Pension Benefits Protection Act of 2005 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code with respect to pension benefits of employees in defined benefit plans.
Directs the Secretary of the Treasury to apply Code provisions regarding continued accrual of benefits beyond normal retirement age under a defined benefit plan, which prohibit certain discrimination based on age, without regard to the portion of the preamble to a specified Treasury Decision which relates to allocation of interest adjustments through normal retirement age under a cash balance plan.
Prohibits forced conversions of certain defined benefit plan participants to cash balance plans, and other such plans that are hybrids of defined benefit and defined contribution plans, by plan amendments which: (1) change the way the accrued benefit to participants or beneficiaries are expressed; and (2) reduce the rate of future benefit accrual of one or more participants. Requires employers, at the time such amendment takes effect, to provide employees who have attained 40 years of age or 10 years of service with certain notices and an election upon retirement to receive benefits as determined either under the plan in effect at time of retirement or under the plan in effect immediately before the plan amendment.
Sets forth a formula to determine when a plan amendment adopted by a large (100 or more participants) defined benefit plan shall be treated as wearing away accrued benefits.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1304 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 1304
To amend the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 to protect pension benefits of employees
in defined benefit plans and to direct the Secretary of the Treasury to
enforce the age discrimination requirements of the Internal Revenue
Code of 1986.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 23, 2005
Mr. Harkin (for himself, Mr. Kennedy, Mr. Durbin, Mr. Feingold, Mrs.
Boxer, and Mr. Dayton) introduced the following bill; which was read
twice and referred to the Committee on Health, Education, Labor, and
Pensions
_______________________________________________________________________
A BILL
To amend the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 to protect pension benefits of employees
in defined benefit plans and to direct the Secretary of the Treasury to
enforce the age discrimination requirements of the Internal Revenue
Code of 1986.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Pension Benefits Protection Act of
2005''.
SEC. 2. PROPER ADMINISTRATION OF INTERNAL REVENUE LAWS AND
NONDISCRIMINATION REQUIREMENTS.
The Secretary of the Treasury shall apply section 411(b)(1)(H) of
the Internal Revenue Code of 1986 without regard to the portion of the
preamble to Treasury Decision 8360 (56 Fed. Reg. 47524-47603, September
19, 1991) which relates to the allocation of interest adjustments
through normal retirement age under a cash balance plan, as such
preamble is and has been since its adoption without the force of law.
SEC. 3. PROTECTION OF PARTICIPANTS FROM CONVERSIONS TO HYBRID DEFINED
BENEFIT PLANS.
(a) Election to Maintain Rate of Accrual in Effect Before Plan
Amendment.--
(1) Amendment to erisa.--Section 204(b)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)(1))
is amended by adding at the end the following new subparagraph:
``(I)(i) Notwithstanding the preceding subparagraphs, in the case
of a plan amendment to a defined benefit plan--
``(I) which has the effect of converting the plan to a plan
under which the accrued benefit is expressed to participants
and beneficiaries as an amount other than an annual benefit
commencing at normal retirement age (or which has a similar
effect as determined under regulations issued under clause
(iv)), and
``(II) which has the effect of reducing the rate of future
benefit accrual of 1 or more participants,
such plan shall be treated as not satisfying the requirements of this
paragraph unless such plan meets the requirements of clause (ii).
``(ii) A plan meets the requirements of this clause if the plan
provides each participant who has attained 40 years of age or 10 years
of service (as determined under section 203) under the plan at the time
such amendment takes effect with--
``(I) notice of the plan amendment indicating that it has
such effect, including a comparison of the present and
projected values of the accrued benefit determined both with
and without regard to the plan amendment, and
``(II) an election upon retirement to either receive
benefits under the terms of the plan as in effect at the time
of retirement or to receive benefits under the terms of the
plan as in effect immediately before the effective date of such
plan amendment (taking into account all benefit accruals under
such terms since such date).
``(iii) For purposes of clause (i), an accrued benefit shall
include any early retirement benefit or retirement-type subsidy (within
the meaning of subsection (g)(2)(A)), but only with respect to a
participant who satisfies (either before or after the effective date of
the amendment) the conditions for the benefit or subsidy under the
terms of the plan as in effect immediately before such date.
