Requires plans to inform participants of the option of staying under the old terms at least 90 days before the effective date of the amendment. Exempts a plan from the above requirements if its sponsor can show the Secretary of the Treasury that each employer contributing to the plan meets certain distress termination conditions under regulations of the Secretary.
Imposes an excise tax on plans that adopt amendments decreasing benefits and do not let participants elect to continue to accrue benefits under the old terms. Makes the plan liable for such tax in the case of a multiemployer plan, and the employer liable in any other case.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4181 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 4181
To amend the Internal Revenue Code of 1986 to prohibit pension plan
amendments reducing the rate of future benefit accrual, subject to a
safe harbor where the plan provides notice of the amendment and an
election to continue benefit accruals under the former plan instead of
the amended plan.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 11, 2002
Mr. Gutknecht (for himself, Mr. Gilman, Mr. Sweeney, Mr. Sabo, Mr.
Sanders, and Mr. Hastings of Florida) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to prohibit pension plan
amendments reducing the rate of future benefit accrual, subject to a
safe harbor where the plan provides notice of the amendment and an
election to continue benefit accruals under the former plan instead of
the amended plan.
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 ``Vested Worker Protection Act of
2002''.
SEC. 2. SAFE HARBOR IN EVENT OF REDUCTION IN FUTURE BENEFIT ACCRUALS
WHERE PLAN PROVIDES NOTICE AND ELECTION TO CONTINUE
BENEFIT ACCRUALS UNDER FORMER PLAN INSTEAD OF AMENDED
PLAN.
(a) In General.--Paragraph (1) of section 411(b) of the Internal
Revenue Code of 1986 (relating to defined benefit plans) is amended by
adding at the end the following new subparagraph:
``(I) Safe harbor upon reduction in future benefit
accruals.--
``(i) In general.--An applicable pension
plan that adopts an amendment which has the
effect of reducing the rate of future benefit
accrual of 1 or more participants shall be
treated as not meeting the requirements of this
paragraph unless such plan provides each
participant who is, as of the date of the
adoption of the plan amendment, a fully vested
participant with--
``(I) written notice which meets
the requirements of section 4980F, and
``(II) an election to continue to
accrue benefits under such plan,
determined under the terms of such plan
as in effect immediately before the
effective date of such plan amendment.
``(ii) Protected accrued benefit.--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.
``(iii) Timing of election.--Except as
provided in regulations, the election required
by clause (i)(II) shall be provided at least 90
days before the effective date of the
amendment.
``(iv) Exemption upon showing of distress
criteria.--This subparagraph shall not apply
with respect to any plan amendment if the plan
sponsor, prior to the date of the adoption of
the amendment, demonstrates to the satisfaction
of the Secretary that, under regulations of the
Secretary, requirements--
``(I) applicable with respect to
the adoption of the plan amendment, and
``(II) similar to the requirements
of clause (i), (ii), or (iii) of
section 4041(c)(2)(B) of the Employee
Retirement Income Security Act of 1974
applicable with respect to a distress
termination,
are met by each employer required (under the
terms of the plan as in effect immediately
before the adoption of the plan amendment) to
make contributions under the plan.
``(v) Fully vested participant.--For
purposes of this subparagraph, the term `fully
vested participant' means a participant who
under the plan has a nonforfeitable right to
the participant's entire accrued benefit.
``(vi) Applicable pension plan.--The term
`applicable pension plan' means--
``(I) a defined benefit plan, or
``(II) an individual account plan
which is subject to the funding
standards of section 412,
which had 100 or more active 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. Such term shall
not include any governmental plan (within the
meaning of section 414(d)) or any church plan
(within the meaning of section 414(e)) with
respect to which the election provided by
section 410(d) has not been made.''.
(b) Excise Tax on Failure To Offer Election.--
(1) In general.--Chapter 43 of subtitle D of the Internal
Revenue Code of 1986 (as amended by section 2 of this Act) is
amended further by adding at the end the following new section:
``SEC. 4980G. FAILURE TO OFFER ELECTION TO CONTINUE BENEFIT ACCRUALS
UNDER FORMER APPLICABLE PENSION PLAN IN EVENT OF
REDUCTIONS IN FUTURE BENEFIT ACCRUALS.
