29 U.S.C. § 1054 : US Code - Section 1054: Benefit accrual requirements

    (a) Satisfaction of requirements by pension plans
      Each pension plan shall satisfy the requirements of subsection
    (b)(3) of this section, and - 
        (1) in the case of a defined benefit plan, shall satisfy the
      requirements of subsection (b)(1) of this section; and
        (2) in the case of a defined contribution plan, shall satisfy
      the requirements of subsection (b)(2) of this section.
    (b) Enumeration of plan requirements
      (1)(A) A defined benefit plan satisfies the requirements of this
    paragraph if the accrued benefit to which each participant is
    entitled upon his separation from the service is not less than - 
        (i) 3 percent of the normal retirement benefit to which he
      would be entitled at the normal retirement age if he commenced
      participation at the earliest possible entry age under the plan
      and served continuously until the earlier of age 65 or the normal
      retirement age specified under the plan, multiplied by
        (ii) the number of years (not in excess of 33 1/3 ) of his
      participation in the plan.

    In the case of a plan providing retirement benefits based on
    compensation during any period, the normal retirement benefit to
    which a participant would be entitled shall be determined as if he
    continued to earn annually the average rate of compensation which
    he earned during consecutive years of service, not in excess of 10,
    for which his compensation was the highest. For purposes of this
    subparagraph, social security benefits and all other relevant
    factors used to compute benefits shall be treated as remaining
    constant as of the current year for all years after such current
    year.
      (B) A defined benefit plan satisfies the requirements of this
    paragraph of a particular plan year if under the plan the accrued
    benefit payable at the normal retirement age is equal to the normal
    retirement benefit and the annual rate at which any individual who
    is or could be a participant can accrue the retirement benefits
    payable at normal retirement age under the plan for any later plan
    year is not more than 133 1/3  percent of the annual rate at which
    he can accrue benefits for any plan year beginning on or after such
    particular plan year and before such later plan year. For purposes
    of this subparagraph - 
        (i) any amendment to the plan which is in effect for the
      current year shall be treated as in effect for all other plan
      years;
        (ii) any change in an accrual rate which does not apply to any
      individual who is or could be a participant in the current year
      shall be disregarded;
        (iii) the fact that benefits under the plan may be payable to
      certain employees before normal retirement age shall be
      disregarded; and
        (iv) social security benefits and all other relevant factors
      used to compute benefits shall be treated as remaining constant
      as of the current year for all years after the current year.

      (C) A defined benefit plan satisfies the requirements of this
    paragraph if the accrued benefit to which any participant is
    entitled upon his separation from the service is not less than a
    fraction of the annual benefit commencing at normal retirement age
    to which he would be entitled under the plan as in effect on the
    date of his separation if he continued to earn annually until
    normal retirement age the same rate of compensation upon which his
    normal retirement benefit would be computed under the plan,
    determined as if he had attained normal retirement age on the date
    any such determination is made (but taking into account no more
    than the 10 years of service immediately preceding his separation
    from service). Such fraction shall be a fraction, not exceeding 1,
    the numerator of which is the total number of his years of
    participation in the plan (as of the date of his separation from
    the service) and the denominator of which is the total number of
    years he would have participated in the plan if he separated from
    the service at the normal retirement age. For purposes of this
    subparagraph, social security benefits and all other relevant
    factors used to compute benefits shall be treated as remaining
    constant as of the current year for all years after such current
    year.
      (D) Subparagraphs (A), (B), and (C) shall not apply with respect
    to years of participation before the first plan year to which this
    section applies but a defined benefit plan satisfies the
    requirements of this subparagraph with respect to such years of
    participation only if the accrued benefit of any participant with
    respect to such years of participation is not less than the greater
    of - 
        (i) his accrued benefit determined under the plan, as in effect
      from time to time prior to September 2, 1974, or
        (ii) an accrued benefit which is not less than one-half of the
      accrued benefit to which such participant would have been
      entitled if subparagraph (A), (B), or (C) applied with respect to
      such years of participation.

