall of a plan for a plan year is zero, for
purposes of determining the waiver amortization charge
for such plan year and succeeding plan years, the
waiver amortization bases for all preceding plan years
(and all waiver amortization installments determined
with respect to such bases) shall be reduced to zero.
(f) Reduction of minimum required contribution by prefunding
balance and funding standard carryover balance.--
(1) Election to maintain balances.--
(A) Prefunding balance.--The plan sponsor of
a defined benefit plan which is not a
multiemployer plan may elect to maintain a
prefunding balance.
(B) Funding standard carryover balance.--
(i) In general.--In the case of a
defined benefit plan (other than a
multiemployer plan) described in clause
(ii), the plan sponsor may elect to
maintain a funding standard carryover
balance, until such balance is reduced
to zero.
(ii) Plans maintaining funding
standard account in 2007.--A plan is
described in this clause if the plan--
(I) was in effect for a plan
year beginning in 2007, and
(II) had a positive balance
in the funding standard account
under section 412(b) as in
effect for such plan year and
determined as of the end of
such plan year.
(2) Application of balances.--A prefunding balance
and a funding standard carryover balance maintained
pursuant to this paragraph--
(A) shall be available for crediting against
the minimum required contribution, pursuant to
an election under paragraph (3),
(B) shall be applied as a reduction in the
amount treated as the value of plan assets for
purposes of this section, to the extent
provided in paragraph (4), and
(C) may be reduced at any time, pursuant to
an election under paragraph (5).
(3) Election to apply balances against minimum
required contribution.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), in the case of any
plan year in which the plan sponsor elects to
credit against the minimum required
contribution for the current plan year all or a
portion of the prefunding balance or the
funding standard carryover balance for the
current plan year (not in excess of such
minimum required contribution), the minimum
required contribution for the plan year shall
be reduced as of the first day of the plan year
by the amount so credited by the plan sponsor.
For purposes of the preceding sentence, the
minimum required contribution shall be
determined after taking into account any waiver
under section 412(c).
(B) Coordination with funding standard
carryover balance.--To the extent that any plan
has a funding standard carryover balance
greater than zero, no amount of the prefunding
balance of such plan may be credited under this
paragraph in reducing the minimum required
contribution.
(C) Limitation for underfunded plans.--The
preceding provisions of this paragraph shall
not apply for any plan year if the ratio
(expressed as a percentage) which--
(i) the value of plan assets for the
preceding plan year (as reduced under
paragraph (4)(C)), bears to
(ii) the funding target of the plan
for the preceding plan year (determined
without regard to subsection (i)(1)),
is less than 80 percent. In the case of plan
years beginning in 2008, the ratio under this
subparagraph may be determined using such
methods of estimation as the Secretary may
prescribe.
(D) Special rule for certain years of plans
maintained by charities.--
(i) In general.--For purposes of
applying subparagraph (C) for plan
years beginning after August 31, 2009,
and before September 1, 2011, the ratio
determined under such subparagraph for
the preceding plan year of a plan shall
be the greater of--
(I) such ratio, as determined
without regard to this
subsection, or
(II) the ratio for such plan
for the plan year beginning
after August 31, 2007 and
before September 1, 2008, as
determined under rules
prescribed by the Secretary.
(ii) Special rule.--In the case of a
plan for which the valuation date is
not the first day of the plan year--
(I) clause (i) shall apply to
plan years beginning after
December 31, 2007, and before
January 1, 2010, and
(II) clause (i)(II) shall
apply based on the last plan
year beginning before September
1, 2007, as determined under
rules prescribed by the
Secretary.
(iii) Limitation to charities.--This
subparagraph shall not apply to any
plan unless such plan is maintained
exclusively by one or more
organizations described in section
501(c)(3).
(4) Effect of balances on amounts treated as value of
plan assets.--In the case of any plan maintaining a
prefunding balance or a funding standard carryover
balance pursuant to this subsection, the amount treated
as the value of plan assets shall be deemed to be such
amount, reduced as provided in the following
subparagraphs:
(A) Applicability of shortfall amortization
base.--For purposes of subsection (c)(5), the
value of plan assets is deemed to be such
amount, reduced by the amount of the prefunding
balance, but only if an election under
paragraph (3) applying any portion of the
prefunding balance in reducing the minimum
required contribution is in effect for the plan
year.
(B) Determination of excess assets, funding
shortfall, and funding target attainment
percentage.--
(i) In general.--For purposes of
subsections (a), (c)(4)(B), and
(d)(2)(A), the value of plan assets is
deemed to be such amount, reduced by
the amount of the prefunding balance
and the funding standard carryover
balance.
(ii) Special rule for certain binding
agreements with PBGC.--For purposes of
subsection (c)(4)(B), the value of plan
assets shall not be deemed to be
reduced for a plan year by the amount
of the specified balance if, with
respect to such balance, there is in
effect for a plan year a binding
written agreement with the Pension
Benefit Guaranty Corporation which
provides that such balance is not
available to reduce the minimum
required contribution for the plan
year. For purposes of the preceding
sentence, the term ``specified
balance'' means the prefunding balance
or the funding standard carryover
balance, as the case may be.
(C) Availability of balances in plan year for
crediting against minimum required
contribution.--For purposes of paragraph
(3)(C)(i) of this subsection, the value of plan
assets is deemed to be such amount, reduced by
the amount of the prefunding balance.
(5) Election to reduce balance prior to
determinations of value of plan assets and crediting
against minimum required contribution.--
(A) In general.--The plan sponsor may elect
to reduce by any amount the balance of the
prefunding balance and the funding standard
carryover balance for any plan year (but not
below zero). Such reduction shall be effective
prior to any determination of the value of plan
assets for such plan year under this section
and application of the balance in reducing the
minimum required contribution for such plan for
such plan year pursuant to an election under
paragraph (2).
(B) Coordination between prefunding balance
and funding standard carryover balance.--To the
extent that any plan has a funding standard
carryover balance greater than zero, no
election may be made under subparagraph (A)
with respect to the prefunding balance.
(6) Prefunding balance.--
(A) In general.--A prefunding balance
maintained by a plan shall consist of a
beginning balance of zero, increased and
decreased to the extent provided in
subparagraphs (B) and (C), and adjusted further
as provided in paragraph (8).
(B) Increases.--
(i) In general.--As of the first day
of each plan year beginning after 2008,
the prefunding balance of a plan shall
be increased by the amount elected by
the plan sponsor for the plan year.
Such amount shall not exceed the excess
(if any) of--
(I) the aggregate total of
employer contributions to the
plan for the preceding plan
year, over--
(II) the minimum required
contribution for such preceding
plan year.
(ii) Adjustments for interest.--Any
excess contributions under clause (i)
shall be properly adjusted for interest
accruing for the periods between the
first day of the current plan year and
the dates on which the excess
contributions were made, determined by
using the effective interest rate for
the preceding plan year and by treating
contributions as being first used to
satisfy the minimum required
contribution.
(iii) Certain contributions necessary
to avoid benefit limitations
disregarded.--The excess described in
clause (i) with respect to any
preceding plan year shall be reduced
(but not below zero) by the amount of
contributions an employer would be
required to make under subsection (b),
(c), or (e) of section 436 to avoid a
benefit limitation which would
otherwise be imposed under such
paragraph for the preceding plan year.
Any contribution which may be taken
into account in satisfying the
requirements of more than 1 of such
paragraphs shall be taken into account
only once for purposes of this clause.
(C) Decreases.--The prefunding balance of a
plan shall be decreased (but not below zero)
by--
(i) as of the first day of each plan
year after 2008, the amount of such
balance credited under paragraph (2)
(if any) in reducing the minimum
required contribution of the plan for
the preceding plan year, and
(ii) as of the time specified in
paragraph (5)(A), any reduction in such
balance elected under paragraph (5).
(7) Funding standard carryover balance.--
(A) In general.--A funding standard carryover
balance maintained by a plan shall consist of a
beginning balance determined under subparagraph
(B), decreased to the extent provided in
subparagraph (C), and adjusted further as
provided in paragraph (8).
(B) Beginning balance.--The beginning balance
of the funding standard carryover balance shall
be the positive balance described in paragraph
(1)(B)(ii)(II).
(C) Decreases.--The funding standard
carryover balance of a plan shall be decreased
(but not below zero) by--
(i) as of the first day of each plan
year after 2008, the amount of such
balance credited under paragraph (2)
(if any) in reducing the minimum
required contribution of the plan for
the preceding plan year, and
(ii) as of the time specified in
paragraph (5)(A), any reduction in such
balance elected under paragraph (5).
(8) Adjustments for investment experience.--In
determining the prefunding balance or the funding
standard carryover balance of a plan as of the first
day of the plan year, the plan sponsor shall, in
accordance with regulations prescribed by the
Secretary, adjust such balance to reflect the rate of
return on plan assets for the preceding plan year.
Notwithstanding subsection (g)(3), such rate of return
shall be determined on the basis of fair market value
and shall properly take into account, in accordance
with such regulations, all contributions,
distributions, and other plan payments made during such
period.
(9) Elections.--Elections under this subsection shall
be made at such times, and in such form and manner, as
shall be prescribed in regulations of the Secretary.
(g) Valuation of plan assets and liabilities.--
(1) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations
under this section for a plan year shall be made as of
the valuation date of the plan for such plan year.
(2) Valuation date.--For purposes of this section--
(A) In general.--Except as provided in
subparagraph (B), the valuation date of a plan
for any plan year shall be the first day of the
plan year.
(B) Exception for small plans.--If, on each
day during the preceding plan year, a plan had
100 or fewer participants, the plan may
designate any day during the plan year as its
valuation date for such plan year and
succeeding plan years. For purposes of this
subparagraph, all defined benefit plans (other
than multiemployer plans) maintained by the
same employer (or any member of such employer's
controlled group) shall be treated as 1 plan,
but only participants with respect to such
employer or member shall be taken into account.
(C) Application of certain rules in
determination of plan size.--For purposes of
this paragraph--
(i) Plans not in existence in
preceding year.--In the case of the
first plan year of any plan,
subparagraph (B) shall apply to such
plan by taking into account the number
of participants that the plan is
reasonably expected to have on days
during such first plan year.
(ii) Predecessors.--Any reference in
subparagraph (B) to an employer shall
include a reference to any predecessor
of such employer.
(3) Determination of value of plan assets.--For
purposes of this section--
(A) In general.--Except as provided in
subparagraph (B), the value of plan assets
shall be the fair market value of the assets.
(B) Averaging allowed.--A plan may determine
the value of plan assets on the basis of the
averaging of fair market values, but only if
such method--
(i) is permitted under regulations
prescribed by the Secretary,
(ii) does not provide for averaging
of such values over more than the
period beginning on the last day of the
25th month preceding the month in which
the valuation date occurs and ending on
the valuation date (or a similar period
in the case of a valuation date which
is not the 1st day of a month), and
(iii) does not result in a
determination of the value of plan
assets which, at any time, is lower
than 90 percent or greater than 110
percent of the fair market value of
such assets at such time.
Any such averaging shall be adjusted for
contributions, distributions, and expected
earnings (as determined by the plan's actuary
on the basis of an assumed earnings rate
specified by the actuary but not in excess of
the third segment rate applicable under
subsection (h)(2)(C)(iii)), as specified by the
Secretary.
(4) Accounting for contribution receipts.--For
purposes of determining the value of assets under
paragraph (3)--
(A) Prior year contributions.--If--
(i) an employer makes any
contribution to the plan after the
valuation date for the plan year in
which the contribution is made, and
(ii) the contribution is for a
preceding plan year, the contribution
shall be taken into account as an asset
of the plan as of the valuation date,
except that in the case of any plan
year beginning after 2008, only the
present value (determined as of the
valuation date) of such contribution
may be taken into account. For purposes
of the preceding sentence, present
value shall be determined using the
effective interest rate for the
preceding plan year to which the
contribution is properly allocable.
(B) Special rule for current year
contributions made before valuation date.--If
any contributions for any plan year are made to
or under the plan during the plan year but
before the valuation date for the plan year,
the assets of the plan as of the valuation date
shall not include--
(i) such contributions, and
(ii) interest on such contributions
for the period between the date of the
contributions and the valuation date,
determined by using the effective
interest rate for the plan year.
(h) Actuarial assumptions and methods.--
(1) In general.--Subject to this subsection, the
determination of any present value or other computation
under this section shall be made on the basis of
actuarial assumptions and methods--
(A) each of which is reasonable (taking into
account the experience of the plan and
reasonable expectations), and
(B) which, in combination, offer the
actuary's best estimate of anticipated
experience under the plan.
