Sec. 301. Hybrid plans
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Section 204(b)(5)(B)(i) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)(5)(B)(i)) is amended— in subclause (I), by adding at the end the following new sentence: Any rate described in subclause
(IV)or
(V)shall be disregarded in determining whether a plan is treated as satisfying the requirements of the first sentence of this subclause. ; and by adding at the end the following: In the case of an interest credit (or equivalent amount) that is based on an actual investment (or on an index that is structured to have effects similar to the effects of an actual investment), a fixed annual crediting rate equal to 3 percent (or a lower rate not less than zero that is specified in the plan) with respect to all contribution credits credited to a participant’s account balance or similar amount during the guarantee period shall be treated as a reasonable minimum guaranteed rate of return. For purposes of this subclause, the guarantee period begins on the prospective date that such reasonable minimum guaranteed rate applies to the participant’s benefit under the plan and ends on the date that such reasonable minimum guaranteed rate ceases to apply to the participant’s benefit. In the case of an interest credit (or equivalent amount) that is not described in subclause (IV), an annual interest rate equal to the lowest interest rate permitted with respect to any plan under section 415(b)(2)(E)(i) of the Internal Revenue Code of 1986 (without regard to section 415(b)(2)(E)(ii) of such Code) shall be treated as a reasonable minimum guaranteed rate of return described in such subclause. . Section 204(b)(5)(B)(i) of such Act ( 29 U.S.C. 1054(b)(5)(B)(i) ), as amended by paragraph (1)(B), is amended by adding at the end the following: An annual interest crediting rate that is a fixed annual crediting rate and that does not exceed the rate described in subclause
(V)plus one percentage point shall be deemed to satisfy the requirements of subclause (I). . Section 204(b)(5)(B) of such Act ( 29 U.S.C. 1054(b)(5)(B)(i)(III) ) is amended by adding at the end the following new clause: For purposes of clause (i)(III)— Except as provided in this subclause, any rate of return available in the market, shall, under the regulation under clause (i)(III), be permitted as a market rate of return under clause (i)(I). Except as provided in subclause (III), the Secretary of the Treasury may prescribe by regulation that a rate of return available in the market is not permitted under clause (i)(I) if such rate is designed to evade the purposes of clause (i)(I) and is not consistent with the purposes of a defined benefit plan. Such authority shall apply only to a rate of return based exclusively or primarily on the returns on employer securities (as defined in section 407(d)(1)), on alternative investments generally not appropriate as an exclusive or primary investment for retirement, or on other similar investments. The following rates of return and any combination of such rates shall be deemed to be market rates of return that satisfy clause (i)(I): The first, second, or third segment rate (as defined in section 430(h)(2)(C) of the Internal Revenue Code of 1986 (without regard to clause
(iv)thereof)) or any combination of such rates. The discount rate on 3-month, 6-month, and 12-month Treasury bills with appropriate margins determined under regulations prescribed by the Secretary of the Treasury. The yield on 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, and 30-year Treasury Constant Maturities with appropriate margins determined under regulations prescribed by the Secretary of the Treasury. The actual return on all or a diversified portion of the assets of the plan. Any total return index or price index commonly used as an investment benchmark, as determined under regulations prescribed by the Secretary of the Treasury. The rate of return on an annuity contract for a participant issued by an insurance company licensed under the laws of a State. A cost of living index with appropriate margin, as determined under regulations promulgated by the Secretary of the Treasury. The rate of return on a broad-based regulated investment company, as determined under regulations promulgated by the Secretary of the Treasury. Any investment in which participants may elect to invest under a defined contribution plan maintained by the sponsor of the plan other than an investment with a rate of return prohibited under clause (i), a stable value fund, or an investment available only through a brokerage account (or similar arrangement). . Section 411(b)(5)(B)(i) of the Internal Revenue Code of 1986 is amended— in subclause (I), by adding at the end the following new sentence: Any rate described in subclause
(IV)or
(V)shall be disregarded in determining whether a plan is treated as satisfying the requirements of the first sentence of this subclause. ; and by adding at the end the following: In the case of an interest credit (or equivalent amount) that is based on an actual investment (or on an index that is structured to have effects similar to the effects of an actual investment), a fixed annual crediting rate equal to 3 percent (or a lower rate not less than zero that is specified in the plan) with respect to all contribution credits credited to a participant’s account balance or similar amount during the guarantee period shall be treated as a reasonable minimum guaranteed rate of return. For purposes of this subclause, the guarantee period begins on the prospective date that such reasonable minimum guaranteed rate applies to the participant’s benefit under the plan and ends on the date that such reasonable minimum guaranteed rate ceases to apply to the participant’s benefit. In the case of an interest credit (or equivalent amount) that is not described in subclause (IV), an annual interest rate equal to the lowest interest rate permitted with respect to any plan under section 415(b)(2)(E)(i) (without regard to section 415(b)(2)(E)(ii)) shall be treated as a reasonable minimum guaranteed rate of return described in such subclause. . Section 411(b)(5)(B)(i) of such Code, as amended by paragraph (1)(B), is further amended by adding at the end the following: An annual interest crediting rate that is a fixed annual crediting rate and that does not exceed the rate described in subclause
(V)plus one percentage point shall be deemed to satisfy the requirements of subclause (I). . Section 411(b)(5)(B) of such Code is amended by adding at the end the following: For purposes of clause (i)(III)— Except as provided in this subclause, any rate of return available in the market, shall, under the regulation under clause (i)(III), be permitted as a market rate of return under clause (i)(I). Except as provided in subclause (III), the Secretary may prescribe by regulation that a rate of return available in the market is not permitted under clause (i)(I) if such rate is designed to evade the purposes of clause (i)(I) and is not consistent with the purposes of a defined benefit plan. Such authority shall apply only to a rate of return based exclusively or primarily on the returns on employer securities (as defined in section 407(d)(1)), on alternative investments generally not appropriate as an exclusive or primary investment for retirement, or on other similar investments. The following rates of return and any combination of such rates shall be deemed to be market rates of return that satisfy clause (i)(I): The first, second, or third segment rate (as defined in section 430(h)(2)(C) (without regard to clause