      (E) Notwithstanding subparagraphs (A), (B), and (C) of this
    paragraph, a plan shall not be treated as not satisfying the
    requirements of this paragraph solely because the accrual of
    benefits under the plan does not become effective until the
    employee has two continuous years of service. For purposes of this
    subparagraph, the term "year of service" has the meaning provided
    by section 1052(a)(3)(A) of this title.
      (F) Notwithstanding subparagraphs (A), (B), and (C), a defined
    benefit plan satisfies the requirements of this paragraph if such
    plan
        (i) is funded exclusively by the purchase of insurance
      contracts, and
        (ii) satisfies the requirements of paragraphs (2) and (3) of
      section 1081(b) of this title (relating to certain insurance
      contract plans),

    but only if an employee's accrued benefit as of any applicable date
    is not less than the cash surrender value his insurance contracts
    would have on such applicable date if the requirements of
    paragraphs (4), (5), and (6) of section 1081(b) of this title were
    satisfied.
      (G) Notwithstanding the preceding subparagraphs, a defined
    benefit plan shall be treated as not satisfying the requirements of
    this paragraph if the participant's accrued benefit is reduced on
    account of any increase in his age or service. The preceding
    sentence shall not apply to benefits under the plan commencing
    before benefits payable under title II of the Social Security Act
    [42 U.S.C. 401 et seq.] which benefits under the plan - 
        (i) do not exceed social security benefits, and
        (ii) terminate when such social security benefits commence.

      (H)(i) Notwithstanding the preceding subparagraphs, a defined
    benefit plan shall be treated as not satisfying the requirements of
    this paragraph if, under the plan, an employee's benefit accrual is
    ceased, or the rate of an employee's benefit accrual is reduced,
    because of the attainment of any age.
      (ii) A plan shall not be treated as failing to meet the
    requirements of this subparagraph solely because the plan imposes
    (without regard to age) a limitation on the amount of benefits that
    the plan provides or a limitation on the number of years of service
    or years of participation which are taken into account for purposes
    of determining benefit accrual under the plan.
      (iii) In the case of any employee who, as of the end of any plan
    year under a defined benefit plan, has attained normal retirement
    age under such plan - 
        (I) if distribution of benefits under such plan with respect to
      such employee has commenced as of the end of such plan year, then
      any requirement of this subparagraph for continued accrual of
      benefits under such plan with respect to such employee during
      such plan year shall be treated as satisfied to the extent of the
      actuarial equivalent of in-service distribution of benefits, and
        (II) if distribution of benefits under such plan with respect
      to such employee has not commenced as of the end of such year in
      accordance with section 1056(a)(3) of this title, and the payment
      of benefits under such plan with respect to such employee is not
      suspended during such plan year pursuant to section 1053(a)(3)(B)
      of this title, then any requirement of this subparagraph for
      continued accrual of benefits under such plan with respect to
      such employee during such plan year shall be treated as satisfied
      to the extent of any adjustment in the benefit payable under the
      plan during such plan year attributable to the delay in the
      distribution of benefits after the attainment of normal
      retirement age.

    The preceding provisions of this clause shall apply in accordance
    with regulations of the Secretary of the Treasury. Such regulations
    may provide for the application of the preceding provisions of this
    clause, in the case of any such employee, with respect to any
    period of time within a plan year.
      (iv) Clause (i) shall not apply with respect to any employee who
    is a highly compensated employee (within the meaning of section
    414(q) of title 26) to the extent provided in regulations
    prescribed by the Secretary of the Treasury for purposes of
    precluding discrimination in favor of highly compensated employees
    within the meaning of subchapter D of chapter 1 of title 26.
      (v) A plan shall not be treated as failing to meet the
    requirements of clause (i) solely because the subsidized portion of
    any early retirement benefit is disregarded in determining benefit
    accruals.
      (vi) Any regulations prescribed by the Secretary of the Treasury
    pursuant to clause (v) of section 411(b)(1)(H) of title 26 shall
    apply with respect to the requirements of this subparagraph in the
    same manner and to the same extent as such regulations apply with
    respect to the requirements of such section 411(b)(1)(H).
      (2)(A) A defined contribution plan satisfies the requirements of
    this paragraph if, under the plan, allocations to the employee's
    account are not ceased, and the rate at which amounts are allocated
    to the employee's account is not reduced, because of the attainment
    of any age.
      (B) A plan shall not be treated as failing to meet the
    requirements of subparagraph (A) solely because the subsidized
    portion of any early retirement benefit is disregarded in
    determining benefit accruals.
      (C) Any regulations prescribed by the Secretary of the Treasury
    pursuant to subparagraphs (B) and (C) of section 411(b)(2) of title
    26 shall apply with respect to the requirements of this paragraph
    in the same manner and to the same extent as such regulations apply
    with respect to the requirements of such section 411(b)(2).
      (3) A plan satisfies the requirements of this paragraph if - 
        (A) in the case of a defined benefit plan, the plan requires
      separate accounting for the portion of each employee's accrued
      benefit derived from any voluntary employee contributions
      permitted under the plan; and
        (B) in the case of any plan which is not a defined benefit
      plan, the plan requires separate accounting for each employee's
      accrued benefit.