(2) Interest rates.--
(A) Effective interest rate.--For purposes of
this section, the term ``effective interest
rate'' means, with respect to any plan for any
plan year, the single rate of interest which,
if used to determine the present value of the
plan's accrued or earned benefits referred to
in subsection (d)(1), would result in an amount
equal to the funding target of the plan for
such plan year.
(B) Interest rates for determining funding
target.--For purposes of determining the
funding target and target normal cost of a plan
for any plan year, the interest rate used in
determining the present value of the benefits
of the plan shall be--
(i) in the case of benefits
reasonably determined to be payable
during the 5-year period beginning on
the valuation date for the plan year,
the first segment rate with respect to
the applicable month,
(ii) in the case of benefits
reasonably determined to be payable
during the 15-year period beginning at
the end of the period described in
clause (i), the second segment rate
with respect to the applicable month,
and
(iii) in the case of benefits
reasonably determined to be payable
after the period described in clause
(ii), the third segment rate with
respect to the applicable month.
(C) Segment rates.--For purposes of this
paragraph--
(i) First segment rate.--The term
``first segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary for such month on the
basis of the corporate bond yield curve
for such month, taking into account
only that portion of such yield curve
which is based on bonds maturing during
the 5-year period commencing with such
month.
(ii) Second segment rate.--The term
``second segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary for such month on the
basis of the corporate bond yield curve
for such month, taking into account
only that portion of such yield curve
which is based on bonds maturing during
the 15-year period beginning at the end
of the period described in clause (i).
(iii) Third segment rate.--The term
``third segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary for such month on the
basis of the corporate bond yield curve
for such month, taking into account
only that portion of such yield curve
which is based on bonds maturing during
periods beginning after the period
described in clause (ii).
(iv) Segment rate stabilization.--
(I) In general.--If a segment
rate described in clause (i),
(ii), or (iii) with respect to
any applicable month
(determined without regard to
this clause) is less than the
applicable minimum percentage,
or more than the applicable
maximum percentage, of the
average of the segment rates
described in such clause for
years in the 25-year period
ending with September 30 of the
calendar year preceding the
calendar year in which the plan
year begins, then the segment
rate described in such clause
with respect to the applicable
month shall be equal to the
applicable minimum percentage
or the applicable maximum
percentage of such average,
whichever is closest. The
Secretary shall determine such
average on an annual basis and
may prescribe equivalent rates
for years in any such 25- year
period for which the rates
described in any such clause
are not available.
(II) Applicable minimum
percentage; applicable maximum
percentage.--For purposes of
subclause (I), the applicable
minimum percentage and the
applicable maximum percentage
for a plan year beginning in a
calendar year shall be
determined in accordance with
the following table:
------------------------------------------------------------------------
If the calendar year The applicable minimum The applicable maximum
is: percentage is: percentage is:
------------------------------------------------------------------------
2012, 2013, 2014, 90% 110%
2015, 2016, 2017,
2018, 2019, or 2020.
2021 85% 115%
2022 80% 120%
2023 75% 125%
After 2023 70% 130%
------------------------------------------------------------------------
(D) Corporate bond yield curve.--For purposes
of this paragraph--
(i) In general.--The term ``corporate
bond yield curve'' means, with respect
to any month, a yield curve which is
prescribed by the Secretary for such
month and which reflects the average,
for the 24-month period ending with the
month preceding such month, of monthly
yields on investment grade corporate
bonds with varying maturities and that
are in the top 3 quality levels
available.
(ii) Election to use yield curve.--
Solely for purposes of determining the
minimum required contribution under
this section, the plan sponsor may, in
lieu of the segment rates determined
under subparagraph (C), elect to use
interest rates under the corporate bond
yield curve. For purposes of the
preceding sentence such curve shall be
determined without regard to the 24-
month averaging described in clause
(i). Such election, once made, may be
revoked only with the consent of the
Secretary.
(E) Applicable month.--For purposes of this
paragraph, the term ``applicable month'' means,
with respect to any plan for any plan year, the
month which includes the valuation date of such
plan for such plan year or, at the election of
the plan sponsor, any of the 4 months which
precede such month. Any election made under
this subparagraph shall apply to the plan year
for which the election is made and all
succeeding plan years, unless the election is
revoked with the consent of the Secretary.
(F) Publication requirements.--The Secretary
shall publish for each month the corporate bond
yield curve (and the corporate bond yield curve
reflecting the modification described in
section 417(e)(3)(D) for such month) and each
of the rates determined under subparagraph (C)
and the averages determined under subparagraph
(C)(iv) for such month. The Secretary shall
also publish a description of the methodology
used to determine such yield curve and such
rates which is sufficiently detailed to enable
plans to make reasonable projections regarding
the yield curve and such rates for future
months based on the plan's projection of future
interest rates.
(3) Mortality tables.--
(A) In general.--Except as provided in
subparagraph (C) or (D), the Secretary shall by
regulation prescribe mortality tables to be
used in determining any present value or making
any computation under this section. Such tables
shall be based on the actual experience of
pension plans and projected trends in such
experience. In prescribing such tables, the
Secretary shall take into account results of
available independent studies of mortality of
individuals covered by pension plans.
(B) Periodic revision.--The Secretary shall
(at least every 10 years) make revisions in any
table in effect under subparagraph (A) to
reflect the actual experience of pension plans
and projected trends in such experience.
(C) Substitute mortality table.--
(i) In general.--Upon request by the
plan sponsor and approval by the
Secretary, a mortality table which
meets the requirements of clause (iii)
shall be used in determining any
present value or making any computation
under this section during the period of
consecutive plan years (not to exceed
10) specified in the request.
(ii) Early termination of period.--
Notwithstanding clause (i), a mortality
table described in clause (i) shall
cease to be in effect as of the
earliest of--
(I) the date on which there
is a significant change in the
participants in the plan by
reason of a plan spinoff or
merger or otherwise, or
(II) the date on which the
plan actuary determines that
such table does not meet the
requirements of clause (iii).
(iii) Requirements.--A mortality
table meets the requirements of this
clause if--
(I) there is a sufficient
number of plan participants,
and the pension plans have been
maintained for a sufficient
period of time, to have
credible information necessary
for purposes of subclause (II),
and
(II) such table reflects the
actual experience of the
pension plans maintained by the
sponsor and projected trends in
general mortality experience.
(iv) All plans in controlled group
must use separate table.--Except as
provided by the Secretary, a plan
sponsor may not use a mortality table
under this subparagraph for any plan
maintained by the plan sponsor unless--
(I) a separate mortality
table is established and used
under this subparagraph for
each other plan maintained by
the plan sponsor and if the
plan sponsor is a member of a
controlled group, each member
of the controlled group, and
(II) the requirements of
clause (iii) are met separately
with respect to the table so
established for each such plan,
determined by only taking into
account the participants of
such plan, the time such plan
has been in existence, and the
actual experience of such plan.
(v) Deadline for submission and
disposition of application.--
(I) Submission.--The plan
sponsor shall submit a
mortality table to the
Secretary for approval under
this subparagraph at least 7
months before the 1st day of
the period described in clause
(i).
(II) Disposition.--Any
mortality table submitted to
the Secretary for approval
under this subparagraph shall
be treated as in effect as of
the 1st day of the period
described in clause (i) unless
the Secretary, during the 180-
day period beginning on the
date of such submission,
disapproves of such table and
provides the reasons that such
table fails to meet the
requirements of clause (iii).
The 180-day period shall be
extended upon mutual agreement
of the Secretary and the plan
sponsor.
(D) Separate mortality tables for the
disabled.--Notwithstanding subparagraph (A)--
(i) In general.--The Secretary shall
establish mortality tables which may be
used (in lieu of the tables under
subparagraph (A)) under this subsection
for individuals who are entitled to
benefits under the plan on account of
disability. The 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 clause (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) Periodic revision.--The
Secretary shall (at least every 10
years) make revisions in any table in
effect under clause (i) to reflect the
actual experience of pension plans and
projected trends in such experience.
(4) Probability of benefit payments in the form of
lump sums or other optional forms.--For purposes of
determining any present value or making any computation
under this section, there shall be taken into account--
(A) the probability that future benefit
payments under the plan will be made in the
form of optional forms of benefits provided
under the plan (including lump sum
distributions, determined on the basis of the
plan's experience and other related
assumptions), and
(B) any difference in the present value of
such future benefit payments resulting from the
use of actuarial assumptions, in determining
benefit payments in any such optional form of
benefits, which are different from those
specified in this subsection.
(5) Approval of large changes in actuarial
assumptions.--
(A) In general.--No actuarial assumption used
to determine the funding target for a plan to
which this paragraph applies may be changed
without the approval of the Secretary.
(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan only if--
(i) the plan is a defined benefit
plan (other than a multiemployer plan)
to which title IV of the Employee
Retirement Income Security Act of 1974
applies,
(ii) the aggregate unfunded vested
benefits as of the close of the
preceding plan year (as determined
under section 4006(a)(3)(E)(iii) of the
Employee Retirement Income Security Act
of 1974) of such plan and all other
plans maintained by the contributing
sponsors (as defined in section
4001(a)(13) of such Act) and members of
such sponsors' controlled groups (as
defined in section 4001(a)(14) of such
Act) which are covered by title IV
(disregarding plans with no unfunded
vested benefits) exceed $50,000,000,
and
(iii) the change in assumptions
(determined after taking into account
any changes in interest rate and
mortality table) results in a decrease
in the funding shortfall of the plan
for the current plan year that exceeds
$50,000,000, or that exceeds $5,000,000
and that is 5 percent or more of the
funding target of the plan before such
change.
(i) Special rules for at-risk plans.--
(1) Funding target for plans in at-risk status.--
(A) In general.--In the case of a plan which
is in at- risk status for a plan year, the
funding target of the plan for the plan year
shall be equal to the sum of--
(i) the present value of all benefits
accrued or earned under the plan as of
the beginning of the plan year, as
determined by using the additional
actuarial assumptions described in
subparagraph (B), and
(ii) in the case of a plan which also
has been in at- risk status for at
least 2 of the 4 preceding plan years,
a loading factor determined under
subparagraph (C).
(B) Additional actuarial assumptions.--The
actuarial assumptions described in this
subparagraph are as follows:
(i) All employees who are not
otherwise assumed to retire as of the
valuation date but who will be eligible
to elect benefits during the plan year
and the 10 succeeding plan years shall
be assumed to retire at the earliest
retirement date under the plan but not
before the end of the plan year for
which the at-risk funding target and
at- risk target normal cost are being
determined.
(ii) All employees shall be assumed
to elect the retirement benefit
available under the plan at the assumed
retirement age (determined after
application of clause (i)) which would
result in the highest present value of
benefits.
(C) Loading factor.--The loading factor
applied with respect to a plan under this
paragraph for any plan year is the sum of--
(i) $700, times the number of
participants in the plan, plus
(ii) 4 percent of the funding target
(determined without regard to this
paragraph) of the plan for the plan
year.
(2) Target normal cost of at-risk plans.--In the case
of a plan which is in at-risk status for a plan year,
the target normal cost of the plan for such plan year
shall be equal to the sum of--
(A) the excess of--
(i) the sum of--
(I) the present value of all
benefits which are expected to
accrue or to be earned under
the plan during the plan year,
determined using the additional
actuarial assumptions described
in paragraph (1)(B), plus
(II) the amount of plan-
related expenses expected to be
paid from plan assets during
the plan year, over (ii) the
amount of mandatory employee
contributions expected to be
made during the plan year,
plus",
(B) in the case of a plan which also has been
in at-risk status for at least 2 of the 4
preceding plan years, a loading factor equal to
4 percent of the amount determined under
subsection (b)(1)(A)(i) with respect to the
plan for the plan year.
(3) Minimum amount.--In no event shall--
(A) the at-risk funding target be less than
the funding target, as determined without
regard to this subsection, or
(B) the at-risk target normal cost be less
than the target normal cost, as determined
without regard to this subsection.
(4) Determination of at-risk status.--For purposes of
this subsection--
(A) In general.--A plan is in at-risk status
for a plan year if--
(i) the funding target attainment
percentage for the preceding plan year
(determined under this section without
regard to this subsection) is less than
80 percent, and
(ii) the funding target attainment
percentage for the preceding plan year
(determined under this section by using
the additional actuarial assumptions
described in paragraph (1)(B) in
computing the funding target) is less
than 70 percent.
