Sec. 4. Loan program for multiemployer defined benefit plans
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The Pension Rehabilitation Administration established under section 2 is authorized— to make loans to multiemployer plans (as defined in section 414(f) of the Internal Revenue Code of 1986) which are defined benefit plans (as defined in section 414(j) of such Code) and which— are in critical and declining status (within the meaning of section 432(b)(6) of such Code and section 305(b)(6) of the Employee Retirement and Income Security Act) as of the date of the enactment of this section, or with respect to which a suspension of benefits has been approved under section 432(e)(9) of such Code and section 305(e)(9) of such Act as of such date; as of such date of enactment, are in critical status (within the meaning of section 432(b)(2) of such Code and section 305(b)(2) of such Act), have a modified funded percentage of less than 40 percent, and have a ratio of active to inactive participants which is less than 2 to 5; or are insolvent for purposes of section 418E of such Code as of such date of enactment, if they became insolvent after December 16, 2014, and have not been terminated; and subject to subsection (b), to establish appropriate terms for such loans.
For purposes of subparagraph (A)(ii), the term modified funded percentage means the percentage equal to a fraction the numerator of which is current value of plan assets (as defined in section 3(26) of such Act) and the denominator of which is current liabilities (as defined in section 431(c)(6)(D) of such Code and section 304(c)(6)(D) of such Act). The Director of the Pension Rehabilitation Administration shall consult with the Secretary of the Treasury, the Secretary of Labor, and the Director of the Pension Benefit Guaranty Corporation before making any loan under paragraph (1), and shall share with such persons the application and plan information with respect to each such loan.
A program to make the loans authorized under this section shall be established not later than September 30, 2019, with guidance regarding such program to be promulgated by the Director of the Pension Rehabilitation Administration, in consultation with the Director of the Pension Benefit Guaranty Corporation, the Secretary of the Treasury, and the Secretary of Labor, not later than December 31, 2019. Without regard to whether the program under subparagraph
(A)has been established, a plan may apply for a loan under this section before either date described in such subparagraph, and the Pension Rehabilitation Administration shall approve the application and make the loan before establishment of the program if necessary to avoid any suspension of the accrued benefits of participants. The terms of any loan made under subsection
(a)shall state that— the plan shall make payments of interest on the loan for a period of 29 years beginning on the date of the loan (or 19 years in the case of a plan making the election under subsection (c)(5)); final payment of interest and principal shall be due in the 30th year after the date of the loan (except as provided in an election under subsection (c)(5)); and as a condition of the loan, the plan sponsor stipulates that— except as provided in clause (ii), the plan will not increase benefits, allow any employer participating in the plan to reduce its contributions, or accept any collective bargaining agreement which provides for reduced contribution rates, during the 30-year period described in subparagraphs
(A)and (B); in the case of a plan with respect to which a suspension of benefits has been approved under section 432(e)(9) of the Internal Revenue Code of 1986 and section 305(e)(9) of the Employee Retirement Income Security Act of 1974, or under section 418E of such Code, before the loan, the plan will reinstate the suspended benefits (or will not carry out any suspension which has been approved but not yet implemented); the plan sponsor will comply with the requirements of section 6059A of the Internal Revenue Code of 1986; the plan will continue to pay all premiums due under section 4007 of the Employee Retirement Income Security Act of 1974; and the plan and plan administrator will meet such other requirements as the Director of the Pension Rehabilitation Administration provides in the loan terms. The terms of the loan shall not make reference to whether the plan is receiving financial assistance under section 4261(d) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1431(d) ) or to any adjustment of the loan amount under subsection (d)(2)(A)(ii). Except as provided in the second sentence of this paragraph and subsection (c)(5), loans made under subsection
(a)shall have as low an interest rate as is feasible. Such rate shall be determined by the Pension Rehabilitation Administration and shall— not be lower than the rate of interest on 30-year Treasury securities on the first day of the calendar year in which the loan is issued; and not exceed the greater of— a rate 0.2 percentage points higher than such rate of interest on such date; or the rate necessary to collect revenues sufficient to administer the program under this section. In applying for a loan under subsection (a), the plan sponsor shall— demonstrate that, except as provided in subparagraph (C)— the loan will enable the plan to avoid insolvency for at least the 30-year period described in subparagraphs
(A)and
