Pension Preservation and Portability Act of 2005 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to require all defined benefit pension plans, including hybrid plans such as a cash balance plan, to comply with certain rules, in cases of reduction in accrued benefits because of attainment of any age, in order to be deemed nondiscriminatory as to age.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2831 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 2831
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to make improvements in benefit
accrual standards.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 9, 2005
Mr. Boehner introduced the following bill; which was referred to the
Committee on Education and the Workforce, and in addition to the
Committee on Ways and Means, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code of 1986 to make improvements in benefit
accrual standards.
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 Preservation and Portability
Act of 2005''.
SEC. 2. IMPROVEMENTS IN BENEFIT ACCRUAL STANDARDS.
(a) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Rules relating to reduction in accrued benefits because
of attainment of any age.--Section 204(b)(1)(H) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1054(b)(1)(H)) is amended by adding at the end the following
new clauses:
``(vii)(I) A plan complies with clause (i) if a participant's
entire accrued benefit, as determined as of any date under the formula
for determining benefits as set forth in the text of the plan
documents, would be equal to or greater than that of any similarly
situated, younger individual.
``(II) For purposes of this clause, an individual is similarly
situated to a participant if such individual is identical to such
participant in every respect (including period of service,
compensation, position, date of hire, work history, and any other
respect) except for age.
``(III) In determining the entire accrued benefit for purposes of
this clause, the subsidized portion of any early retirement benefit
(including any early retirement subsidy that is fully or partially
included or reflected in an employee's opening balance or other
transition benefits) shall be disregarded.
``(viii) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan provides
allowable offsets against those benefits under the plan which are
attributable to employer contributions, based on benefits which are
provided under title II of the Social Security Act, the Railroad
Retirement Act of 1974, or under any retirement program for officers or
employees of the Federal Government or of the government of any State
or political subdivision thereof. For purposes of this clause,
allowable offsets based on such benefits consist of offsets equal to
all or part of the actual benefit payment amounts, reasonable
projections or estimations of such benefit payment amounts, or
actuarial equivalents of such actual benefit payment amounts,
projections, or estimations (determined on the basis of reasonable
actuarial assumptions).
``(ix) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan provides a
disparity in contributions or benefits with respect to which the
requirements of section 401(l) of the Internal Revenue Code of 1986 are
met.
``(x)(I) A plan shall not be treated as failing to meet the
requirements of this subparagraph solely because the plan provides for
pre-retirement indexing of accrued benefits under the plan.
``(II) For purposes of this clause, the term `pre-retirement
indexing' means, in connection with an accrued benefit, the periodic
adjustment of the accrued benefit by means of the application of a
recognized index or methodology so as to protect the economic value of
the benefit against inflation prior to distribution.''.
(2) Determinations of accrued benefit as balance of benefit
account.--Section 203 of such Act (29 U.S.C. 1053) is amended
by adding at the end the following new subsection:
``(f)(1) A defined benefit plan under which the accrued benefit
payable under the plan upon distribution (or any portion thereof) is
expressed as the balance of an account maintained for the participant
shall not be treated as failing to meet the requirements of subsection
(a)(2) and section 205(g) solely because of the amount actually made
available for such distribution under the terms of the plan, in any
case in which--
``(A) the applicable interest rate that would be required
to discount the participant's accrued benefit projected under
the terms of the plan to normal retirement age to a present
value equal to the amount actually made available for
distribution under the plan is not greater than
``(B) a market rate of return.
``(2) The Secretary of the Treasury may provide by regulation for
rules governing the calculation of a market rate of return for purposes
of paragraph (1) and for permissible methods of crediting interest to
the account (including variable interest rates) resulting in effective
rates of return meeting the requirements of paragraph (1).''.