(B) Transition rule.--In the case of plan
years beginning in 2008, 2009, and 2010,
subparagraph (A)(i) shall be applied by
substituting the following percentages for ``80
percent'':
(i) 65 percent in the case of 2008.
(ii) 70 percent in the case of 2009.
(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008,
the funding target attainment percentage for
the preceding plan year under subparagraph (A)
may be determined using such methods of
estimation as the Secretary may provide.
(C) Special rule for employees offered early
retirement in 2006.--
(i) In general.--For purposes of
subparagraph (A)(ii), the additional
actuarial assumptions described in
paragraph (1)(B) shall not be taken
into account with respect to any
employee if--
(I) such employee is employed
by a specified automobile
manufacturer,
(II) such employee is offered
a substantial amount of
additional cash compensation,
substantially enhanced
retirement benefits under the
plan, or materially reduced
employment duties on the
condition that by a specified
date (not later than December
31, 2010) the employee retires
(as defined under the terms of
the plan),
(III) such offer is made
during 2006 and pursuant to a
bona fide retirement incentive
program and requires, by the
terms of the offer, that such
offer can be accepted not later
than a specified date (not
later than December 31, 2006),
and
(IV) such employee does not
elect to accept such offer
before the specified date on
which the offer expires.
(ii) Specified automobile
manufacturer.--For purposes of clause
(i), the term ``specified automobile
manufacturer'' means--
(I) any manufacturer of
automobiles, and
(II) any manufacturer of
automobile parts which supplies
such parts directly to a
manufacturer of automobiles and
which, after a transaction or
series of transactions ending
in 1999, ceased to be a member
of a controlled group which
included such manufacturer of
automobiles.
(5) Transition between applicable funding targets and
between applicable target normal costs.--
(A) In general.--In any case in which a plan
which is in at-risk status for a plan year has
been in such status for a consecutive period of
fewer than 5 plan years, the applicable amount
of the funding target and of the target normal
cost shall be, in lieu of the amount determined
without regard to this paragraph, the sum of--
(i) the amount determined under this
section without regard to this
subsection, plus
(ii) the transition percentage for
such plan year of the excess of the
amount determined under this subsection
(without regard to this paragraph) over
the amount determined under this
section without regard to this
subsection.
(B) Transition percentage.--For purposes of
subparagraph (A), the transition percentage
shall be determined in accordance with the
following table:
------------------------------------------------------------------------
If the consecutive number of years
(including the plan year) the plan The transition percentage is--
is in at-risk status is--
------------------------------------------------------------------------
1 20
2 40
3 60
4 80.
------------------------------------------------------------------------
(C) Years before effective date.--For
purposes of this paragraph, plan years
beginning before 2008 shall not be taken into
account.
(6) Small plan exception.--If, on each day during the
preceding plan year, a plan had 500 or fewer
participants, the plan shall not be treated as in at-
risk status for the plan year. For purposes of this
paragraph, all defined benefit plans (other than
multiemployer plans) maintained by the same employer
(or any member of such employer's controlled group)
shall be treated as 1 plan, but only participants with
respect to such employer or member shall be taken into
account and the rules of subsection (g)(2)(C) shall
apply.
(j) Payment of minimum required contributions.--
(1) In general.--For purposes of this section, the
due date for any payment of any minimum required
contribution for any plan year shall be 8\1/2\ months
after the close of the plan year.
(2) Interest.--Any payment required under paragraph
(1) for a plan year that is made on a date other than
the valuation date for such plan year shall be adjusted
for interest accruing for the period between the
valuation date and the payment date, at the effective
rate of interest for the plan for such plan year.
(3) Accelerated quarterly contribution schedule for
underfunded plans.--
(A) Failure to timely make required
installment.--In any case in which the plan has
a funding shortfall for the preceding plan
year, the employer maintaining the plan shall
make the required installments under this
paragraph and if the employer fails to pay the
full amount of a required installment for the
plan year, then the amount of interest charged
under paragraph (2) on the underpayment for the
period of underpayment shall be determined by
using a rate of interest equal to the rate
otherwise used under paragraph (2) plus 5
percentage points. In the case of plan years
beginning in 2008, the funding shortfall for
the preceding plan year may be determined using
such methods of estimation as the Secretary may
provide.
(B) Amount of underpayment, period of
underpayment.--For purposes of subparagraph
(A)--
(i) Amount.--The amount of the
underpayment shall be the excess of--
(I) the required installment,
over (II) the amount (if any)
of the installment contributed
to or under the plan on or
before the due date for the
installment.
(ii) Period of underpayment.--The
period for which any interest is
charged under this paragraph with
respect to any portion of the
underpayment shall run from the due
date for the installment to the date on
which such portion is contributed to or
under the plan.
(iii) Order of crediting
contributions.--For purposes of clause
(i)(II), contributions shall be
credited against unpaid required
installments in the order in which such
installments are required to be paid.
(C) Number of required installments; due
dates.--For purposes of this paragraph--
(i) Payable in 4 installments.--There
shall be 4 required installments for
each plan year.
(ii) Time for payment of
installments.--The due dates for
required installments are set forth in
the following table:
------------------------------------------------------------------------
In the case of the following required
installment: The due date is:
------------------------------------------------------------------------
1st April 15
2nd July 15
3rd October 15
4th January 15 of the following
year.
------------------------------------------------------------------------
(D) Amount of required installment.--For
purposes of this paragraph--
(i) In general.--The amount of any
required installment shall be 25
percent of the required annual payment.
(ii) Required annual payment.--For
purposes of clause (i), the term
``required annual payment'' means the
lesser of--
(I) 90 percent of the minimum
required contribution
(determined without regard to
this subsection) to the plan
for the plan year under this
section, or
(II) 100 percent of the
minimum required contribution
(determined without regard to
this subsection or to any
waiver under section 412(c)) to
the plan for the preceding plan
year.
Subclause (II) shall not apply if the
preceding plan year referred to in such
clause was not a year of 12 months.
(E) Fiscal years, short years, and years with
alternate valuation date.--
(i) Fiscal years.--In applying this
paragraph to a plan year beginning on
any date other than January 1, there
shall be substituted for the months
specified in this paragraph, the months
which correspond thereto.
(ii) Short plan year.--This
subparagraph shall be applied to plan
years of less than 12 months in
accordance with regulations prescribed
by the Secretary.
(iii) Plan with alternate valuation
date.--The Secretary shall prescribe
regulations for the application of this
paragraph in the case of a plan which
has a valuation date other than the
first day of the plan year.
(F) Quarterly contributions not to include
certain increased contributions.--Subparagraph
(D) shall be applied without regard to any
increase under subsection (c)(7).
(4) Liquidity requirement in connection with
quarterly contributions.--
(A) In general.--A plan to which this
paragraph applies shall be treated as failing
to pay the full amount of any required
installment under paragraph (3) 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 plan (other than a
plan described in subsection (g)(2)(B)) which--
(i) is required to pay installments
under paragraph (3) 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 (3)(A), 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 funding target
attainment percentage of the plan for the plan
year (taking into account the expected increase
in funding target due to benefits accruing or
earned 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--
(I) the base amount with
respect to such quarter, over
(II) 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
subclause (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 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 funding target
attainment percentage for the
plan year, and
(II) the sum of the purchases
of annuities, payments of
single sums, and such other
disbursements as the Secretary
shall provide in regulations.
(v) Liquid assets.--The term ``liquid
assets'' means cash, marketable
securities, and such other assets as
specified by the Secretary 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 may prescribe
such regulations as are necessary to carry out
this paragraph.
(k) Imposition of lien where failure to make required
contributions.--
(1) In general.--In the case of a plan to which this
subsection applies (as provided under paragraph (2)),
if--
(A) any person fails to make a contribution
payment required by section 412 and this
section before the due date for such payment,
and
(B) the unpaid balance of such payment
(including interest), when added to the
aggregate unpaid balance of all preceding such
payments for which payment was not made before
the due date (including interest), exceeds
$1,000,000, then there shall be a lien in favor
of the plan in the amount determined under
paragraph (3) upon all property and rights to
property, whether real or personal, belonging
to such person and any other person who is a
member of the same controlled group of which
such person is a member.
(2) Plans to which subsection applies.--This
subsection shall apply to a defined benefit plan (other
than a multiemployer plan) covered under section 4021
of the Employee Retirement Income Security Act of 1974
for any plan year for which the funding target
attainment percentage (as defined in subsection (d)(2))
of such plan is less than 100 percent.
(3) Amount of lien.--For purposes of paragraph (1),
the amount of the lien shall be equal to the aggregate
unpaid balance of contribution payments required under
this section and section 412 for which payment has not
been made before the due date.
(4) Notice of failure; lien.--
(A) Notice of failure.--A person committing a
failure described in paragraph (1) shall notify
the Pension Benefit Guaranty Corporation of
such failure within 10 days of the due date for
the required contribution payment.
(B) Period of lien.--The lien imposed by
paragraph (1) shall arise on the due date for
the required contribution payment and shall
continue until the last day of the first plan
year in which the plan ceases to be described
in paragraph (1)(B). Such lien shall continue
to run without regard to whether such plan
continues to be described in paragraph (2)
during the period referred to in the preceding
sentence.
(C) Certain rules to apply.--Any amount with
respect to which a lien is imposed under
paragraph (1) shall be treated as taxes due and
owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of
section 4068 of the Employee Retirement Income
Security Act of 1974 shall apply with respect
to a lien imposed by subsection (a) and the
amount with respect to such lien.
(5) Enforcement.--Any lien created under paragraph
(1) may be perfected and enforced only by the Pension
Benefit Guaranty Corporation, or at the direction of
the Pension Benefit Guaranty Corporation, by the
contributing sponsor (or any member of the controlled
group of the contributing sponsor).
(6) Definitions.--For purposes of this subsection--
(A) Contribution payment.--The term
``contribution payment'' means, in connection
with a plan, a contribution payment required to
be made to the plan, including any required
installment under paragraphs (3) and (4) of
subsection (j).
(B) Due date; required installment.--The
terms ``due date'' and ``required installment''
have the meanings given such terms by
subsection USC Sec..
(C) Controlled group.--The term ``controlled
group'' means any group treated as a single
employer under subsections (b), (c), (m), and
(o) of section 414.
(l) Qualified transfers to health benefit accounts.--In the
case of a qualified transfer (as defined in section 420), any
assets so transferred shall not, for purposes of this section,
be treated as assets in the plan.
(m) Special Rules for Community Newspaper Plans.--
(1) In general.--The plan sponsor of a community
newspaper plan under which no participant has had the
participant's accrued benefit increased (whether
because of service or compensation) after December 31,
2017, may elect to have the alternative standards
described in paragraph (3) apply to such plan, and any
plan sponsored by any member of the same controlled
group, for purposes of this section for plan years
beginning with any plan year in effect on or beginning
after the date of the enactment of this subsection. For
purposes of this paragraph, the term ``controlled
group'' means all persons treated as a single employer
under subsection (b), (c), (m), or (o) of section 414.
(2) Election.--An election under paragraph (1) shall
be made at such time and in such manner as prescribed
by the Secretary. Such election, once made with respect
to a plan year, shall apply to all subsequent plan
years unless revoked with the consent of the Secretary.
(3) Alternative minimum funding standards.--The
alternative standards described in this paragraph are
the following:
(A) Interest rates.--
(i) In general.--Notwithstanding
subsection (h)(2)(C) and except as
provided in clause (ii), the first,
second, and third segment rates in
effect for any month for purposes of
this section shall be 8 percent.
(ii) New benefit accruals.--
Notwithstanding subsection (h)(2), for
purposes of determining the funding
target and normal cost of a plan for
any plan year, the present value of any
benefits accrued or earned under the
plan for a plan year with respect to
which an election under paragraph (1)
is in effect shall be determined on the
basis of the U.S. Treasury obligation
yield curve for the day that is the
valuation date of such plan for such
plan year.
(iii) U.S. treasury obligation yield
curve.--For purposes of this
subsection, the term ``U.S. Treasury
obligation yield curve'' means, with
respect to any day, a yield curve which
shall be prescribed by the Secretary
for such day on interest-bearing
obligations of the United States.
(B) Shortfall amortization base.--
(i) Previous shortfall amortization
bases.--The shortfall amortization
bases determined under subsection
(c)(3) for all plan years preceding the
first plan year to which the election
under paragraph (1) applies (and all
shortfall amortization installments
determined with respect to such bases)
shall be reduced to zero under rules
similar to the rules of subsection
(c)(6).