``(a) Imposition of Tax.--There is hereby imposed a tax on the
failure of any applicable pension plan to meet the requirements of
subsection (d).
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) shall be 50 percent of the lesser of--
``(A) the reduction in the future employer benefit
cost for the plan attributable to the plan amendment
referred to in subsection (d) (determined, as provided
in regulations of the Secretary, as of the date of the
adoption of such plan amendment), or
``(B) the amount of the excess pension assets in
such plan, determined as of the effective date of the
amendment.
``(2) Future employer benefit cost.--For purposes of
paragraph (1)(A), the term `future employer benefit cost' for a
plan means the present value of future accruals, by current
participants and beneficiaries, of benefits derived from
employer contributions (within the meaning of section
411(c)(1)).
``(3) Excess pension assets.--For purposes of paragraph
(1), the term `excess pension assets' has the meaning given to
such term by section 420(e)(2).
``(c) Liability for Tax.--The following shall be liable for the tax
imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
For purposes of the preceding sentence, all multiemployer plans of
which the same trust forms a part shall be treated as 1 plan. For
purposes of this paragraph, if not all persons who are treated as a
single employer for purposes of this section have the same taxable
year, the taxable years taken into account shall be determined under
principles similar to the principles of section 1561.
``(d) Election To Continue Benefit Accruals Under Former Applicable
Pension Plan In Event of Reductions in Future Benefit Accruals.--In the
case that an applicable pension plan adopts an amendment which has the
effect of reducing the rate of future benefit accrual of 1 or more
participants, the requirements of this subsection are met if the plan
administrator provides each fully vested participant with--
``(1) written notice which meets the requirements of
section 4980F, and
``(2) an election to continue to accrue benefits under such
plan, determined under the terms of such plan as in effect
immediately before the effective date of such plan amendment.
``(e) Timing of Election.--Except as provided in regulations, the
election required by subsection (d) shall be provided at least 90 days
before the effective date of such amendment.
``(f) Protected Accrued Benefit.--For purposes of this section, an
accrued benefit shall include any early retirement benefit or
retirement-type subsidy (within the meaning of section
411(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.
``(g) Exemption upon Showing of Distress Criteria.--This section
shall not apply with respect to any plan amendment if the plan sponsor,
prior to the date of the adoption of the amendment, demonstrates to the
satisfaction of the Secretary that, under regulations of the Secretary,
requirements--
``(1) applicable with respect to the adoption of the plan
amendment, and
``(2) similar to the requirements of clause (i), (ii), or
(iii) of section 4041(c)(2)(B) of the Employee Retirement
Income Security Act of 1974 applicable with respect to a
distress termination,
are met by each employer required (under the terms of the plan as in
effect immediately before the adoption of the plan amendment) to make
contributions under the plan.
``(h) Definitions.--For purposes of this section--
``(1) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) a defined benefit plan, or
``(B) an individual account plan which is subject
to the funding standards of section 412,
which had 100 or more active 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. Such term shall not include any governmental
plan (within the meaning of section 414(d)) or any
church plan (within the meaning of section 414(e)) with
respect to which the election provided by section
410(d) has not been made.
``(2) Fully vested participant.--The term `fully vested
participant' means a participant who has under the plan a
nonforfeitable right to the participant's entire accrued
benefit.''.
(2) Clerical amendment.--The table of sections for chapter
43 of subtitle D of such Code (as amended by section 2 of this
Act) is amended further by adding at the end the following new
item:
``Sec. 4980G. Failure to offer election to continue benefit accruals
under former applicable pension plan in
event of reductions in future benefit
accruals.''.
SEC. 3. EFFECTIVE DATES.
(a) In General.--The amendments made by this Act shall apply to
plans and plan amendments taking effect after 60 days after the date of
the enactment of this Act.
(b) Special Rule.--The period for providing any notice required by
the amendments made by this Act shall not end before the date which is
90 days after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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