(iv)thereof)) or any combination of such rates. The discount rate on 3-month, 6-month, and 12-month Treasury bills with appropriate margins determined under regulations prescribed by the Secretary. The yield on 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, and 30-year Treasury Constant Maturities with appropriate margins determined under regulations prescribed by the Secretary. The actual return on all or a diversified portion of the assets of the plan. Any total return index or price index commonly used as an investment benchmark, as determined under regulations prescribed by the Secretary. The rate of return on an annuity contract for a participant issued by an insurance company licensed under the laws of a State. A cost of living index with appropriate margin, as determined under regulations promulgated by the Secretary. The rate of return on a broad-based regulated investment company, as determined under regulations promulgated by the Secretary. Any investment in which participants may elect to invest under a defined contribution plan maintained by the sponsor of the plan other than an investment with a rate of return prohibited under clause (i), a stable value fund, or an investment available only through a brokerage account (or similar arrangement). . If an interest credit (or equivalent amount) under a plan subject to section 411(b)(5)(B)(i)(I) of the Internal Revenue Code of 1986 or section 204(b)(5)(B)(i)(I) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(b)(5)(B)(i)(I)) was reasonable in relation to market rates in existence when such interest credit (or equivalent amount) was established (disregarding any minimum rates of return that were reasonable when established), such interest credit (or equivalent amount) shall be treated as satisfying the requirements of section 411(b)(5)(B)(i)(I) of such Code and section 204(b)(5)(B)(i)(I) of such Act for the transition period. For purposes of paragraph (1), the transition period, with respect to any plan, begins on the date that section 411(b)(5)(B)(i)(I) of such Code or section 204(b)(5)(B)(i)(I) of such Act first applied to such plan and ends on the effective date of comprehensive final regulations under such sections prescribed by the Secretary of the Treasury. In the case of an interest credit (or equivalent amount) under a plan subject to section 411(b)(5)(B)(i)(I) of the Internal Revenue Code of 1986 or section 204(b)(5)(B)(i)(I) of the Employee Retirement Income Security Act of 1974 that is in effect for the last plan year prior to the effective date of comprehensive final regulations under such section of such Code but does not comply with such regulations determined after application of subsection (c), the Secretary of the Treasury shall provide an exception from the requirements of section 411(d)(6) of such Code and section 204(g) of such Act for a reduction in such interest credit (or equivalent amendment) that is made pursuant to such comprehensive final regulations. The exception under paragraph
(1)from section 204(g) of such Act and section 411(d)(6) of such Code shall be issued through regulations to ensure the opportunity of interested persons to make comments through a public notice and comment process. Such exception shall permit any interest credit (or equivalent amount) to which this subsection applies to be modified to be the maximum fixed rate of return permitted under section 204(b)(5)(B)(i)(VI) of such Act or section 411(b)(5)(B)(i)(VI) of such Code or to be the maximum rate permitted under any rate of return deemed to be a market rate of return pursuant to section 204(b)(5)(B)(i)(III) of such Act or section 411(b)(5)(B)(i)(III) of such Code. The Secretary of the Treasury shall further structure the exception to ensure that there are clear and simple methods for plans to comply with the requirements of section 204(b)(5)(B)(i)(I) of such Act and section 411(b)(5)(B)(i)(I) of such Code. In the case of any defined benefit plan to which this subsection applies, comprehensive regulations under sections 203(f)(1) and 204(b)(5)(B)(i) of the Employee Retirement Income Security Act of 1974 or sections 411(a)(13)(A) and 411(b)(5)(B)(i) of the Internal Revenue Code of 1986 shall not take effect before the first plan year beginning at least 1 year after the later of— the date of publication of such regulations; or the date of publication of the regulations described in subsection (d). This subsection applies to any defined benefit plan that— is subject to section 204(b)(5) of the Employee Retirement Income Security Act of 1974 or section 411(b)(5) of the Internal Revenue Code of 1986; expresses any portion of any participant’s benefit as a current value equal to an accumulated percentage of the employee’s final average compensation; and in the absence of guidance from the Secretary of the Treasury or the Secretary of Labor, has been structured in a reasonable, good faith manner to comply with the requirements of such Code and such Act with respect to benefits described in subparagraph (B). In the case of a plan to which this subsection applies, no rule shall be issued and no adverse enforcement action shall be taken by the Secretary of the Treasury or the Secretary of Labor with respect to a plan described in paragraph
(2)regarding the structure of the benefits described in paragraph (2)(B) for any period prior to the effective date of comprehensive final regulations issued by the Secretary of the Treasury with respect to such benefits. Such final regulations shall not be effective before the first plan year beginning at least 1 year after publication of such regulations. Except as otherwise provided, the amendments and other provisions of this section shall take effect as if included in section 701 of the Pension Protection Act of 2006 ( Public Law 109–280 ; 120 Stat. 981). With respect to any period prior to the effective date of the comprehensive regulations described in subsection (e), no plan shall fail to comply with any requirement of the Employee Retirement Income Security Act of 1974 or of the Internal Revenue Code of 1986 by reason of complying with the law in effect without regard to the amendments made by subsections
(a)and (b).
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U.S. Code
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- Pub. L. 109-280
- 120 Stat. 981
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