(ii) New shortfall amortization
base.--Notwithstanding subsection
(c)(3), the shortfall amortization base
for the first plan year to which the
election under paragraph (1) applies
shall be the funding shortfall of such
plan for such plan year (determined
using the interest rates as modified
under subparagraph (A)).
(C) Determination of shortfall amortization
installments.--
(i) 30-year period.--Subparagraphs
(A) and (B) of subsection (c)(2) shall
be applied by substituting ``30-plan-
year'' for ``7-plan-year'' each place
it appears.
(ii) No special election.--The
election under subparagraph (D) of
subsection (c)(2) shall not apply to
any plan year to which the election
under paragraph (1) applies.
(D) Exemption from at-risk treatment.--
Subsection (i) shall not apply.
(4) Community newspaper plan.--For purposes of this
subsection--
(A) In general.--The term ``community
newspaper plan'' means a plan to which this
section applies maintained by an employer
which, as of December 31, 2017--
(i) publishes and distributes daily,
either electronically or in printed
form, 1 or more community newspapers in
a single State,
(ii) is not a company the stock of
which is publicly traded (on a stock
exchange or in an over-the-counter
market), and is not controlled,
directly or indirectly, by such a
company,
(iii) is controlled, directly or
indirectly--
(I) by 1 or more persons
residing primarily in the State
in which the community
newspaper is published,
(II) for not less than 30
years by individuals who are
members of the same family,
(III) by a trust created or
organized in the State in which
the community newspaper is
published, the sole trustees of
which are persons described in
subclause (I) or (II),
(IV) by an entity which is
described in section 501(c)(3)
and exempt from taxation under
section 501(a), which is
organized and operated in the
State in which the community
newspaper is published, and the
primary purpose of which is to
benefit communities in such
State, or
(V) a combination of persons
described in subclause (I),
(III), or (IV), and
(iv) does not control, directly or
indirectly, any newspaper in any other
State.
(B) Community newspaper.--The term
``community newspaper'' means a newspaper which
primarily serves a metropolitan statistical
area, as determined by the Office of Management
and Budget, with a population of not less than
100,000.
(C) Control.--A person shall be treated as
controlled by another person if such other
person possesses, directly or indirectly, the
power to direct or cause the direction and
management of such person (including the power
to elect a majority of the members of the board
of directors of such person) through the
ownership of voting securities.
* * * * * * *
----------
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
* * * * * * *
TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS
* * * * * * *
Subtitle B--Regulatory Provisions
* * * * * * *
Part 3--Funding
* * * * * * *
SEC. 303. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED BENEFIT
PENSION PLANS.
(a) Minimum Required Contribution.--For purposes of this
section and section 302(a)(2)(A), except as provided in
subsection (f), the term ``minimum required contribution''
means, with respect to any plan year of a single-employer
plan--
(1) in any case in which the value of plan assets of
the plan (as reduced under subsection (f)(4)(B)) is
less than the funding target of the plan for the plan
year, the sum of--
(A) the target normal cost of the plan for
the plan year,
(B) the shortfall amortization charge (if
any) for the plan for the plan year determined
under subsection (c), and
(C) the waiver amortization charge (if any)
for the plan for the plan year as determined
under subsection (e); or
(2) in any case in which the value of plan assets of
the plan (as reduced under subsection (f)(4)(B)) equals
or exceeds the funding target of the plan for the plan
year, the target normal cost of the plan for the plan
year reduced (but not below zero) by such excess.
(b) Target Normal Cost.--For purposes of this section:
(1) In general.--Except as provided in subsection
(i)(2) with respect to plans in at-risk status, the
term ``target normal cost'' means, for any plan year,
the excess of--
(A) the sum of--
(i) the present value of all benefits
which are expected to accrue or to be
earned under the plan during the plan
year, plus
(ii) the amount of plan-related
expenses expected to be paid from plan
assets during the plan year, over
(B) the amount of mandatory employee
contributions expected to be made during the
plan year.
(2) Special rule for increase in compensation.--For
purposes of this subsection, if any benefit
attributable to services performed in a preceding plan
year is increased by reason of any increase in
compensation during the current plan year, the increase
in such benefit shall be treated as having accrued
during the current plan year.
(c) Shortfall Amortization Charge.--
(1) In general.--For purposes of this section, the
shortfall amortization charge for a plan for any plan
year is the aggregate total (not less than zero) of the
shortfall amortization installments for such plan year
with respect to any shortfall amortization base which
has not been fully amortized under this subsection.
(2) Shortfall amortization installment.--For purposes
of paragraph (1)--
(A) Determination.--The shortfall
amortization installments are the amounts
necessary to amortize the shortfall
amortization base of the plan for any plan year
in level annual installments over the 7-plan-
year period beginning with such plan year.
(B) Shortfall installment.--The shortfall
amortization installment for any plan year in
the 7-plan-year period under subparagraph (A)
with respect to any shortfall amortization base
is the annual installment determined under
subparagraph (A) for that year for that base.
(C) Segment rates.--In determining any
shortfall amortization installment under this
paragraph, the plan sponsor shall use the
segment rates determined under subparagraph (C)
of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of
subsection (h)(2).
(D) Special election for eligible plan
years.--
(i) In general.--If a plan sponsor
elects to apply this subparagraph with
respect to the shortfall amortization
base of a plan for any eligible plan
year (in this subparagraph and
paragraph (7) referred to as an
``election year''), then,
notwithstanding subparagraphs (A) and
(B)--
(I) the shortfall
amortization installments with
respect to such base shall be
determined under clause (ii) or
(iii), whichever is specified
in the election, and
(II) the shortfall
amortization installment for
any plan year in the 9-plan-
year period described in clause
(ii) or the 15-plan-year period
described in clause (iii),
respectively, with respect to
such shortfall amortization
base is the annual installment
determined under the applicable
clause for that year for that
base.
(ii) 2 plus 7 amortization
schedule.--The shortfall amortization
installments determined under this
clause are--
(I) in the case of the first
2 plan years in the 9-plan-year
period beginning with the
election year, interest on the
shortfall amortization base of
the plan for the election year
(determined using the effective
interest rate for the plan for
the election year), and
(II) in the case of the last
7 plan years in such 9-plan-
year period, the amounts
necessary to amortize the
remaining balance of the
shortfall amortization base of
the plan for the election year
in level annual installments
over such last 7 plan years
(using the segment rates under
subparagraph (C) for the
election year).
(iii) 15-year amortization.--The
shortfall amortization installments
determined under this subparagraph are
the amounts necessary to amortize the
shortfall amortization base of the plan
for the election year in level annual
installments over the 15-plan-year
period beginning with the election year
(using the segment rates under
subparagraph (C) for the election
year).
(iv) Election.--
(I) In general.--The plan
sponsor of a plan may elect to
have this subparagraph apply to
not more than 2 eligible plan
years with respect to the plan,
except that in the case of a
plan described in section 106
of the Pension Protection Act
of 2006, the plan sponsor may
only elect to have this
subparagraph apply to a plan
year beginning in 2011.
(II) Amortization schedule.--
Such election shall specify
whether the amortization
schedule under clause (ii) or
(iii) shall apply to an
election year, except that if a
plan sponsor elects to have
this subparagraph apply to 2
eligible plan years, the plan
sponsor must elect the same
schedule for both years.
(III) Other rules.--Such
election shall be made at such
time, and in such form and
manner, as shall be prescribed
by the Secretary of the
Treasury, and may be revoked
only with the consent of the
Secretary of the Treasury. The
Secretary of the Treasury
shall, before granting a
revocation request, provide the
Pension Benefit Guaranty
Corporation an opportunity to
comment on the conditions
applicable to the treatment of
any portion of the election
year shortfall amortization
base that remains unamortized
as of the revocation date.
(v) Eligible plan year.--For purposes
of this subparagraph, the term
``eligible plan year'' means any plan
year beginning in 2008, 2009, 2010, or
2011, except that a plan year shall
only be treated as an eligible plan
year if the due date under subsection
(j)(1) for the payment of the minimum
required contribution for such plan
year occurs on or after the date of the
enactment of this subparagraph.
(vi) Reporting.--A plan sponsor of a
plan who makes an election under clause
(i) shall--
(I) give notice of the
election to participants and
beneficiaries of the plan, and
(II) inform the Pension
Benefit Guaranty Corporation of
such election in such form and
manner as the Director of the
Pension Benefit Guaranty
Corporation may prescribe.
(vii) Increases in required
installments in certain cases.--For
increases in required contributions in
cases of excess compensation or
extraordinary dividends or stock
redemptions, see paragraph (7).
(3) Shortfall amortization base.--For purposes of
this section, the shortfall amortization base of a plan
for a plan year is--
(A) the funding shortfall of such plan for
such plan year, minus
(B) the present value (determined using the
segment rates determined under subparagraph (C)
of subsection (h)(2), applied under rules
similar to the rules of subparagraph (B) of
subsection (h)(2)) of the aggregate total of
the shortfall amortization installments and
waiver amortization installments which have
been determined for such plan year and any
succeeding plan year with respect to the
shortfall amortization bases and waiver
amortization bases of the plan for any plan
year preceding such plan year.
(4) Funding shortfall.--For purposes of this section,
the funding shortfall of a plan for any plan year is
the excess (if any) of--
(A) the funding target of the plan for the
plan year, over
(B) the value of plan assets of the plan (as
reduced under subsection (f)(4)(B)) for the
plan year which are held by the plan on the
valuation date.
(5) Exemption from new shortfall amortization base.--
In any case in which the value of plan assets of the
plan (as reduced under subsection (f)(4)(A)) is equal
to or greater than the funding target of the plan for
the plan year, the shortfall amortization base of the
plan for such plan year shall be zero.
(6) Early deemed amortization upon attainment of
funding target.--In any case in which the funding
shortfall of a plan for a plan year is zero, for
purposes of determining the shortfall amortization
charge for such plan year and succeeding plan years,
the shortfall amortization bases for all preceding plan
years (and all shortfall amortization installments
determined with respect to such bases) shall be reduced
to zero.
(7) Increases in alternate required installments in
cases of excess compensation or extraordinary dividends
or stock redemptions.--
(A) In general.--If there is an installment
acceleration amount with respect to a plan for
any plan year in the restriction period with
respect to an election year under paragraph
(2)(D), then the shortfall amortization
installment otherwise determined and payable
under such paragraph for such plan year shall,
subject to the limitation under subparagraph
(B), be increased by such amount.
(B) Total installments limited to shortfall
base.--Subject to rules prescribed by the
Secretary of the Treasury, if a shortfall
amortization installment with respect to any
shortfall amortization base for an election
year is required to be increased for any plan
year under subparagraph (A)--
(i) such increase shall not result in
the amount of such installment
exceeding the present value of such
installment and all succeeding
installments with respect to such base
(determined without regard to such
increase but after application of
clause (ii)), and
(ii) subsequent shortfall
amortization installments with respect
to such base shall, in reverse order of
the otherwise required installments, be
reduced to the extent necessary to
limit the present value of such
subsequent shortfall amortization
installments (after application of this
paragraph) to the present value of the
remaining unamortized shortfall
amortization base.
(C) Installment acceleration amount.--For
purposes of this paragraph--
(i) In general.--The term
``installment acceleration amount''
means, with respect to any plan year in
a restriction period with respect to an
election year, the sum of--
(I) the aggregate amount of
excess employee compensation
determined under subparagraph
(D) with respect to all
employees for the plan year,
plus
(II) the aggregate amount of
extraordinary dividends and
redemptions determined under
subparagraph (E) for the plan
year.
(ii) Annual limitation.--The
installment acceleration amount for any
plan year shall not exceed the excess
(if any) of--
(I) the sum of the shortfall
amortization installments for
the plan year and all preceding
plan years in the amortization
period elected under paragraph
(2)(D) with respect to the
shortfall amortization base
with respect to an election
year, determined without regard
to paragraph (2)(D) and this
paragraph, over
(II) the sum of the shortfall
amortization installments for
such plan year and all such
preceding plan years,
determined after application of
paragraph (2)(D) (and in the
case of any preceding plan
year, after application of this
paragraph).
(iii) Carryover of excess installment
acceleration amounts.--
(I) In general.--If the
installment acceleration amount
for any plan year (determined
without regard to clause (ii))
exceeds the limitation under
clause (ii), then, subject to
subclause (II), such excess
shall be treated as an
installment acceleration amount
with respect to the succeeding
plan year.
