Bills Sec. 201 — Valuation of plan liabilities

Subparagraph

(B)of section 431(b)(2) of the Internal Revenue Code of 1986 is amended— by striking and at the end of clause (iii), by redesignating clause

(iv)as clause (v), by striking actuarial assumptions in clause (v), as so redesignated, and inserting actuarial assumptions not described in clause

(iv), and by inserting after clause

(iii)the following new clause: separately, with respect to each plan year, an amount equal to the excess, if any, of— the net increase (if any) in the unfunded past service liability resulting from a reduction in the interest rate under paragraph (6)(A) from the rate which applied for the preceding year, over the amount in the investment risk reduction subaccount under paragraph (9), over a period of 30 years, and . Clause

(iii)of section 431(b)(3)(B) of such Code is amended by inserting , except that any amount of net gain resulting from an increase in the interest rate from the rate which applied for the preceding year shall first be offset against any unamortized amounts charged under paragraph (2)(B)(iv) after 15 plan years . Paragraph

(6)of section 431(b) of such Code is amended to read as follows: The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine the unfunded past service liability. Notwithstanding any other provision of this section, the interest rate used shall not exceed— 7.5 percent for actuarial valuations for plan years beginning after December 31, 2020, and before January 1, 2024, 7.25 percent for actuarial valuations for plan years beginning after December 31, 2023, and before January 1, 2028, 7.0 percent for actuarial valuations for plan years beginning after December 31, 2027, and before January 1, 2032, 6.75 percent for actuarial valuations for plan years beginning after December 31, 2031, and before January 1, 2036, and 6.5 percent for actuarial valuations for plan years beginning after December 31, 2035. Notwithstanding subsection (c), the plan sponsor may direct the plan actuary to use any rate which is not lower than the rate determined under subparagraph

(B)(without regard to this sentence) and not greater than the rate determined under the preceding sentence for the plan year. Nothing in this subparagraph shall require a plan to take into account the interest rate limitation for subsequent years under the preceding sentence in determining actuarial valuations as of any given year. Notwithstanding any other provision of this section, the interest rate used for determining the normal cost to be charged under paragraph

(2)for the plan year shall be equal to the least of— the interest rate applicable under subparagraph

(A)for the plan year, a rate equal to the 24-month average of the third segment rate (as defined in section 430(h)(2)(C)(iii)), as of the date the determination is made, without regard to section 430(h)(2)(C)(iv), increased by 2 percent, or 5.5 percent. Notwithstanding subparagraph (A), in the case of a plan which has been partitioned under section 4233A of the Employee Retirement Income Security Act of 1974, the rate of interest used to determine normal cost under subparagraph

(B)shall also be used to determine the unfunded past service liability of the plan. Notwithstanding subparagraph (B), and except as noted in subparagraph (C), in the case of a plan which uses a funding method other than the unit credit method or entry-age normal method— the normal cost and past service liability shall be calculated using interest rates under subparagraph (A), an additional normal cost component shall be calculated in the same manner as under paragraph (9)(B)(i) based on the unit credit method, and the amount determined under clause

(ii)shall be added to the otherwise calculated normal cost under the funding method in lieu of the credit under paragraph (9)(B)(i). . Subsection

(b)of section 431 of such Code is amended by adding at the end the following new paragraph: For purposes of this part— The funding standard account shall include an investment risk reduction subaccount used solely to offset losses attributable to reductions in the rate of interest used to determine the unfunded past service liability of the plan over time. For a plan year, the investment risk reduction subaccount shall be— credited with the net change (if any) in the normal cost for the immediately preceding plan year due to recalculation to reflect the difference in interest rates under paragraphs (6)(A) and (6)(B), charged with the amount of any reduction applied under paragraph (2)(B)(iv)(II), or, in the case of a plan using a spread-gain method, an amount equal to the lesser of— the entire remaining balance of such subaccount immediately before the charge, or the amount of the increase in the present value of benefits resulting from a decrease in the interest rate from the rate which applied for the preceding year, at the election of the plan sponsor, and pursuant to regulations to be issued by the Secretary, credited with the net decrease in the unfunded past service liability (or present value of benefits, in the case of a plan using a spread-gain method) resulting from an increase in the interest rate under paragraph (6)(A), not to exceed the amount of any previous charges to the account under clause (ii), reduced by any previous credits under this clause, and adjusted with interest at the rate under paragraph (6)(A), as applicable. . Paragraph

(1)of section 431(c) of such Code is amended to read as follows: For purposes of this part, normal costs, accrued liability, and experience gains and losses used to determine the unfunded past service liability for the plan shall be determined under the funding method used to determine costs under the plan and based on the interest rate under subparagraph

(A)(or subparagraph (C), if applicable) of subsection (b)(6). Notwithstanding subparagraph (A), in the case of a plan using the unit credit funding method or the entry-age normal funding method, the normal cost for a plan year to be charged to the funding standard account under subsection (b)(2) shall be determined under the funding method used to determine costs under the plan and based on the interest rate under subsection (b)(6)(B). . Subparagraph

(B)of section 304(b)(2) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1084(b)(2) ) is amended— by striking and at the end of clause (iii), by redesignating clause

(iv)as clause (v), by striking actuarial assumptions in clause (v), as so redesignated, and inserting actuarial assumptions not described in clause

(iv), and by inserting after clause

(iii)the following new clause: separately, with respect to each plan year, an amount equal to the excess, if any, of— the net increase (if any) in the unfunded past service liability resulting from a reduction in the interest rate under paragraph (6)(A) from the rate which applied for the preceding year, over the amount in the investment risk reduction subaccount under paragraph (9), over a period of 30 years, and . Clause

