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Pub.L. 108-219 To provide for the conveyance to the Utrok Atoll local government of a decommissioned National Oceanic and Atmospheric Administration ship, and for other purposes. <> ...


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[[Page 595]]

                   PENSION FUNDING EQUITY ACT OF 2004

[[Page 118 STAT. 596]]

Public Law 108-218
108th Congress

                                 An Act


 
  To amend the Employee Retirement Income Security Act of 1974 and the 
    Internal Revenue Code of 1986 to temporarily replace the 30-year 
Treasury rate with a rate based on long-term corporate bonds for certain 
 pension plan funding requirements and other provisions, and for other 
            purposes. <<NOTE: Apr. 10, 2004 -  [H.R. 3108]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Pension Funding Equity Act 
of 2004. 29 USC 1001 note.>> assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pension Funding Equity Act of 2004''.

                        TITLE I--PENSION FUNDING

SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.

    (a) Employee Retirement Income Security Act of 1974.--
            (1) Determination of permissible range.--
                    (A) In general.--Clause (ii) of section 302(b)(5)(B) 
                of the Employee Retirement Income Security 
                Act <<NOTE: 29 USC 1082.>> of 1974 is amended by 
                redesignating subclause (II) as subclause (III) and by 
                inserting after subclause (I) the following new 
                subclause:
                          ``(II) Special rule for years 2004 and 2005.--
                      In the case of plan years beginning after December 
                      31, 2003, and before January 1, 2006, the term 
                      `permissible range' means a rate of interest which 
                      is not above, and not more than 10 percent below, 
                      the weighted average of the rates of interest on 
                      amounts invested conservatively in long-term 
                      investment grade corporate bonds during the 4-year 
                      period ending on the last day before the beginning 
                      of the plan year. Such rates shall be determined 
                      by the Secretary of the Treasury on the basis of 2 
                      or more indices that are selected periodically by 
                      the Secretary of the Treasury and that are in the 
                      top 3 quality levels available. The <<NOTE: Public 
                      information.>> Secretary of the Treasury shall 
                      make the permissible range, and the indices and 
                      methodology used to determine the average rate, 
                      publicly available.''.
                    (B) Secretarial authority.--Subclause (III) of 
                section 302(b)(5)(B)(ii) of such Act, as redesignated by 
                subparagraph (A), is amended--
                          (i) by inserting ``or (II)'' after ``subclause 
                      (I)'' the first place it appears, and

[[Page 118 STAT. 597]]

                          (ii) by striking ``subclause (I)'' the second 
                      place it appears and inserting ``such subclause''.
                    (C) Conforming amendment.--Subclause (I) of section 
                302(b)(5)(B)(ii) of such Act <<NOTE: 29 USC 1082.>> is 
                amended by inserting ``or (III)'' after ``subclause 
                (II)''.
            (2) Determination of current liability.--Clause (i) of 
        section 302(d)(7)(C) of such Act is amended by adding at the end 
        the following new subclause:
                                    ``(IV) Special rule for 2004 and 
                                2005.--For plan years beginning in 2004 
                                or 2005, notwithstanding subclause (I), 
                                the rate of interest used to determine 
                                current liability under this subsection 
                                shall be the rate of interest under 
                                subsection (b)(5).''.
            (3) Conforming amendment.--Paragraph (7) of section 302(e) 
        of such Act is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which the 
        interest rate used to determine current liability is determined 
        under subsection (d)(7)(C)(i)(III), for purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, 
        the current liability for the preceding plan year shall be 
        redetermined using 120 percent as the specified percentage 
        determined under subsection (d)(7)(C)(i)(II).''.
            (4) PBGC.--Clause (iii) of section 4006(a)(3)(E) of such Act 
        is amended <<NOTE: 29 USC 1306.>> by adding at the end the 
        following new subclause:
            ``(V) In the case of plan years beginning after December 31, 
        2003, and before January 1, 2006, the annual yield taken into 
        account under subclause (II) shall be the annual rate of 
        interest determined by the Secretary of the Treasury on amounts 
        invested conservatively in long-term investment grade corporate 
        bonds for the month preceding the month in which the plan year 
        begins. For purposes of the preceding sentence, the Secretary of 
        the Treasury shall determine such rate of interest on the basis 
        of 2 or more indices that are selected periodically by the 
        Secretary of the Treasury and that are in the top 3 quality 
        levels available. <<NOTE: Public information.>> The Secretary of 
        the Treasury shall make the permissible range, and the indices 
        and methodology used to determine the rate, publicly 
        available.''.