(II) Cap to apply.--If any
amount treated as an
installment acceleration amount
under subclause (I) or this
subclause with respect any
succeeding plan year, when
added to other installment
acceleration amounts
(determined without regard to
clause (ii)) with respect to
the plan year, exceeds the
limitation under clause (ii),
the portion of such amount
representing such excess shall
be treated as an installment
acceleration amount with
respect to the next succeeding
plan year.
(III) Limitation on years to
which amounts carried for.--No
amount shall be carried under
subclause (I) or (II) to a plan
year which begins after the
first plan year following the
last plan year in the
restriction period (or after
the second plan year following
such last plan year in the case
of an election year with
respect to which 15-year
amortization was elected under
paragraph (2)(D)).
(IV) Ordering rules.--For
purposes of applying subclause
(II), installment acceleration
amounts for the plan year
(determined without regard to
any carryover under this
clause) shall be applied first
against the limitation under
clause (ii) and then carryovers
to such plan year shall be
applied against such limitation
on a first-in, first-out basis.
(D) Excess employee compensation.--For
purposes of this paragraph--
(i) In general.--The term ``excess
employee compensation'' means, with
respect to any employee for any plan
year, the excess (if any) of--
(I) the aggregate amount
includible in income under
chapter 1 of the Internal
Revenue Code of 1986 for
remuneration during the
calendar year in which such
plan year begins for services
performed by the employee for
the plan sponsor (whether or
not performed during such
calendar year), over
(II) $1,000,000.
(ii) Amounts set aside for
nonqualified deferred compensation.--If
during any calendar year assets are set
aside or reserved (directly or
indirectly) in a trust (or other
arrangement as determined by the
Secretary of the Treasury), or
transferred to such a trust or other
arrangement, by a plan sponsor for
purposes of paying deferred
compensation of an employee under a
nonqualified deferred compensation plan
(as defined in section 409A of such
Code) of the plan sponsor, then, for
purposes of clause (i), the amount of
such assets shall be treated as
remuneration of the employee includible
in income for the calendar year unless
such amount is otherwise includible in
income for such year. An amount to
which the preceding sentence applies
shall not be taken into account under
this paragraph for any subsequent
calendar year.
(iii) Only remuneration for certain
post-2009 services counted.--
Remuneration shall be taken into
account under clause (i) only to the
extent attributable to services
performed by the employee for the plan
sponsor after February 28, 2010.
(iv) Exception for certain equity
payments.--
(I) In general.--There shall
not be taken into account under
clause (i)(I) any amount
includible in income with
respect to the granting after
February 28, 2010, of service
recipient stock (within the
meaning of section 409A of the
Internal Revenue Code of 1986)
that, upon such grant, is
subject to a substantial risk
of forfeiture (as defined under
section 83(c)(1) of such Code)
for at least 5 years from the
date of such grant.
(II) Secretarial authority.--
The Secretary of the Treasury
may by regulation provide for
the application of this clause
in the case of a person other
than a corporation.
(v) Other exceptions.--The following
amounts includible in income shall not
be taken into account under clause
(i)(I):
(I) Commissions.--Any
remuneration payable on a
commission basis solely on
account of income directly
generated by the individual
performance of the individual
to whom such remuneration is
payable.
(II) Certain payments under
existing contracts.--Any
remuneration consisting of
nonqualified deferred
compensation, restricted stock,
stock options, or stock
appreciation rights payable or
granted under a written binding
contract that was in effect on
March 1, 2010, and which was
not modified in any material
respect before such
remuneration is paid.
(vi) Self-employed individual treated
as employee.--The term ``employee''
includes, with respect to a calendar
year, a self-employed individual who is
treated as an employee under section
401(c) of such Code for the taxable
year ending during such calendar year,
and the term ``compensation'' shall
include earned income of such
individual with respect to such self-
employment.
(vii) Indexing of amount.--In the
case of any calendar year beginning
after 2010, the dollar amount under
clause (i)(II) shall be increased by an
amount equal to--
(I) such dollar amount,
multiplied by
(II) the cost-of-living
adjustment determined under
section 1(f)(3) of such Code
for the calendar year,
determined by substituting
``calendar year 2009'' for
``calendar year 1992'' in
subparagraph (B) thereof.
If the amount of any increase under
clause (i) is not a multiple of $1,000,
such increase shall be rounded to the
next lowest multiple of $1,000.
(E) Extraordinary dividends and
redemptions.--
(i) In general.--The amount
determined under this subparagraph for
any plan year is the excess (if any) of
the sum of the dividends declared
during the plan year by the plan
sponsor plus the aggregate amount paid
for the redemption of stock of the plan
sponsor redeemed during the plan year
over the greater of--
(I) the adjusted net income
(within the meaning of section
4043) of the plan sponsor for
the preceding plan year,
determined without regard to
any reduction by reason of
interest, taxes, depreciation,
or amortization, or
(II) in the case of a plan
sponsor that determined and
declared dividends in the same
manner for at least 5
consecutive years immediately
preceding such plan year, the
aggregate amount of dividends
determined and declared for
such plan year using such
manner.
(ii) Only certain post-2009 dividends
and redemptions counted.--For purposes
of clause (i), there shall only be
taken into account dividends declared,
and redemptions occurring, after
February 28, 2010.
(iii) Exception for intra-group
dividends.--Dividends paid by one
member of a controlled group (as
defined in section 302(d)(3)) to
another member of such group shall not
be taken into account under clause (i).
(iv) Exception for certain
redemptions.--Redemptions that are made
pursuant to a plan maintained with
respect to employees, or that are made
on account of the death, disability, or
termination of employment of an
employee or shareholder, shall not be
taken into account under clause (i).
(v) Exception for certain preferred
stock.--
(I) In general.--Dividends
and redemptions with respect to
applicable preferred stock
shall not be taken into account
under clause (i) to the extent
that dividends accrue with
respect to such stock at a
specified rate in all events
and without regard to the plan
sponsor's income, and interest
accrues on any unpaid dividends
with respect to such stock.
(II) Applicable preferred
stock.--For purposes of
subclause (I), the term
``applicable preferred stock''
means preferred stock which was
issued before March 1, 2010 (or
which was issued after such
date and is held by an employee
benefit plan subject to the
provisions of this title).
(F) Other definitions and rules.--For
purposes of this paragraph--
(i) Plan sponsor.--The term ``plan
sponsor'' includes any member of the
plan sponsor's controlled group (as
defined in section 302(d)(3)).
(ii) Restriction period.--The term
``restriction period'' means, with
respect to any election year--
(I) except as provided in
subclause (II), the 3-year
period beginning with the
election year (or, if later,
the first plan year beginning
after December 31, 2009), and
(II) if the plan sponsor
elects 15-year amortization for
the shortfall amortization base
for the election year, the 5-
year period beginning with the
election year (or, if later,
the first plan year beginning
after December 31, 2009).
(iii) Elections for multiple plans.--
If a plan sponsor makes elections under
paragraph (2)(D) with respect to 2 or
more plans, the Secretary of the
Treasury shall provide rules for the
application of this paragraph to such
plans, including rules for the ratable
allocation of any installment
acceleration amount among such plans on
the basis of each plan's relative
reduction in the plan's shortfall
amortization installment for the first
plan year in the amortization period
described in subparagraph (A)
(determined without regard to this
paragraph).
(iv) Mergers and acquisitions.--The
Secretary of the Treasury shall
prescribe rules for the application of
paragraph (2)(D) and this paragraph in
any case where there is a merger or
acquisition involving a plan sponsor
making the election under paragraph
(2)(D).
(d) Rules Relating to Funding Target.--For purposes of this
section--
(1) Funding target.--Except as provided in subsection
(i)(1) with respect to plans in at-risk status, the
funding target of a plan for a plan year is the present
value of all benefits accrued or earned under the plan
as of the beginning of the plan year.
(2) Funding target attainment percentage.--The
``funding target attainment percentage'' of a plan for
a plan year is the ratio (expressed as a percentage)
which--
(A) the value of plan assets for the plan
year (as reduced under subsection (f)(4)(B)),
bears to
(B) the funding target of the plan for the
plan year (determined without regard to
subsection (i)(1)).
(e) Waiver Amortization Charge.--
(1) Determination of waiver amortization charge.--The
waiver amortization charge (if any) for a plan for any
plan year is the aggregate total of the waiver
amortization installments for such plan year with
respect to the waiver amortization bases for each of
the 5 preceding plan years.
(2) Waiver amortization installment.--For purposes of
paragraph (1)--
(A) Determination.--The waiver amortization
installments are the amounts necessary to
amortize the waiver amortization base of the
plan for any plan year in level annual
installments over a period of 5 plan years
beginning with the succeeding plan year.
(B) Waiver installment.--The waiver
amortization installment for any plan year in
the 5-year period under subparagraph (A) with
respect to any waiver amortization base is the
annual installment determined under
subparagraph (A) for that year for that base.
(3) Interest rate.--In determining any waiver
amortization installment under this subsection, the
plan sponsor shall use the segment rates determined
under subparagraph (C) of subsection (h)(2), applied
under rules similar to the rules of subparagraph (B) of
subsection (h)(2).
(4) Waiver amortization base.--The waiver
amortization base of a plan for a plan year is the
amount of the waived funding deficiency (if any) for
such plan year under section 302(c).
(5) Early deemed amortization upon attainment of
funding target.--In any case in which the funding
shortfall of a plan for a plan year is zero, for
purposes of determining the waiver amortization charge
for such plan year and succeeding plan years, the
waiver amortization bases for all preceding plan years
(and all waiver amortization installments determined
with respect to such bases) shall be reduced to zero.
(f) Reduction of Minimum Required Contribution by Prefunding
Balance and Funding Standard Carryover Balance.--
(1) Election to maintain balances.--
(A) Prefunding balance.--The plan sponsor of
a single-employer plan may elect to maintain a
prefunding balance.
(B) Funding standard carryover balance.--
(i) In general.--In the case of a
single-employer plan described in
clause (ii), the plan sponsor may elect
to maintain a funding standard
carryover balance, until such balance
is reduced to zero.
(ii) Plans maintaining funding
standard account in 2007.--A plan is
described in this clause if the plan--
(I) was in effect for a plan
year beginning in 2007, and
(II) had a positive balance
in the funding standard account
under section 302(b) as in
effect for such plan year and
determined as of the end of
such plan year.
(2) Application of balances.--A prefunding balance
and a funding standard carryover balance maintained
pursuant to this paragraph--
(A) shall be available for crediting against
the minimum required contribution, pursuant to
an election under paragraph (3),
(B) shall be applied as a reduction in the
amount treated as the value of plan assets for
purposes of this section, to the extent
provided in paragraph (4), and
(C) may be reduced at any time, pursuant to
an election under paragraph (5).
(3) Election to apply balances against minimum
required contribution.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), in the case of any
plan year in which the plan sponsor elects to
credit against the minimum required
contribution for the current plan year all or a
portion of the prefunding balance or the
funding standard carryover balance for the
current plan year (not in excess of such
minimum required contribution), the minimum
required contribution for the plan year shall
be reduced as of the first day of the plan year
by the amount so credited by the plan sponsor.
For purposes of the preceding sentence, the
minimum required contribution shall be
determined after taking into account any waiver
under section 302(c).
(B) Coordination with funding standard
carryover balance.--To the extent that any plan
has a funding standard carryover balance
greater than zero, no amount of the prefunding
balance of such plan may be credited under this
paragraph in reducing the minimum required
contribution.
(C) Limitation for underfunded plans.--The
preceding provisions of this paragraph shall
not apply for any plan year if the ratio
(expressed as a percentage) which--
(i) the value of plan assets for the
preceding plan year (as reduced under
paragraph (4)(C)), bears to
(ii) the funding target of the plan
for the preceding plan year (determined
without regard to subsection (i)(1)),
is less than 80 percent. In the case of plan
years beginning in 2008, the ratio under this
subparagraph may be determined using such
methods of estimation as the Secretary of the
Treasury may prescribe.
(D) Special rule for certain years of plans
maintained by charities.--
(i) In general.--For purposes of
applying subparagraph (C) for plan
years beginning after August 31, 2009,
and before September 1, 2011, the ratio
determined under such subparagraph for
the preceding plan year shall be the
greater of--
(I) such ratio, as determined
without regard to this
subparagraph, or
(II) the ratio for such plan
for the plan year beginning
after August 31, 2007, and
before September 1, 2008, as
determined under rules
prescribed by the Secretary of
the Treasury.