``(iv) The Secretary of the Treasury shall issue regulations under
which any plan amendment which has an effect similar to the effect
described in clause (i)(I) shall be treated as a plan amendment
described in clause (i)(I). Such regulations may provide that if a plan
sponsor represents in communications to participants and beneficiaries
that a plan amendment has an effect described in the preceding
sentence, such plan amendment shall be treated as a plan amendment
described in clause (i)(I).''.
(2) Amendment to internal revenue code.--Section 411(b)(1)
of the Internal Revenue Code of 1986 (relating to accrued
benefit requirements for defined benefit plans) is amended by
adding at the end the following new subparagraph:
``(I) Election to maintain rate of accrual in
effect before certain plan amendments.--
``(i) In general.--Notwithstanding the
preceding subparagraphs, in the case of a plan
amendment to a defined benefit plan--
``(I) which has the effect of
converting the plan to a plan under
which the accrued benefit is expressed
to participants and beneficiaries as an
amount other than an annual benefit
commencing at normal retirement age (or
which has a similar effect as
determined under regulations issued
under clause (iv)), and
``(II) which has the effect of
reducing the rate of future benefit
accrual of 1 or more participants,
such plan shall be treated as not satisfying
the requirements of this paragraph unless such
plan meets the requirements of clause (ii).
``(ii) Requirements.--A plan meets the
requirements of this clause if the plan
provides each participant who has attained 40
years of age or 10 years of service (as
determined under subsection (a)) under the plan
at the time such amendment takes effect with--
``(I) notice of the plan amendment
indicating that it has such effect,
including a comparison of the present
and projected values of the accrued
benefit determined both with and
without regard to the plan amendment,
and
``(II) an election upon retirement
to either receive benefits under the
terms of the plan as in effect at the
time of retirement or to receive
benefits under the terms of the plan as
in effect immediately before the
effective date of such plan amendment
(taking into account all benefit
accruals under such terms since such
date).
``(iii) Treatment of early retirement
benefits and retirement-type subsidies.--For
purposes of clause (i), an accrued benefit
shall include any early retirement benefit or
retirement-type subsidy (within the meaning of
subsection (d)(6)(B)(i)), but only with respect
to a participant who satisfies (either before
or after the effective date of the amendment)
the conditions for the benefit or subsidy under
the terms of the plan as in effect immediately
before such date.
``(iv) Regulations.--The Secretary shall
issue regulations under which any plan
amendment which has an effect similar to the
effect described in clause (i)(I) shall be
treated as a plan amendment described in clause
(i)(I). Such regulations may provide that if a
plan sponsor represents in communications to
participants and beneficiaries that a plan
amendment has an effect described in the
preceding sentence, such plan amendment shall
be treated as a plan amendment described in
clause (i)(I).''.
(b) Effective Date and Related Rules.--
(1) In general.--The amendments made by this section apply
to plan amendments taking effect before, on, or after the date
of the enactment of this Act, except that such amendments shall
not apply to a plan amendment if the Internal Revenue Service
has issued on or before June 23, 2005, a determination letter
which has the effect of approving the plan amendment.
(2) Special rule.--In the case of a plan amendment taking
effect before 90 days after the date of the enactment of this
Act, the requirements of section 204(b)(1)(I) of the Employee
Retirement Income Security Act of 1974 (as added by this
section) and section 411(b)(1)(I) of the Internal Revenue Code
of 1986 (as added by this section) shall be treated as
satisfied in connection with such plan amendment, in the case
of any participant described in such sections 204(b)(1)(I) and
411(b)(1)(I) in connection with such plan amendment, if, as of
the end of such 90-day period--
(A) the notice described in clause (i)(I) of such
section 204(b)(1)(I) and clause (i)(I) of such section
411(b)(1)(I) in connection with such plan amendment has
been provided to such participant, and
(B) the plan provides for the election described in
clause (i)(II) of such section 204(b)(1)(I) and clause
(i)(II) of such section 411(b)(1)(I) in connection with
such participant's retirement under the plan.
SEC. 4. PREVENTION OF WEARING AWAY OF EMPLOYEE'S ACCRUED BENEFIT.