      (4)(A) For purposes of determining an employee's accrued benefit,
    the term "year of participation" means a period of service
    (beginning at the earliest date on which the employee is a
    participant in the plan and which is included in a period of
    service required to be taken into account under section 1052(b) of
    this title, determined without regard to section 1052(b)(5) of this
    title) as determined under regulations prescribed by the Secretary
    which provide for the calculation of such period on any reasonable
    and consistent basis.
      (B) For purposes of this paragraph, except as provided in
    subparagraph (C), in the case of any employee whose customary
    employment is less than full time, the calculation of such
    employee's service on any basis which provides less than a ratable
    portion of the accrued benefit to which he would be entitled under
    the plan if his customary employment were full time shall not be
    treated as made on a reasonable and consistent basis.
      (C) For purposes of this paragraph, in the case of any employee
    whose service is less than 1,000 hours during any calendar year,
    plan year or other 12-consecutive-month period designated by the
    plan (and not prohibited under regulations prescribed by the
    Secretary) the calculation of his period of service shall not be
    treated as not made on a reasonable and consistent basis merely
    because such service is not taken into account.
      (D) In the case of any seasonal industry where the customary
    period of employment is less than 1,000 hours during a calendar
    year, the term "year of participation" shall be such period as
    determined under regulations prescribed by the Secretary.
      (E) For purposes of this subsection in the case of any maritime
    industry, 125 days of service shall be treated as a year of
    participation. The Secretary may prescribe regulations to carry out
    the purposes of this subparagraph.
      (5) Special rules relating to age. - 
        (A) Comparison to similarly situated younger individual. - 
          (i) In general. - A plan shall not be treated as failing to
        meet the requirements of paragraph (1)(H)(i) if a participant's
        accrued benefit, as determined as of any date under the terms
        of the plan, would be equal to or greater than that of any
        similarly situated, younger individual who is or could be a
        participant.
          (ii) Similarly situated. - For purposes of this subparagraph,
        a participant is similarly situated to any other individual if
        such participant is identical to such other individual in every
        respect (including period of service, compensation, position,
        date of hire, work history, and any other respect) except for
        age.
          (iii) Disregard of subsidized early retirement benefits. - In
        determining the accrued benefit as of any date for purposes of
        this subparagraph, the subsidized portion of any early
        retirement benefit or retirement-type subsidy shall be
        disregarded.
          (iv) Accrued benefit. - For purposes of this subparagraph,
        the accrued benefit may, under the terms of the plan, be
        expressed as an annuity payable at normal retirement age, the
        balance of a hypothetical account, or the current value of the
        accumulated percentage of the employee's final average
        compensation.

        (B) Applicable defined benefit plans. - 
          (i) Interest credits. - 
            (I) In general. - An applicable defined benefit plan shall
          be treated as failing to meet the requirements of paragraph
          (1)(H) unless the terms of the plan provide that any interest
          credit (or an equivalent amount) for any plan year shall be
          at a rate which is not greater than a market rate of return.
          A plan shall not be treated as failing to meet the
          requirements of this subclause merely because the plan
          provides for a reasonable minimum guaranteed rate of return
          or for a rate of return that is equal to the greater of a
          fixed or variable rate of return.
            (II) Preservation of capital. - An applicable defined
          benefit plan shall be treated as failing to meet the
          requirements of paragraph (1)(H) unless the plan provides
          that an interest credit (or equivalent amount) of less than
          zero shall in no event result in the account balance or
          similar amount being less than the aggregate amount of
          contributions credited to the account.
            (III) Market rate of return. - The Secretary of the
          Treasury may provide by regulation for rules governing the
          calculation of a market rate of return for purposes of
          subclause (I) and for permissible methods of crediting
          interest to the account (including fixed or variable interest
          rates) resulting in effective rates of return meeting the
          requirements of subclause (I).