(ii) Special rule.--In the case of a
plan for which the valuation date is
not the first day of the plan year--
(I) clause (i) shall apply to
plan years beginning after
December 31, 2008, and before
January 1, 2011, and
(II) clause (i)(II) shall
apply based on the last plan
year beginning before September
1, 2007, as determined under
rules prescribed by the
Secretary of the Treasury.
(iii) Limitation to charities.--This
subparagraph shall not apply to any
plan unless such plan is maintained
exclusively by one or more
organizations described in section
501(c)(3) of the Internal Revenue Code
of 1986.
(4) Effect of balances on amounts treated as value of
plan assets.--In the case of any plan maintaining a
prefunding balance or a funding standard carryover
balance pursuant to this subsection, the amount treated
as the value of plan assets shall be deemed to be such
amount, reduced as provided in the following
subparagraphs:
(A) Applicability of shortfall amortization
base.--For purposes of subsection (c)(5), the
value of plan assets is deemed to be such
amount, reduced by the amount of the prefunding
balance, but only if an election under
paragraph (3) applying any portion of the
prefunding balance in reducing the minimum
required contribution is in effect for the plan
year.
(B) Determination of excess assets, funding
shortfall, and funding target attainment
percentage.--
(i) In general.--For purposes of
subsections (a), (c)(4)(B), and
(d)(2)(A), the value of plan assets is
deemed to be such amount, reduced by
the amount of the prefunding balance
and the funding standard carryover
balance.
(ii) Special rule for certain binding
agreements with pbgc.--For purposes of
subsection (c)(4)(B), the value of plan
assets shall not be deemed to be
reduced for a plan year by the amount
of the specified balance if, with
respect to such balance, there is in
effect for a plan year a binding
written agreement with the Pension
Benefit Guaranty Corporation which
provides that such balance is not
available to reduce the minimum
required contribution for the plan
year. For purposes of the preceding
sentence, the term ``specified
balance'' means the prefunding balance
or the funding standard carryover
balance, as the case may be.
(C) Availability of balances in plan year for
crediting against minimum required
contribution.--For purposes of paragraph
(3)(C)(i) of this subsection, the value of plan
assets is deemed to be such amount, reduced by
the amount of the prefunding balance.
(5) Election to reduce balance prior to
determinations of value of plan assets and crediting
against minimum required contribution.--
(A) In general.--The plan sponsor may elect
to reduce by any amount the balance of the
prefunding balance and the funding standard
carryover balance for any plan year (but not
below zero). Such reduction shall be effective
prior to any determination of the value of plan
assets for such plan year under this section
and application of the balance in reducing the
minimum required contribution for such plan for
such plan year pursuant to an election under
paragraph (2).
(B) Coordination between prefunding balance
and funding standard carryover balance.--To the
extent that any plan has a funding standard
carryover balance greater than zero, no
election may be made under subparagraph (A)
with respect to the prefunding balance.
(6) Prefunding balance.--
(A) In general.--A prefunding balance
maintained by a plan shall consist of a
beginning balance of zero, increased and
decreased to the extent provided in
subparagraphs (B) and (C), and adjusted further
as provided in paragraph (8).
(B) Increases.--
(i) In general.--As of the first day
of each plan year beginning after 2008,
the prefunding balance of a plan shall
be increased by the amount elected by
the plan sponsor for the plan year.
Such amount shall not exceed the excess
(if any) of--
(I) the aggregate total of
employer contributions to the
plan for the preceding plan
year, over--
(II) the minimum required
contribution for such preceding
plan year.
(ii) Adjustments for interest.--Any
excess contributions under clause (i)
shall be properly adjusted for interest
accruing for the periods between the
first day of the current plan year and
the dates on which the excess
contributions were made, determined by
using the effective interest rate for
the preceding plan year and by treating
contributions as being first used to
satisfy the minimum required
contribution.
(iii) Certain contributions necessary
to avoid benefit limitations
disregarded.--The excess described in
clause (i) with respect to any
preceding plan year shall be reduced
(but not below zero) by the amount of
contributions an employer would be
required to make under paragraph (1),
(2), or (4) of section 206(g) to avoid
a benefit limitation which would
otherwise be imposed under such
paragraph for the preceding plan year.
Any contribution which may be taken
into account in satisfying the
requirements of more than 1 of such
paragraphs shall be taken into account
only once for purposes of this clause.
(C) Decrease.--The prefunding balance of a
plan shall be decreased (but not below zero)
by--
(i) as of the first day of each plan
year after 2008, the amount of such
balance credited under paragraph (2)
(if any) in reducing the minimum
required contribution of the plan for
the preceding plan year, and
(ii) as of the time specified in
paragraph (5)(A), any reduction in such
balance elected under paragraph (5).
(7) Funding standard carryover balance.--
(A) In general.--A funding standard carryover
balance maintained by a plan shall consist of a
beginning balance determined under subparagraph
(B), decreased to the extent provided in
subparagraph (C), and adjusted further as
provided in paragraph (8).
(B) Beginning balance.--The beginning balance
of the funding standard carryover balance shall
be the positive balance described in paragraph
(1)(B)(ii)(II).
(C) Decreases.--The funding standard
carryover balance of a plan shall be decreased
(but not below zero) by--
(i) as of the first day of each plan
year after 2008, the amount of such
balance credited under paragraph (2)
(if any) in reducing the minimum
required contribution of the plan for
the preceding plan year, and
(ii) as of the time specified in
paragraph (5)(A), any reduction in such
balance elected under paragraph (5).
(8) Adjustments for investment experience.--In
determining the prefunding balance or the funding
standard carryover balance of a plan as of the first
day of the plan year, the plan sponsor shall, in
accordance with regulations prescribed by the Secretary
of the Treasury, adjust such balance to reflect the
rate of return on plan assets for the preceding plan
year. Notwithstanding subsection (g)(3), such rate of
return shall be determined on the basis of fair market
value and shall properly take into account, in
accordance with such regulations, all contributions,
distributions, and other plan payments made during such
period.
(9) Elections.--Elections under this subsection shall
be made at such times, and in such form and manner, as
shall be prescribed in regulations of the Secretary of
the Treasury.
(g) Valuation of Plan Assets and Liabilities.--
(1) Timing of determinations.--Except as otherwise
provided under this subsection, all determinations
under this section for a plan year shall be made as of
the valuation date of the plan for such plan year.
(2) Valuation date.--For purposes of this section--
(A) In general.--Except as provided in
subparagraph (B), the valuation date of a plan
for any plan year shall be the first day of the
plan year.
(B) Exception for small plans.--If, on each
day during the preceding plan year, a plan had
100 or fewer participants, the plan may
designate any day during the plan year as its
valuation date for such plan year and
succeeding plan years. For purposes of this
subparagraph, all defined benefit plans which
are single-employer plans and are maintained by
the same employer (or any member of such
employer's controlled group) shall be treated
as 1 plan, but only participants with respect
to such employer or member shall be taken into
account.
(C) Application of certain rules in
determination of plan size.--For purposes of
this paragraph--
(i) Plans not in existence in
preceding year.--In the case of the
first plan year of any plan,
subparagraph (B) shall apply to such
plan by taking into account the number
of participants that the plan is
reasonably expected to have on days
during such first plan year.
(ii) Predecessors.--Any reference in
subparagraph (B) to an employer shall
include a reference to any predecessor
of such employer.
(3) Determination of value of plan assets.--For
purposes of this section--
(A) In general.--Except as provided in
subparagraph (B), the value of plan assets
shall be the fair market value of the assets.
(B) Averaging allowed.--A plan may determine
the value of plan assets on the basis of the
averaging of fair market values, but only if
such method--
(i) is permitted under regulations
prescribed by the Secretary of the
Treasury,
(ii) does not provide for averaging
of such values over more than the
period beginning on the last day of the
25th month preceding the month in which
the valuation date occurs and ending on
the valuation date (or a similar period
in the case of a valuation date which
is not the 1st day of a month), and
(iii) does not result in a
determination of the value of plan
assets which, at any time, is lower
than 90 percent or greater than 110
percent of the fair market value of
such assets at such time.
Any such averaging shall be adjusted for
contributions, distributions, and expected
earnings (as determined by the plan's actuary
on the basis of an assumed earnings rate
specified by the actuary but not in excess of
the third segment rate applicable under
subsection (h)(2)(C)(iii)), as specified by the
Secretary of the Treasury.
(4) Accounting for contribution receipts.--For
purposes of determining the value of assets under
paragraph (3)--
(A) Prior year contributions.--If--
(i) an employer makes any
contribution to the plan after the
valuation date for the plan year in
which the contribution is made, and
(ii) the contribution is for a
preceding plan year,
the contribution shall be taken into account as
an asset of the plan as of the valuation date,
except that in the case of any plan year
beginning after 2008, only the present value
(determined as of the valuation date) of such
contribution may be taken into account. For
purposes of the preceding sentence, present
value shall be determined using the effective
interest rate for the preceding plan year to
which the contribution is properly allocable.
(B) Special rule for current year
contributions made before valuation date.--If
any contributions for any plan year are made to
or under the plan during the plan year but
before the valuation date for the plan year,
the assets of the plan as of the valuation date
shall not include--
(i) such contributions, and
(ii) interest on such contributions
for the period between the date of the
contributions and the valuation date,
determined by using the effective
interest rate for the plan year.
(h) Actuarial Assumptions and Methods.--
(1) In general.--Subject to this subsection, the
determination of any present value or other computation
under this section shall be made on the basis of
actuarial assumptions and methods--
(A) each of which is reasonable (taking into
account the experience of the plan and
reasonable expectations), and
(B) which, in combination, offer the
actuary's best estimate of anticipated
experience under the plan.
(2) Interest rates.--
(A) Effective interest rate.--For purposes of
this section, the term ``effective interest
rate'' means, with respect to any plan for any
plan year, the single rate of interest which,
if used to determine the present value of the
plan's accrued or earned benefits referred to
in subsection (d)(1), would result in an amount
equal to the funding target of the plan for
such plan year.
(B) Interest rates for determining funding
target.--For purposes of determining the
funding target and normal cost of a plan for
any plan year, the interest rate used in
determining the present value of the benefits
of the plan shall be--
(i) in the case of benefits
reasonably determined to be payable
during the 5-year period beginning on
the valuation date for the plan year,
the first segment rate with respect to
the applicable month,
(ii) in the case of benefits
reasonably determined to be payable
during the 15-year period beginning at
the end of the period described in
clause (i), the second segment rate
with respect to the applicable month,
and
(iii) in the case of benefits
reasonably determined to be payable
after the period described in clause
(ii), the third segment rate with
respect to the applicable month.
(C) Segment rates.--For purposes of this
paragraph--
(i) First segment rate.--The term
``first segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary of the Treasury for
such month on the basis of the
corporate bond yield curve for such
month, taking into account only that
portion of such yield curve which is
based on bonds maturing during the 5-
year period commencing with such month.
(ii) Second segment rate.--The term
``second segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary of the Treasury for
such month on the basis of the
corporate bond yield curve for such
month, taking into account only that
portion of such yield curve which is
based on bonds maturing during the 15-
year period beginning at the end of the
period described in clause (i).
(iii) Third segment rate.--The term
``third segment rate'' means, with
respect to any month, the single rate
of interest which shall be determined
by the Secretary of the Treasury for
such month on the basis of the
corporate bond yield curve for such
month, taking into account only that
portion of such yield curve which is
based on bonds maturing during periods
beginning after the period described in
clause (ii).
(iv) Segment rate stabilization.--
(I) In general.--If a segment
rate described in clause (i),
(ii), or (iii) with respect to
any applicable month
(determined without regard to
this clause) is less than the
applicable minimum percentage,
or more than the applicable
maximum percentage, of the
average of the segment rates
described in such clause for
years in the 25-year period
ending with September 30 of the
calendar year preceding the
calendar year in which the plan
year begins, then the segment
rate described in such clause
with respect to the applicable
month shall be equal to the
applicable minimum percentage
or the applicable maximum
percentage of such average,
whichever is closest. The
Secretary of the Treasury shall
determine such average on an
annual basis and may prescribe
equivalent rates for years in
any such 25-year period for
which the rates described in
any such clause are not
available.