(a) Amendment to ERISA.--Section 204(g) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054(g)) is amended by adding at
the end the following new paragraph:
``(6)(A) For purposes of paragraph (1), an applicable plan
amendment adopted by a large defined benefit plan shall be treated as
reducing accrued benefits of a participant if, under the terms of the
plan after the adoption of the amendment, the accrued benefit of the
participant may at any time be less than the sum of--
``(i) the participant's accrued benefit for years of
service before the effective date of the amendment, determined
under the terms of the plan as in effect immediately before the
effective date, plus
``(ii) the participant's accrued benefit determined under
the formula applicable to benefit accruals under the current
plan as applied to years of service after such effective date.
``(B) For purposes of this paragraph--
``(i) The term `applicable plan amendment' means a plan
amendment which has the effect of converting the plan to a plan
under which the accrued benefit is expressed to participants
and beneficiaries as an amount other than an annual benefit
commencing at normal retirement age (or which has a similar
effect as determined under regulations of the Secretary of the
Treasury under subsection (b)(1)(I)(iv)).
``(ii) The term `large defined benefit plan' means any
defined benefit plan which had 100 or more participants who had
accrued a benefit under the plan (whether or not vested) as of
the last day of the plan year preceding the plan year in which
the plan amendment becomes effective.
``(iii) An accrued benefit shall include any early
retirement benefit or retirement-type subsidy (within the
meaning of paragraph (2)(A)), but only with respect to a
participant who satisfies (either before or after the effective
date of the amendment) the conditions for the benefit or
subsidy under the terms of the plan as in effect immediately
before such date.''.
(b) Amendment to Internal Revenue Code.--Section 411(d)(6) of the
Internal Revenue Code of 1986 (relating to accrued benefit may not be
decreased by amendment) is amended by adding at the end the following
new subparagraph:
``(F) Treatment of plan amendments wearing away
accrued benefit.--
``(i) In general.--For purposes of
subparagraph (A), an applicable plan amendment
adopted by a large defined benefit plan shall
be treated as reducing accrued benefits of a
participant if, under the terms of the plan
after the adoption of the amendment, the
accrued benefit of the participant may at any
time be less than the sum of--
``(I) the participant's accrued
benefit for years of service before the
effective date of the amendment,
determined under the terms of the plan
as in effect immediately before the
effective date, plus
``(II) the participant's accrued
benefit determined under the formula
applicable to benefit accruals under
the current plan as applied to years of
service after such effective date.
``(ii) Definitions.--For purposes of this
subparagraph--
``(I) Applicable plan amendment.--
The term `applicable plan amendment'
means a plan amendment which has the
effect of converting the plan to a plan
under which the accrued benefit is
expressed to participants and
beneficiaries as an amount other than
an annual benefit commencing at normal
retirement age (or which has a similar
effect as determined under regulations
of the Secretary under subsection
(b)(1)(I)(iv)).
``(II) Large defined benefit
plan.--The term `large defined benefit
plan' means any defined benefit plan
which had 100 or more participants who
had accrued a benefit under the plan
(whether or not vested) as of the last
day of the plan year preceding the plan
year in which the plan amendment
becomes effective.
``(III) Protected accrued
benefit.--An accrued benefit shall
include any early retirement benefit or
retirement-type subsidy (within the
meaning of subparagraph (B)(i)), but
only with respect to a participant who
satisfies (either before or after the
effective date of the amendment) the
conditions for the benefit or subsidy
under the terms of the plan as in
effect immediately before such date.''.
(c) Effective Date and Related Rules.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section apply to plan amendments taking
effect before, on, or after the date of the enactment of this
Act, except that such amendments shall not apply to a plan
amendment if the Internal Revenue Service has issued on or
before June 23, 2005, a determination letter which has the
effect of approving the plan amendment.
(2) Special rule.--Notwithstanding paragraph (1), the
amendments made by this section shall not apply in connection
with any participant with respect to any plan amendment which
has taken effect before 90 days after the date of the enactment
of this Act if, as of the end of such 90-day period, the plan
provides that the participant's accrued benefit shall at no
time be less than the sum described in section 204(g)(6)(A) of
the Employee Retirement Income Security Act of 1974 (as added
by this section) or section 411(d)(6)(F)(i) of the Internal
Revenue Code of 1986 (as added by this section) in connection
with such plan amendment.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S7312-7313)
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
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