          (ii) Special rule for plan conversions. - If, after June 29,
        2005, an applicable plan amendment is adopted, the plan shall
        be treated as failing to meet the requirements of paragraph
        (1)(H) unless the requirements of clause (iii) are met with
        respect to each individual who was a participant in the plan
        immediately before the adoption of the amendment.
          (iii) Rate of benefit accrual. - Subject to clause (iv), the
        requirements of this clause are met with respect to any
        participant if the accrued benefit of the participant under the
        terms of the plan as in effect after the amendment is not less
        than the sum of - 
            (I) the participant's accrued benefit for years of service
          before the effective date of the amendment, determined under
          the terms of the plan as in effect before the amendment, plus
            (II) the participant's accrued benefit for years of service
          after the effective date of the amendment, determined under
          the terms of the plan as in effect after the amendment.

          (iv) Special rules for early retirement subsidies. - For
        purposes of clause (iii)(I), the plan shall credit the
        accumulation account or similar amount (!1) with the amount of
        any early retirement benefit or retirement-type subsidy for the
        plan year in which the participant retires if, as of such time,
        the participant has met the age, years of service, and other
        requirements under the plan for entitlement to such benefit or
        subsidy.

          (v) Applicable plan amendment. - For purposes of this
        subparagraph - 
            (I) In general. - The term "applicable plan amendment"
          means an amendment to a defined benefit plan which has the
          effect of converting the plan to an applicable defined
          benefit plan.
            (II) Special rule for coordinated benefits. - If the
          benefits of 2 or more defined benefit plans established or
          maintained by an employer are coordinated in such a manner as
          to have the effect of the adoption of an amendment described
          in subclause (I), the sponsor of the defined benefit plan or
          plans providing for such coordination shall be treated as
          having adopted such a plan amendment as of the date such
          coordination begins.
            (III) Multiple amendments. - The Secretary of the Treasury
          shall issue regulations to prevent the avoidance of the
          purposes of this subparagraph through the use of 2 or more
          plan amendments rather than a single amendment.
            (IV) Applicable defined benefit plan. - For purposes of
          this subparagraph, the term "applicable defined benefit plan"
          has the meaning given such term by section 1053(f)(3) of this
          title.

          (vi) Termination requirements. - An applicable defined
        benefit plan shall not be treated as meeting the requirements
        of clause (i) unless the plan provides that, upon the
        termination of the plan - 
            (I) if the interest credit rate (or an equivalent amount)
          under the plan is a variable rate, the rate of interest used
          to determine accrued benefits under the plan shall be equal
          to the average of the rates of interest used under the plan
          during the 5-year period ending on the termination date, and
            (II) the interest rate and mortality table used to
          determine the amount of any benefit under the plan payable in
          the form of an annuity payable at normal retirement age shall
          be the rate and table specified under the plan for such
          purpose as of the termination date, except that if such
          interest rate is a variable rate, the interest rate shall be
          determined under the rules of subclause (I).

        (C) Certain offsets permitted. - A plan shall not be treated as
      failing to meet the requirements of paragraph (1)(H)(i) solely
      because the plan provides offsets against benefits under the plan
      to the extent such offsets are otherwise allowable in applying
      the requirements of section 401(a) of title 26.
        (D) Permitted disparities in plan contributions or benefits. -
      A plan shall not be treated as failing to meet the requirements
      of paragraph (1)(H) solely because the plan provides a disparity
      in contributions or benefits with respect to which the
      requirements of section 401(l) of title 26 are met.
        (E) Indexing permitted. - 
          (i) In general. - A plan shall not be treated as failing to
        meet the requirements of paragraph (1)(H) solely because the
        plan provides for indexing of accrued benefits under the plan.
          (ii) Protection against loss. - Except in the case of any
        benefit provided in the form of a variable annuity, clause (i)
        shall not apply with respect to any indexing which results in
        an accrued benefit less than the accrued benefit determined
        without regard to such indexing.
          (iii) Indexing. - For purposes of this subparagraph, the term
        "indexing" means, in connection with an accrued benefit, the
        periodic adjustment of the accrued benefit by means of the
        application of a recognized investment index or methodology.