(II) Applicable minimum
percentage; applicable maximum
percentage.--For purposes of
subclause (I), the applicable
minimum percentage and the
applicable maximum percentage
for a plan year beginning in a
calendar year shall be
determined in accordance with
the following table:
----------------------------------------------------------------------------------------------------------------
The applicable minimum
If the calendar year is: percentage is: The applicable maximum percentage is:
----------------------------------------------------------------------------------------------------------------
2012, 2013, 2014, 2015, 2016, 2017, 90%.......................... 110%
2018, 2019, or 2020..
2021.................................. 85%.......................... 115%
2022.................................. 80%.......................... 120%
2023.................................. 75%.......................... 125%
After 2023............................ 70%.......................... 130%
----------------------------------------------------------------------------------------------------------------
(D) Corporate bond yield curve.--For purposes
of this paragraph--
(i) In general.--The term ``corporate
bond yield curve'' means, with respect
to any month, a yield curve which is
prescribed by the Secretary of the
Treasury for such month and which
reflects the average, for the 24-month
period ending with the month preceding
such month, of monthly yields on
investment grade corporate bonds with
varying maturities and that are in the
top 3 quality levels available.
(ii) Election to use yield curve.--
Solely for purposes of determining the
minimum required contribution under
this section, the plan sponsor may, in
lieu of the segment rates determined
under subparagraph (C), elect to use
interest rates under the corporate bond
yield curve. For purposes of the
preceding sentence such curve shall be
determined without regard to the 24-
month averaging described in clause
(i). Such election, once made, may be
revoked only with the consent of the
Secretary of the Treasury.
(E) Applicable month.--For purposes of this
paragraph, the term ``applicable month'' means,
with respect to any plan for any plan year, the
month which includes the valuation date of such
plan for such plan year or, at the election of
the plan sponsor, any of the 4 months which
precede such month. Any election made under
this subparagraph shall apply to the plan year
for which the election is made and all
succeeding plan years, unless the election is
revoked with the consent of the Secretary of
the Treasury.
(F) Publication requirements.--The Secretary
of the Treasury shall publish for each month
the corporate bond yield curve (and the
corporate bond yield curve reflecting the
modification described in section
205(g)(3)(B)(iii)(I) for such month) and each
of the rates determined under subparagraph (C)
and the averages determined under subparagraph
(C)(iv) for such month. The Secretary of the
Treasury shall also publish a description of
the methodology used to determine such yield
curve and such rates which is sufficiently
detailed to enable plans to make reasonable
projections regarding the yield curve and such
rates for future months based on the plan's
projection of future interest rates.
(3) Mortality tables.--
(A) In general.--Except as provided in
subparagraph (C) or (D), the Secretary of the
Treasury shall by regulation prescribe
mortality tables to be used in determining any
present value or making any computation under
this section. Such tables shall be based on 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.
(B) Periodic revision.--The Secretary of the
Treasury shall (at least every 10 years) make
revisions in any table in effect under
subparagraph (A) to reflect the actual
experience of pension plans and projected
trends in such experience.
(C) Substitute mortality table.--
(i) In general.--Upon request by the
plan sponsor and approval by the
Secretary of the Treasury, a mortality
table which meets the requirements of
clause (iii) shall be used in
determining any present value or making
any computation under this section
during the period of consecutive plan
years (not to exceed 10) specified in
the request.
(ii) Early termination of period.--
Notwithstanding clause (i), a mortality
table described in clause (i) shall
cease to be in effect as of the
earliest of--
(I) the date on which there
is a significant change in the
participants in the plan by
reason of a plan spinoff or
merger or otherwise, or
(II) the date on which the
plan actuary determines that
such table does not meet the
requirements of clause (iii).
(iii) Requirements.--A mortality
table meets the requirements of this
clause if--
(I) there is a sufficient
number of plan participants,
and the pension plans have been
maintained for a sufficient
period of time, to have
credible information necessary
for purposes of subclause (II),
and
(II) such table reflects the
actual experience of the
pension plans maintained by the
sponsor and projected trends in
general mortality experience.
(iv) All plans in controlled group
must use separate table.--Except as
provided by the Secretary of the
Treasury, a plan sponsor may not use a
mortality table under this subparagraph
for any plan maintained by the plan
sponsor unless--
(I) a separate mortality
table is established and used
under this subparagraph for
each other plan maintained by
the plan sponsor and if the
plan sponsor is a member of a
controlled group, each member
of the controlled group, and
(II) the requirements of
clause (iii) are met separately
with respect to the table so
established for each such plan,
determined by only taking into
account the participants of
such plan, the time such plan
has been in existence, and the
actual experience of such plan.
(v) Deadline for submission and
disposition of application.--
(I) Submission.--The plan
sponsor shall submit a
mortality table to the
Secretary of the Treasury for
approval under this
subparagraph at least 7 months
before the 1st day of the
period described in clause (i).
(II) Disposition.--Any
mortality table submitted to
the Secretary of the Treasury
for approval under this
subparagraph shall be treated
as in effect as of the 1st day
of the period described in
clause (i) unless the Secretary
of the Treasury, during the
180-day period beginning on the
date of such submission,
disapproves of such table and
provides the reasons that such
table fails to meet the
requirements of clause (iii).
The 180-day period shall be
extended upon mutual agreement
of the Secretary of the
Treasury and the plan sponsor.
(D) Separate mortality tables for the
disabled.--Notwithstanding subparagraph (A)--
(i) In general.--The Secretary of the
Treasury shall establish mortality
tables which may be used (in lieu of
the tables under subparagraph (A))
under this subsection for individuals
who are entitled to benefits under the
plan on account of disability. The
Secretary of the Treasury 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 clause (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) Periodic revision.--The
Secretary of the Treasury shall (at
least every 10 years) make revisions in
any table in effect under clause (i) to
reflect the actual experience of
pension plans and projected trends in
such experience.
(4) Probability of benefit payments in the form of
lump sums or other optional forms.--For purposes of
determining any present value or making any computation
under this section, there shall be taken into account--
(A) the probability that future benefit
payments under the plan will be made in the
form of optional forms of benefits provided
under the plan (including lump sum
distributions, determined on the basis of the
plan's experience and other related
assumptions), and
(B) any difference in the present value of
such future benefit payments resulting from the
use of actuarial assumptions, in determining
benefit payments in any such optional form of
benefits, which are different from those
specified in this subsection.
(5) Approval of large changes in actuarial
assumptions.--
(A) In general.--No actuarial assumption used
to determine the funding target for a plan to
which this paragraph applies may be changed
without the approval of the Secretary of the
Treasury.
(B) Plans to which paragraph applies.--This
paragraph shall apply to a plan only if--
(i) the plan is a single-employer
plan to which title IV applies,
(ii) the aggregate unfunded vested
benefits as of the close of the
preceding plan year (as determined
under section 4006(a)(3)(E)(iii)) of
such plan and all other plans
maintained by the contributing sponsors
(as defined in section 4001(a)(13)) and
members of such sponsors' controlled
groups (as defined in section
4001(a)(14)) which are covered by title
IV (disregarding plans with no unfunded
vested benefits) exceed $50,000,000,
and
(iii) the change in assumptions
(determined after taking into account
any changes in interest rate and
mortality table) results in a decrease
in the funding shortfall of the plan
for the current plan year that exceeds
$50,000,000, or that exceeds $5,000,000
and that is 5 percent or more of the
funding target of the plan before such
change.
(i) Special Rules for At-Risk Plans.--
(1) Funding target for plans in at-risk status.--
(A) In general.--In the case of a plan which
is in at-risk status for a plan year, the
funding target of the plan for the plan year
shall be equal to the sum of--
(i) the present value of all benefits
accrued or earned under the plan as of
the beginning of the plan year, as
determined by using the additional
actuarial assumptions described in
subparagraph (B), and
(ii) in the case of a plan which also
has been in at-risk status for at least
2 of the 4 preceding plan years, a
loading factor determined under
subparagraph (C).
(B) Additional actuarial assumptions.--The
actuarial assumptions described in this
subparagraph are as follows:
(i) All employees who are not
otherwise assumed to retire as of the
valuation date but who will be eligible
to elect benefits during the plan year
and the 10 succeeding plan years shall
be assumed to retire at the earliest
retirement date under the plan but not
before the end of the plan year for
which the at-risk funding target and
at-risk target normal cost are being
determined.
(ii) All employees shall be assumed
to elect the retirement benefit
available under the plan at the assumed
retirement age (determined after
application of clause (i)) which would
result in the highest present value of
benefits.
(C) Loading factor.--The loading factor
applied with respect to a plan under this
paragraph for any plan year is the sum of--
(i) $700, times the number of
participants in the plan, plus
(ii) 4 percent of the funding target
(determined without regard to this
paragraph) of the plan for the plan
year.
(2) Target normal cost of at-risk plans.--In the case
of a plan which is in at-risk status for a plan year,
the target normal cost of the plan for such plan year
shall be equal to the sum of--
(A) the excess of--
(i) the sum of--
(I) the present value of all
benefits which are expected to
accrue or to be earned under
the plan during the plan year,
determined using the additional
actuarial assumptions described
in paragraph (1)(B), plus
(II) the amount of plan-
related expenses expected to be
paid from plan assets during
the plan year, over
(ii) the amount of mandatory employee
contributions expected to be made
during the plan year, plus
(B) in the case of a plan which also has been
in at-risk status for at least 2 of the 4
preceding plan years, a loading factor equal to
4 percent of the amount determined under
subsection (b)(1)(A)(i) with respect to the
plan for the plan year.
(3) Minimum amount.--In no event shall--
(A) the at-risk funding target be less than
the funding target, as determined without
regard to this subsection, or
(B) the at-risk target normal cost be less
than the target normal cost, as determined
without regard to this subsection.
(4) Determination of at-risk status.--For purposes of
this subsection--
(A) In general.--A plan is in at-risk status
for a plan year if--
(i) the funding target attainment
percentage for the preceding plan year
(determined under this section without
regard to this subsection) is less than
80 percent, and
(ii) the funding target attainment
percentage for the preceding plan year
(determined under this section by using
the additional actuarial assumptions
described in paragraph (1)(B) in
computing the funding target) is less
than 70 percent.
(B) Transition rule.--In the case of plan
years beginning in 2008, 2009, and 2010,
subparagraph (A)(i) shall be applied by
substituting the following percentages for ``80
percent'':
(i) 65 percent in the case of 2008.
(ii) 70 percent in the case of 2009.
(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008,
the funding target attainment percentage for
the preceding plan year under subparagraph (A)
may be determined using such methods of
estimation as the Secretary of the Treasury may
provide.
(C) Special rule for employees offered early
retirement in 2006.--
(i) In general.--For purposes of
subparagraph (A)(ii), the additional
actuarial assumptions described in
paragraph (1)(B) shall not be taken
into account with respect to any
employee if--
(I) such employee is employed
by a specified automobile
manufacturer,
(II) such employee is offered
a substantial amount of
additional cash compensation,
substantially enhanced
retirement benefits under the
plan, or materially reduced
employment duties on the
condition that by a specified
date (not later than December
31, 2010) the employee retires
(as defined under the terms of
the plan),
(III) such offer is made
during 2006 and pursuant to a
bona fide retirement incentive
program and requires, by the
terms of the offer, that such
offer can be accepted not later
than a specified date (not
later than December 31, 2006),
and
(IV) such employee does not
elect to accept such offer
before the specified date on
which the offer expires.
(ii) Specified automobile
manufacturer.--For purposes of clause
(i), the term ``specified automobile
manufacturer'' means--
(I) any manufacturer of
automobiles, and
(II) any manufacturer of
automobile parts which supplies
such parts directly to a
manufacturer of automobiles and
which, after a transaction or
series of transactions ending
in 1999, ceased to be a member
of a controlled group which
included such manufacturer of
automobiles.
(5) Transition between applicable funding targets and
between applicable target normal costs.--
(A) In general.--In any case in which a plan
which is in at-risk status for a plan year has
been in such status for a consecutive period of
fewer than 5 plan years, the applicable amount
of the funding target and of the target normal
cost shall be, in lieu of the amount determined
without regard to this paragraph, the sum of--
(i) the amount determined under this
section without regard to this
subsection, plus
(ii) the transition percentage for
such plan year of the excess of the
amount determined under this subsection
(without regard to this paragraph) over
the amount determined under this
section without regard to this
subsection.
(B) Transition percentage.--For purposes of
subparagraph (A), the transition percentage
shall be determined in accordance with the
following table:
If the consecutive number of
years (including the plan year) The transition
the plan is in at-risk status is-- percentage is--
1............................................................. 20
2............................................................. 40
3............................................................. 60
4............................................................. 80.