    (b) Internal Revenue Code of 1986.--
            (1) Determination of permissible range.--
                    (A) In general.--Clause (ii) of section 412(b)(5)(B) 
                of the Internal Revenue Code of 1986 <<NOTE: 26 USC 
                412.>> is amended by redesignating subclause (II) as 
                subclause (III) and by inserting after subclause (I) the 
                following new subclause:
                                    ``(II) Special rule for years 2004 
                                and 2005.--In the case of plan years 
                                beginning after December 31, 2003, and 
                                before January 1, 2006, the term 
                                `permissible range' means a rate of 
                                interest which is not above, and not 
                                more than 10 percent below, the weighted 
                                average of the rates of interest on 
                                amounts invested conservatively in long-
                                term investment grade corporate bonds 
                                during the 4-year period ending on the 
                                last day before the beginning of the 
                                plan year. Such rates shall be 
                                determined by the Secretary on the basis 
                                of 2 or more

[[Page 118 STAT. 598]]

                                indices that are selected periodically 
                                by the Secretary and that are in the top 
                                3 quality levels 
                                available. <<NOTE: Public 
                                information.>> The Secretary shall make 
                                the permissible range, and the indices 
                                and methodology used to determine the 
                                average rate, publicly available.''.
                    (B) Secretarial authority.--Subclause (III) of 
                section 412(b)(5)(B)(ii) of such Code, as redesignated 
                by subparagraph (A), <<NOTE: 26 USC 412.>> is amended--
                          (i) by inserting ``or (II)'' after ``subclause 
                      (I)'' the first place it appears, and
                          (ii) by striking ``subclause (I)'' the second 
                      place it appears and inserting ``such subclause''.
                    (C) Conforming amendment.--Subclause (I) of section 
                412(b)(5)(B)(ii) of such Code is amended by inserting 
                ``or (III)'' after ``subclause (II)''.
            (2) Determination of current liability.--Clause (i) of 
        section 412(l)(7)(C) of such Code is amended by adding at the 
        end the following new subclause:
                                    ``(IV) Special rule for 2004 and 
                                2005.--For plan years beginning in 2004 
                                or 2005, notwithstanding subclause (I), 
                                the rate of interest used to determine 
                                current liability under this subsection 
                                shall be the rate of interest under 
                                subsection (b)(5).''.
            (3) Conforming amendment.--Paragraph (7) of section 412(m) 
        of such Code is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which the 
        interest rate used to determine current liability is determined 
        under subsection (l)(7)(C)(i)(III), for purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, 
        the current liability for the preceding plan year shall be 
        redetermined using 120 percent as the specified percentage 
        determined under subsection (l)(7)(C)(i)(II).''.
            (4) Limitation on certain assumptions.--Section 
        415(b)(2)(E)(ii) of such Code <<NOTE: 26 USC 415.>> is amended 
        by inserting ``, except that in the case of plan years beginning 
        in 2004 or 2005, `5.5 percent' shall be substituted for `5 
        percent' in clause (i)'' before the period at the end.
            (5) Election to disregard modification for deduction 
        purposes.--Section 404(a)(1) of such Code <<NOTE: 26 USC 
        404.>> is amended by adding at the end the following new 
        subparagraph:
                    ``(F) Election to disregard modified interest 
                rate.--An employer may elect to disregard subsections 
                (b)(5)(B)(ii)(II) and (l)(7)(C)(i)(IV) of section 412 
                solely for purposes of determining the interest rate 
                used in calculating the maximum amount of the deduction 
                allowable under this paragraph.''.

    (c) Provisions <<NOTE: 26 USC 411 note.>> Relating to Plan 
Amendments.--
            (1) In general.--If this subsection applies to any plan or 
        annuity contract amendment--
                    (A) such plan or contract shall be treated as being 
                operated in accordance with the terms of the plan or 
                contract during the period described in paragraph 
                (2)(B)(i), and
                    (B) except as provided by the Secretary of the 
                Treasury, such plan shall not fail to meet the 
                requirements of section 411(d)(6) of the Internal 
                Revenue Code of 1986 and section

[[Page 118 STAT. 599]]