(B)of subsection (b)(1) or, in the case of a plan which is already insolvent, to emerge from insolvency within and avoid insolvency for the remainder of such period; and the plan is reasonably expected to be able to pay benefits and the interest on the loan during such period and to accumulate sufficient funds to repay the principal when due; provide the plan’s most recently filed Form 5500 as of the date of application and any other information necessary to determine the loan amount under subsection (d); stipulate whether the plan is also applying for financial assistance under section 4261(d) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1431(d) ) in combination with the loan to enable the plan to avoid insolvency and to pay benefits, or is already receiving such financial assistance as a result of a previous application; state in what manner the loan proceeds will be invested pursuant to subsection (d), the person from whom any annuity contracts under such subsection will be purchased, and the person who will be the investment manager for any portfolio implemented under such subsection; and include such other information and certifications as the Director of the Pension Rehabilitation Administration shall require. In evaluating the plan sponsor’s application, the Director of the Pension Rehabilitation Administration shall accept the determinations and demonstrations in the application unless the Director, in consultation with the Director of the Pension Benefit Guaranty Corporation, the Secretary of the Treasury, and the Secretary of Labor, concludes that any such determinations or demonstrations in the application (or any underlying assumptions) are unreasonable or are inconsistent with any rules issued by the Director pursuant to subsection (g). The Director of the Pension Rehabilitation Administration shall approve or deny any application under this subsection within 90 days after the submission of such application. An application shall be deemed approved unless, within such 90 days, the Director notifies the plan sponsor of the denial of such application and the reasons for such denial. Any approval or denial of an application by the Director of the Pension Rehabilitation Administration shall be treated as a final agency action for purposes of section 704 of title 5, United States Code. The Pension Rehabilitation Administration shall make the loan pursuant to any application promptly after the approval of such application. The plan sponsor of any plan with respect to which a suspension of benefits has been approved under section 432(e)(9) of the Internal Revenue Code of 1986 and section 305(e)(9) of the Employee Retirement Income Security Act of 1974 or under section 418E of such Code, before the date of the enactment of this Act shall apply for a loan under this section. The Director of the Pension Rehabilitation Administration shall provide for such plan sponsors to use the simplified application under subsection (d)(2)(B). The plan sponsor may elect at the time of the application to repay the loan principal, along with the remaining interest, at least as rapidly as equal installments over the 10-year period beginning with the 21st year after the date of the loan. In the case of a plan making this election, the interest on the loan shall be reduced by 0.5 percentage points. Except as provided in subparagraph
(B)and paragraph (2), the amount of any loan under subsection
(a)shall be, as demonstrated by the plan sponsor on the application under subsection (c), the amount needed to purchase annuity contracts or to implement a portfolio described in paragraph (3)(C) (or a combination of the two) sufficient to provide benefits of participants and beneficiaries of the plan in pay status, and terminated vested benefits, at the time the loan is made. In the case of a plan with respect to which a suspension of benefits has been approved under section 432(e)(9) of the Internal Revenue Code of 1986 and section 305(e)(9) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1085(e)(9) ) or under section 418E of such Code— the suspension of benefits shall not be taken into account in applying subparagraph (A); and the loan amount shall be the amount sufficient to provide benefits of participants and beneficiaries of the plan in pay status and terminated vested benefits at the time the loan is made, determined without regard to the suspension, including retroactive payment of benefits which would otherwise have been payable during the period of the suspension. In the case of a plan which is also applying for financial assistance under section 4261(d) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1431(d) )— the plan sponsor shall submit the loan application and the application for financial assistance jointly to the Pension Rehabilitation Administration and the Pension Benefit Guaranty Corporation with the information necessary to determine the eligibility for and amount of the loan under this section and the financial assistance under section 4261(d) of such Act; and if such financial assistance is granted, the amount of the loan under subsection
(a)shall not exceed an amount equal to the excess of— the amount determined under paragraph (1)(A) or (1)(B)(ii) (whichever is applicable); over the amount of such financial assistance. The Director of the Pension Rehabilitation Administration shall provide for a simplified application for the loan under this section which may be used by an insolvent plan which has not been terminated and which is already receiving financial assistance (other than under section 4261(d) of such Act) from the Pension Benefit Guaranty Corporation at the time of the application for the loan under this section. Notwithstanding section 432(f)(2)(A)(ii) of the Internal Revenue Code of 1986 and section 305(f)(2)(A)(ii) of such Act, the loan received under subsection