(C) Years before effective date.--For
purposes of this paragraph, plan years
beginning before 2008 shall not be taken into
account.
(6) Small plan exception.--If, on each day during the
preceding plan year, a plan had 500 or fewer
participants, the plan shall not be treated as in at-
risk status for the plan year. For purposes of this
paragraph, all defined benefit plans (other than
multiemployer plans) maintained by the same employer
(or any member of such employer's controlled group)
shall be treated as 1 plan, but only participants with
respect to such employer or member shall be taken into
account and the rules of subsection (g)(2)(C) shall
apply.
(j) Payment of Minimum Required Contributions.--
(1) In general.--For purposes of this section, the
due date for any payment of any minimum required
contribution for any plan year shall be 8\1/2\ months
after the close of the plan year.
(2) Interest.--Any payment required under paragraph
(1) for a plan year that is made on a date other than
the valuation date for such plan year shall be adjusted
for interest accruing for the period between the
valuation date and the payment date, at the effective
rate of interest for the plan for such plan year.
(3) Accelerated quarterly contribution schedule for
underfunded plans.--
(A) Failure to timely make required
installment.--In any case in which the plan has
a funding shortfall for the preceding plan
year, the employer maintaining the plan shall
make the required installments under this
paragraph and if the employer fails to pay the
full amount of a required installment for the
plan year, then the amount of interest charged
under paragraph (2) on the underpayment for the
period of underpayment shall be determined by
using a rate of interest equal to the rate
otherwise used under paragraph (2) plus 5
percentage points. In the case of plan years
beginning in 2008, the funding shortfall for
the preceding plan year may be determined using
such methods of estimation as the Secretary of
the Treasury may provide.
(B) Amount of underpayment, period of
underpayment.--For purposes of subparagraph
(A)--
(i) Amount.--The amount of the
underpayment shall be the excess of--
(I) the required installment,
over
(II) the amount (if any) of
the installment contributed to
or under the plan on or before
the due date for the
installment.
(ii) Period of underpayment.--The
period for which any interest is
charged under this paragraph with
respect to any portion of the
underpayment shall run from the due
date for the installment to the date on
which such portion is contributed to or
under the plan.
(iii) Order of crediting
contributions.--For purposes of clause
(i)(II), contributions shall be
credited against unpaid required
installments in the order in which such
installments are required to be paid.
(C) Number of required installments; due
dates.--For purposes of this paragraph--
(i) Payable in 4 installments.--There
shall be 4 required installments for
each plan year.
(ii) Time for payment of
installments.--The due dates for
required installments are set forth in
the following table:
In the case of the following The due date is:
required installment:
1st............................. April 15
2nd............................. July 15
3rd............................. October 15
4th............................. January 15 of the following year.
(D) Amount of required installment.--For
purposes of this paragraph--
(i) In general.--The amount of any
required installment shall be 25
percent of the required annual payment.
(ii) Required annual payment.--For
purposes of clause (i), the term
``required annual payment'' means the
lesser of--
(I) 90 percent of the minimum
required contribution
(determined without regard to
this subsection) to the plan
for the plan year under this
section, or
(II) 100 percent of the
minimum required contribution
(determined without regard to
this subsection or to any
waiver under section 302(c)) to
the plan for the preceding plan
year.
Subclause (II) shall not apply if the
preceding plan year referred to in such
clause was not a year of 12 months.
(E) Fiscal years, short years, and years with
alternate valuation date.--
(i) Fiscal years.--In applying this
paragraph to a plan year beginning on
any date other than January 1, there
shall be substituted for the months
specified in this paragraph, the months
which correspond thereto.
(ii) Short plan year.--This
subparagraph shall be applied to plan
years of less than 12 months in
accordance with regulations prescribed
by the Secretary of the Treasury.
(iii) Plan with alternate valuation
date.--The Secretary of the Treasury
shall prescribe regulations for the
application of this paragraph in the
case of a plan which has a valuation
date other than the first day of the
plan year.
(F) Quarterly contributions not to include
certain increased contributions.--Subparagraph
(D) shall be applied without regard to any
increase under subsection (c)(7).
(4) Liquidity requirement in connection with
quarterly contributions.--
(A) In general.--A plan to which this
paragraph applies shall be treated as failing
to pay the full amount of any required
installment under paragraph (3) 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 plan (other than a
plan described in subsection (g)(2)(B)) which--
(i) is required to pay installments
under paragraph (3) 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 (3)(A), 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 funding target
attainment percentage of the plan for the plan
year (taking into account the expected increase
in funding target due to benefits accruing or
earned 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--
(I) the base amount with
respect to such quarter, over
(II) 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
subclause (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 funding target
attainment percentage for the
plan year, and
(II) the sum of the purchases
of annuities, payments of
single sums, and such other
disbursements 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.
(k) Imposition of Lien Where Failure to Make Required
Contributions.--
(1) In general.--In the case of a plan to which this
subsection applies (as provided under paragraph (2)),
if--
(A) any person fails to make a contribution
payment required by section 302 and this
section before the due date for such payment,
and
(B) the unpaid balance of such payment
(including interest), when added to the
aggregate unpaid balance of all preceding such
payments for which payment was not made before
the due date (including interest), exceeds
$1,000,000,
then there shall be a lien in favor of the plan in the
amount determined under paragraph (3) upon all property
and rights to property, whether real or personal,
belonging to such person and any other person who is a
member of the same controlled group of which such
person is a member.
(2) Plans to which subsection applies.--This
subsection shall apply to a single-employer plan
covered under section 4021 for any plan year for which
the funding target attainment percentage (as defined in
subsection (d)(2)) of such plan is less than 100
percent.
(3) Amount of lien.--For purposes of paragraph (1),
the amount of the lien shall be equal to the aggregate
unpaid balance of contribution payments required under
this section and section 302 for which payment has not
been made before the due date.
(4) Notice of failure; lien.--
(A) Notice of failure.--A person committing a
failure described in paragraph (1) shall notify
the Pension Benefit Guaranty Corporation of
such failure within 10 days of the due date for
the required contribution payment.
(B) Period of lien.--The lien imposed by
paragraph (1) shall arise on the due date for
the required contribution payment and shall
continue until the last day of the first plan
year in which the plan ceases to be described
in paragraph (1)(B). Such lien shall continue
to run without regard to whether such plan
continues to be described in paragraph (2)
during the period referred to in the preceding
sentence.
(C) Certain rules to apply.--Any amount with
respect to which a lien is imposed under
paragraph (1) shall be treated as taxes due and
owing the United States and rules similar to
the rules of subsections (c), (d), and (e) of
section 4068 shall apply with respect to a lien
imposed by subsection (a) and the amount with
respect to such lien.
(5) Enforcement.--Any lien created under paragraph
(1) may be perfected and enforced only by the Pension
Benefit Guaranty Corporation, or at the direction of
the Pension Benefit Guaranty Corporation, by the
contributing sponsor (or any member of the controlled
group of the contributing sponsor).
(6) Definitions.--For purposes of this subsection--
(A) Contribution payment.--The term
``contribution payment'' means, in connection
with a plan, a contribution payment required to
be made to the plan, including any required
installment under paragraphs (3) and (4) of
subsection (j).
(B) Due date; required installment.--The
terms ``due date'' and ``required installment''
have the meanings given such terms by
subsection (j).
(C) Controlled group.--The term ``controlled
group'' means any group treated as a single
employer under subsections (b), (c), (m), and
(o) of section 414 of the Internal Revenue Code
of 1986.
(l) Qualified Transfers to Health Benefit Accounts.--In the
case of a qualified transfer (as defined in section 420 of the
Internal Revenue Code of 1986), any assets so transferred shall
not, for purposes of this section, be treated as assets in the
plan.
(m) Special Rules for Community Newspaper Plans.--
(1) In general.--The plan sponsor of a community
newspaper plan under which no participant has had the
participant's accrued benefit increased (whether
because of service or compensation) after December 31,
2017, may elect to have the alternative standards
described in paragraph (3) apply to such plan, and any
plan sponsored by any member of the same controlled
group, for purposes of this section for plan years
beginning with any plan year in effect on or beginning
after the date of the enactment of this subsection.
(2) Election.--An election under paragraph (1) shall
be made at such time and in such manner as prescribed
by the Secretary of the Treasury. Such election, once
made with respect to a plan year, shall apply to all
subsequent plan years unless revoked with the consent
of the Secretary of the Treasury.
(3) Alternative minimum funding standards.--The
alternative standards described in this paragraph are
the following:
(A) Interest rates.--
(i) In general.--Notwithstanding
subsection (h)(2)(C) and except as
provided in clause (ii), the first,
second, and third segment rates in
effect for any month for purposes of
this section shall be 8 percent.
(ii) New benefit accruals.--
Notwithstanding subsection (h)(2), for
purposes of determining the funding
target and normal cost of a plan for
any plan year, the present value of any
benefits accrued or earned under the
plan for a plan year with respect to
which an election under paragraph (1)
is in effect shall be determined on the
basis of the U.S. Treasury obligation
yield curve for the day that is the
valuation date of such plan for such
plan year.
(iii) U.S. treasury obligation yield
curve.--For purposes of this
subsection, the term ``U.S. Treasury
obligation yield curve'' means, with
respect to any day, a yield curve which
shall be prescribed by the Secretary
for such day on interest-bearing
obligations of the United States.
(B) Shortfall amortization base.--
(i) Previous shortfall amortization
bases.--The shortfall amortization
bases determined under subsection
(c)(3) for all plan years preceding the
first plan year to which the election
under paragraph (1) applies (and all
shortfall amortization installments
determined with respect to such bases)
shall be reduced to zero under rules
similar to the rules of subsection
(c)(6).
(ii) New shortfall amortization
base.--Notwithstanding subsection
(c)(3), the shortfall amortization base
for the first plan year to which the
election under paragraph (1) applies
shall be the funding shortfall of such
plan for such plan year (determined
using the interest rates as modified
under subparagraph (A)).
(C) Determination of shortfall amortization
installments.--
(i) 30-year period.--Subparagraphs
(A) and (B) of subsection (c)(2) shall
be applied by substituting ``30-plan-
year'' for ``7-plan-year'' each place
it appears.
(ii) No special election.--The
election under subparagraph (D) of
subsection (c)(2) shall not apply to
any plan year to which the election
under paragraph (1) applies.
(D) Exemption from at-risk treatment.--
Subsection (i) shall not apply.
(4) Community newspaper plan.--For purposes of this
subsection--
(A) In general.--The term ``community
newspaper plan'' means a plan to which this
section applies maintained by an employer
which, as of December 31, 2017--
(i) publishes and distributes daily,
either electronically or in printed
form--
(I) a community newspaper, or
(II) 1 or more community
newspapers in the same State,
(ii) is not a company the stock of
which is publicly traded (on a stock
exchange or in an over-the-counter
market), and is not controlled,
directly or indirectly, by such a
company,
(iii) is controlled, directly or
indirectly--
(I) by 1 or more persons
residing primarily in the State
in which the community
newspaper is published,
(II) for not less than 30
years by individuals who are
members of the same family,
(III) by a trust created or
organized in the State in which
the community newspaper is
published, the sole trustees of
which are persons described in
subclause (I) or (II),
(IV) by an entity which is
described in section 501(c)(3)
of the Internal Revenue Code of
1986 and exempt from taxation
under section 501(a) of such
Code, which is organized and
operated in the State in which
the community newspaper is
published, and the primary
purpose of which is to benefit
communities in such State, or
(V) a combination of persons
described in subclause (I),
(III), or (IV), and
(iv) does not control, directly or
indirectly, any newspaper in any other
State.
(B) Community newspaper.--The term
``community newspaper'' means a newspaper which
primarily serves a metropolitan statistical
area, as determined by the Office of Management
and Budget, with a population of not less than
100,000.
(C) Control.--A person shall be treated as
controlled by another person if such other
person possesses, directly or indirectly, the
power to direct or cause the direction and
management of such person (including the power
to elect a majority of the members of the board
of directors of such person) through the
ownership of voting securities.
(5) Effect on premium rate calculation.--
Notwithstanding any other provision of law or any
regulation issued by the Pension Benefit Guaranty
Corporation, in the case of a community newspaper plan
which elects the application of the alternative
standards described in paragraph (3), the additional
premium under section 4006(a)(3)(E) shall be determined
as if such election had not been made.
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