(b) Amendments to the Internal Revenue Code of 1986.--
(1) Rules relating to reduction in accrued benefits because
of attainment of any age.--Subparagraph (H) of section
411(b)(1) of the Internal Revenue Code of 1986 (relating to
continued accrual beyond normal retirement age) is amended--
(A) by striking the heading and inserting the
following: ``Rules relating to reduction in accrued
benefits because of attainment of any age.--''; and
(B) by adding at the end the following:
``(vi) Comparison to similarly situated,
younger individuals.--
``(I) In general.--A plan shall not
be treated as failing to meet the
requirements of clause (i) if, as of
any applicable date, a participant's
entire accrued benefit, as determined
under the formula for determining
benefits as set forth in the text of
the plan documents, would be equal to
or greater than that of any similarly
situated, younger individual.
``(II) Similarly situated
individual.--For purposes of this
clause, an individual is similarly
situated to a participant if such
individual is identical to such
participant in every respect (including
period of service, compensation,
position, date of hire, work history,
and any other respect) except for age.
``(III) Subsidized portion of early
retirement benefit disregarded.--In
determining the entire accrued benefit
for purposes of this clause, the
subsidized portion of any early
retirement benefit shall be
disregarded.
``(vii) Allowable offsets.--A plan shall
not be treated as failing to meet the
requirements of this subparagraph solely
because the plan provides allowable offsets
against those benefits under the plan which are
attributable to employer contributions, based
on benefits which are provided--
``(I) under title II of the Social
Security Act, the Railroad Retirement
Act of 1974, or under any retirement
program for officers or employees of
the Federal Government or of the
government of any State or political
subdivision thereof, or
``(II) under another defined
benefit plan which meets the
requirements of this subparagraph or a
defined contribution plan which meets
the requirements of paragraph (2), if
such offset is determined under a
formula which does not provide for the
commencement of, or any increase in,
the offset upon the attainment of any
specified age of the participant.
For purposes of this clause, allowable offsets
based on such benefits consist of offsets equal
to the actual benefit payment amounts,
reasonable projections or estimations of such
benefit payment amounts, or actuarial
equivalents of such actual benefit payment
amounts, projections, or estimations
(determined on the basis of reasonable
actuarial assumptions).
``(viii) Compliance with rules permitting
disparity in plan contributions or benefits.--A
plan shall not be treated as failing to meet
the requirements of this subparagraph solely
because the plan provides a disparity in
contributions or benefits with respect to which
the requirements of section 401(l) are met.
``(ix) Pre-retirement indexing.--
``(I) In general.--A plan shall not
be treated as failing to meet the
requirements of this subparagraph
solely because the plan provides for
pre-retirement indexing of accrued
benefits under the plan.
``(II) Definition.--For purposes of
this clause, the term `pre-retirement
indexing' means, in connection with an
accrued benefit, the periodic
adjustment of the accrued benefit by
means of the application of a
recognized index or methodology so as
to protect the economic value of the
benefit against inflation prior to
distribution.''.
(2) Determinations of accrued benefit as balance of benefit
account.--Subsection (a) of section 411 of such Code (relating
to minimum vesting standards) is amended by adding at the end
the following new paragraph:
``(13) Maintenance of nonforfeitability of benefits
expressed as account balance.--
``(A) In general.--A defined benefit plan under
which the accrued benefit payable under the plan upon
distribution (or any portion thereof) is expressed as
the balance of an account maintained for the
participant shall not be treated as failing to meet the
requirements of paragraph (2) or 417(e) solely because
of the amount actually made available for such
distribution under the terms of the plan, in any case
in which--
``(i) the applicable interest rate that
would be required to discount the participant's
accrued benefit projected under the terms of
the plan to normal retirement age to a present
value equal to the amount actually made
available for distribution under the plan is
not greater than
``(ii) a market rate of return.
``(B) Regulations.--The Secretary may provide by
regulation for rules governing the calculation of a
market rate of return for purposes of subparagraph (A)
and for permissible methods of crediting interest to
the account (including variable interest rates)
resulting in effective rates of return meeting the
requirements of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning before, on, or after the date of the
enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Subcommittee on Employer-Employee Relations.
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