(a)shall only be used to purchase annuity contracts which meet the requirements of subparagraph
(B)or to implement a portfolio described in subparagraph
(C)(or a combination of the two) to provide the benefits described in paragraph (1). The annuity contracts purchased under subparagraph
(A)shall be issued by an insurance company which is licensed to do business under the laws of any State and which is rated A or better by a nationally recognized statistical rating organization, and the purchase of such contracts shall meet all applicable fiduciary standards under the Employee Retirement Income Security Act of 1974. A portfolio described in this subparagraph is— a cash matching portfolio or duration matching portfolio consisting of investment grade (as rated by a nationally recognized statistical rating organization) fixed income investments, including United States dollar-denominated public or private debt obligations issued or guaranteed by the United States or a foreign issuer, which are tradeable in United States currency and are issued at fixed or zero coupon rates; or any other portfolio prescribed by the Secretary of the Treasury in regulations which has a similar risk profile to the portfolios described in subclause
(I)and is equally protective of the interests of participants and beneficiaries. Once implemented, such a portfolio shall be maintained until all liabilities to participants and beneficiaries in pay status, and terminated vested participants, at the time of the loan are satisfied. Any investment manager of a portfolio under this subparagraph shall acknowledge in writing that such person is a fiduciary under the Employee Retirement Income Security Act of 1974 with respect to the plan. Participants and beneficiaries covered by a portfolio under this subparagraph shall continue to be treated as participants and beneficiaries of the plan, including for purposes of title IV of the Employee Retirement Income Security Act of 1974. Annuity contracts purchased and portfolios implemented under this paragraph shall be used solely to provide the benefits described in paragraph
(1)until all such benefits have been paid and shall be accounted for separately from the other assets of the plan. Any portfolio implemented under this paragraph shall be subject to oversight by the Pension Rehabilitation Administration, including a mandatory triennial review of the adequacy of the portfolio to provide the benefits described in paragraph
(1)and approval (to be provided within a reasonable period of time) of any decision by the plan sponsor to change the investment manager of the portfolio. If the oversight under subclause
(I)determines an inadequacy, the plan sponsor shall take remedial action to ensure that the inadequacy will be cured within 2 years of such determination. The Participant and Plan Sponsor Advocate established under section 4004 of the Employee Retirement Income Security Act of 1974 shall act as ombudsperson for participants and beneficiaries on behalf of whom annuity contracts are purchased or who are covered by a portfolio under this paragraph. Except as provided in subsection (f), the Pension Rehabilitation Administration shall make every effort to collect repayment of loans under this section in accordance with section 3711 of title 31, United States Code. If a plan is unable to make any payment on a loan under this section when due, the Pension Rehabilitation Administration shall negotiate with the plan sponsor revised terms for repayment (including installment payments over a reasonable period or forgiveness of a portion of the loan principal), but only to the extent necessary to avoid insolvency in the subsequent 18 months. The Director of the Pension Rehabilitation Administration, in consultation with the Director of the Pension Benefit Guaranty Corporation, the Secretary of the Treasury, and the Secretary of Labor, is authorized to issue rules regarding the form, content, and process of applications for loans under this section, actuarial standards and assumptions to be used in making estimates and projections for purposes of such applications, and assumptions regarding interest rates, mortality, and distributions with respect to a portfolio described in subsection (d)(3)(C). Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Director of the Pension Rehabilitation Administration shall submit to the Committee on Ways and Means and the Committee on Education and Labor of the House of Representatives, and the Committee on Finance and the Committee on Health, Education, Labor and Pensions of the Senate, a report identifying any plan that— has failed to make any scheduled payment on a loan under this section; has negotiated revised terms for repayment of such loan (including any installment payments or forgiveness of a portion of the loan principal); or the Director has determined is no longer reasonably expected to be able to— pay benefits and the interest on the loan; or accumulate sufficient funds to repay the principal when due. Such report shall include the details of any such failure, revised terms, or determination, as the case may be. Subparagraph
(A)of section 514(c)(6) of the Internal Revenue Code of 1986 is amended— by striking or at the end of clause (i); by striking the period at the end of clause (ii)(II) and inserting , or ; and by adding at the end the following new clause: indebtedness with respect to a multiemployer plan under a loan made by the Pension Rehabilitation Administration pursuant to section 4 of the Rehabilitation for Multiemployer Pensions Act of 2019 . .
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