                204(g) of the Employee Retirement Income Security Act of 
                1974 by reason of such amendment.
            (2) Amendments to which section applies.--
                    (A) In general.--This <<NOTE: Effective 
                date.>> subsection shall apply to any amendment to any 
                plan or annuity contract which is made--
                          (i) pursuant to any amendment made by this 
                      section, and
                          (ii) on or before the last day of the first 
                      plan year beginning on or after January 1, 2006.
                    (B) Conditions.--This subsection shall not apply to 
                any plan or annuity contract amendment unless--
                          (i) during the period beginning on the date 
                      the amendment described in subparagraph (A)(i) 
                      takes effect and ending on the date described in 
                      subparagraph (A)(ii) (or, if earlier, the date the 
                      plan or contract amendment is adopted), the plan 
                      or contract is operated as if such plan or 
                      contract amendment were in effect; and
                          (ii) such plan or contract amendment applies 
                      retroactively for such period.

    (d) Effective <<NOTE: 26 USC 404 note.>> Dates.--
            (1) In general.--Except <<NOTE: Applicability.>> as provided 
        in paragraphs (2) and (3), the amendments made by this section 
        shall apply to plan years beginning after December 31, 2003.
            (2) Lookback rules.--For purposes of applying subsections 
        (d)(9)(B)(ii) and (e)(1) of section 302 of the Employee 
        Retirement Income Security Act of 1974 and subsections 
        (l)(9)(B)(ii) and (m)(1) of section 412 of the Internal Revenue 
        Code of 1986 to plan years beginning after December 31, 2003, 
        the amendments made by this section may be applied as if such 
        amendments had been in effect for all prior plan years. The 
        Secretary of the Treasury may prescribe simplified assumptions 
        which may be used in applying the amendments made by this 
        section to such prior plan years.
            (3) Transition rule for section 415 limitation.--In the case 
        of any participant or beneficiary receiving a distribution after 
        December 31, 2003 and before January 1, 2005, the amount payable 
        under any form of benefit subject to section 417(e)(3) of the 
        Internal Revenue Code of 1986 and subject to adjustment under 
        section 415(b)(2)(B) of such Code shall not, solely by reason of 
        the amendment made by subsection (b)(4), be less than the amount 
        that would have been so payable had the amount payable been 
        determined using the applicable interest rate in effect as of 
        the last day of the last plan year beginning before January 1, 
        2004.

SEC. 102. ELECTION OF ALTERNATIVE DEFICIT REDUCTION CONTRIBUTION.

    (a) Amendment of ERISA.--Section 302(d) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1082(d)) is amended by adding at 
the end the following new paragraph:
            ``(12) Election for certain plans.--
                    ``(A) In general.--In the case of a defined benefit 
                plan established and maintained by an applicable 
                employer, if this subsection did not apply to the plan 
                for the plan

[[Page 118 STAT. 600]]

                year beginning in 2000 (determined without regard to 
                paragraph (6)), then, at the election of the employer, 
                the increased amount under paragraph (1) for any 
                applicable plan year shall be the greater of--
                          ``(i) 20 percent of the increased amount under 
                      paragraph (1) determined without regard to this 
                      paragraph, or
                          ``(ii) the increased amount which would be 
                      determined under paragraph (1) if the deficit 
                      reduction contribution under paragraph (2) for the 
                      applicable plan year were determined without 
                      regard to subparagraphs (A), (B), and (D) of 
                      paragraph (2).
                    ``(B) Restrictions on benefit increases.--No 
                amendment which increases the liabilities of the plan by 
                reason of any increase in benefits, any change in the 
                accrual of benefits, or any change in the rate at which 
                benefits become nonforfeitable under the plan shall be 
                adopted during any applicable plan year, unless--
                          ``(i) the plan's enrolled actuary certifies 
                      (in such form and manner prescribed by the 
                      Secretary of the Treasury) that the amendment 
                      provides for an increase in annual contributions 
                      which will exceed the increase in annual charges 
                      to the funding standard account attributable to 
                      such amendment, or
                          ``(ii) the amendment is required by a 
                      collective bargaining agreement which is in effect 
                      on the date of enactment of this subparagraph.
                If a plan is amended during any applicable plan year in 
                violation of the preceding sentence, any election under 
                this paragraph shall not apply to any applicable plan 
                year ending on or after the date on which such amendment 
                is adopted.
                    ``(C) Applicable employer.--For purposes of this 
                paragraph, the term `applicable employer' means an 

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