(iii)of section 304(b)(3)(B) of such Act ( 29 U.S.C. 1084(b)(3)(B) ) is amended by inserting , except that any amount of net gain resulting from an increase in the interest rate from the rate which applied for the preceding year shall first be offset against any unamortized amounts charged under paragraph (2)(B)(iv) after 15 plan years . Paragraph

(6)of section 304(b) of such Act ( 29 U.S.C. 1084(b) ) is amended to read as follows: The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine the unfunded past service liability. Notwithstanding any other provision of this section, this interest rate shall not exceed— 7.5 percent for actuarial valuations for plan years beginning after December 31, 2020, and before January 1, 2024, 7.25 percent for actuarial valuations for plan years beginning after December 31, 2023, and before January 1, 2028, 7.0 percent for actuarial valuations for plan years beginning after December 31, 2027, and before January 1, 2032, 6.75 percent for actuarial valuations for plan years beginning after December 31, 2031, and before January 1, 2036, and 6.5 percent for actuarial valuations for plan years beginning after December 31, 2035. Notwithstanding subsection (c), the plan sponsor may direct the plan actuary to use any rate which is not lower than the rate determined under subparagraph

(B)(without regard to this sentence) and not greater than the rate determined under the preceding sentence for the plan year. Nothing in this subparagraph shall require a plan to take into account the interest rate limitation for subsequent years under the preceding sentence in determining actuarial valuations as of any given year. Notwithstanding any other provision of this section, the interest rate used for determining the normal cost to be charged under paragraph

(2)for the plan year shall be equal to the least of— the interest rate applicable under subparagraph

(A)for the plan year, a rate equal to the 24-month average of the third segment rate (as defined in section 303(h)(2)(C)(iii)), as of the date the determination is made, without regard to section 303(h)(2)(C)(iv), increased by 2 percent, or 5.5 percent. Notwithstanding subparagraph (A), in the case of a plan which has been partitioned under section 4233A, the rate of interest used to determine normal cost under subparagraph

(B)shall also be used to determine the unfunded past service liability of the plan. Notwithstanding subparagraph (B), and except as noted in subparagraph (C), in the case of a plan which uses a funding method other than the unit credit method or entry-age normal method— the normal cost and past service liability shall be calculated using interest rates under subparagraph (A), an additional normal cost component shall be calculated in the same manner as under paragraph (9)(B)(i) based on the unit credit method, and the amount determined under clause

(ii)shall be added to the otherwise calculated normal cost under the funding method in lieu of the credit under paragraph (9)(B)(i). . Subparagraph

(A)of section 4233A(h)(4) of such Act, as added by this Act, is amended by inserting , consistent with section 304(b)(6)(C) before the period. Subsection

(b)of section 304 of such Act ( 29 U.S.C. 1084 ) is amended by adding at the end the following new paragraph: For purposes of this part— The funding standard account shall include an investment risk reduction subaccount used solely to offset losses attributable to reductions in the rate of interest used to determine the unfunded past service liability of the plan over time. For a plan year, the investment risk reduction subaccount shall be— credited with the net change (if any) in the normal cost for the immediately preceding plan year due to recalculation to reflect the difference in interest rates under paragraphs (6)(A) and (6)(B), charged with the amount of any reduction applied under paragraph (2)(B)(iv)(II), or, in the case of a plan using a spread-gain method, an amount equal to the lesser of— the entire remaining balance of such subaccount immediately before the charge, or the amount of the increase in the present value of benefits resulting from a decrease in the interest rate from the rate which applied for the preceding year, at the election of the plan sponsor, and pursuant to regulations to be issued by the Secretary of the Treasury, credited with the net decrease in the unfunded past service liability (or present value of benefits, in the case of a plan using a spread-gain method) resulting from an increase in the interest rate under paragraph (6)(A), not to exceed the amount of any previous charges to the account under clause (ii), reduced by any previous credits under this clause, and adjusted with interest at the rate under paragraph (6)(A), as applicable. . Paragraph

(1)of section 304(c) of such Act ( 29 U.S.C. 1084(c) ) is amended to read as follows: For purposes of this part, normal costs, accrued liability, and experience gains and losses used to determine the unfunded past service liability for the plan shall be determined under the funding method used to determine costs under the plan and based on the interest rate under subparagraph

(A)(or subparagraph (C), if applicable) of subsection (b)(6). Notwithstanding subparagraph (A), in the case of a plan using the unit credit funding method or the entry-age normal funding method, the normal cost for a plan year to be charged to the funding standard account under subsection (b)(2) shall be determined under the funding method used to determine costs under the plan and based on the interest rate under subsection (b)(6)(B). . Pursuant to regulations to be issued by the Secretary of the Treasury (or such Secretary's delegate), a multiemployer plan must petition the Secretary of the Treasury (or delegate) for any increase in the interest assumption made after a 30-year amortization base is established in accordance with section 431(b)(2)(B)(iv) of the Internal Revenue Code of 1986 and section 304(b)(2)(B)(iv) of the Employee Retirement Income Security Act of 1974 (as added by this Act). The Secretary of the Treasury (or delegate) shall approve such request upon a determination that the change is reasonably supported by changes in the financial markets or changes in the plan’s asset allocation, and is consistent with the manner in which prior changes in interest rate assumptions were determined since the date of the enactment of this Act. If the Secretary of the Treasury (or such Secretary's delegate) does not approve or deny any petition submitted pursuant to paragraph

(1)within 180 days of receiving such petition, such petition shall be deemed to have been approved. The amendments made by this section shall apply to plan years beginning after December 31, 2020.

Sec. 201. Valuation of plan liabilities