        (F) Early retirement benefit or retirement-type subsidy. - For
      purposes of this paragraph, the terms "early retirement benefit"
      and "retirement-type subsidy" have the meaning given such terms
      in subsection (g)(2)(A).
        (G) Benefit accrued to date. - For purposes of this paragraph,
      any reference to the accrued benefit shall be a reference to such
      benefit accrued to date.
    (c) Employee's accrued benefits derived from employer and employee
      contributions
      (1) For purposes of this section and section 1053 of this title
    an employee's accrued benefit derived from employer contributions
    as of any applicable date is the excess (if any) of the accrued
    benefit for such employee as of such applicable date over the
    accrued benefit derived from contributions made by such employee as
    of such date.
      (2)(A) In the case of a plan other than a defined benefit plan,
    the accrued benefit derived from contributions made by an employee
    as of any applicable date is - 
        (i) except as provided in clause (ii), the balance of the
      employee's separate account consisting only of his contributions
      and the income, expenses, gains, and losses attributable thereto,
      or
        (ii) if a separate account is not maintained with respect to an
      employee's contributions under such a plan, the amount which
      bears the same ratio to his total accrued benefit as the total
      amount of the employee's contributions (less withdrawals) bears
      to the sum of such contributions and the contributions made on
      his behalf by the employer (less withdrawals).

      (B) Defined benefit plans. - In the case of a defined benefit
    plan, the accrued benefit derived from contributions made by an
    employee as of any applicable date is the amount equal to the
    employee's accumulated contributions expressed as an annual benefit
    commencing at normal retirement age, using an interest rate which
    would be used under the plan under section 1055(g)(3) of this title
    (as of the determination date).
      (C) For purposes of this subsection, the term "accumulated
    contributions" means the total of - 
        (i) all mandatory contributions made by the employee,
        (ii) interest (if any) under the plan to the end of the last
      plan year to which section 1053(a)(2) of this title does not
      apply (by reason of the applicable effective date), and
        (iii) interest on the sum of the amounts determined under
      clauses (i) and (ii) compounded annually - 
          (I) at the rate of 120 percent of the Federal mid-term rate
        (as in effect under section 1274 of title 26 for the 1st month
        of a plan year for the period beginning with the 1st plan year
        to which subsection (a)(2) of this section applies by reason of
        the applicable effective date) and ending with the date on
        which the determination is being made, and
          (II) at the interest rate which would be used under the plan
        under section 1055(g)(3) of this title (as of the determination
        date) for the period beginning with the determination date and
        ending on the date on which the employee attains normal
        retirement age.

    For purposes of this subparagraph, the term "mandatory
    contributions" means amounts contributed to the plan by the
    employee which are required as a condition of employment, as a
    condition of participation in such plans, or as a condition of
    obtaining benefits under the plan attributable to employer
    contributions.
      (D) The Secretary of the Treasury is authorized to adjust by
    regulation the conversion factor described in subparagraph (B) from
    time to time as he may deem necessary. No such adjustment shall be
    effective for a plan year beginning before the expiration of 1 year
    after such adjustment is determined and published.
      (3) For purposes of this section, in the case of any defined
    benefit plan, if an employee's accrued benefit is to be determined
    as an amount other than an annual benefit commencing at normal
    retirement age, or if the accrued benefit derived from
    contributions made by an employee is to be determined with respect
    to a benefit other than an annual benefit in the form of a single
    life annuity (without ancillary benefits) commencing at normal
    retirement age, the employee's accrued benefit, or the accrued
    benefits derived from contributions made by an employee, as the
    case may be, shall be the actuarial equivalent of such benefit or
    amount determined under paragraph (1) or (2).
      (4) In the case of a defined benefit plan which permits voluntary
    employee contributions, the portion of an employee's accrued
    benefit derived from such contributions shall be treated as an
    accrued benefit derived from employee contributions under a plan
    other than a defined benefit plan.
    (d) Employee service which may be disregarded in determining
      employee's accrued benefits under plan
      Notwithstanding section 1053(b)(1) of this title, for purposes of
    determining the employee's accrued benefit under the plan, the plan
    may disregard service performed by the employee with respect to
    which he has received - 
        (1) a distribution of the present value of his entire
      nonforfeitable benefit if such distribution was in an amount (not
      more than the dollar limit under section 1053(e)(1) of this
      title) permitted under regulations prescribed by the Secretary of
      the Treasury, or
        (2) a distribution of the present value of his nonforfeitable
      benefit attributable to such service which he elected to receive.

    Paragraph (1) shall apply only if such distribution was made on
    termination of the employee's participation in the plan. Paragraph
    (2) shall apply only if such distribution was made on termination
    of the employee's participation in the plan or under such other
    circumstances as may be provided under regulations prescribed by
    the Secretary of the Treasury.
    (e) Opportunity to repay full amount of distributions which have
      been reduced through disregarded employee service
      For purposes of determining the employee's accrued benefit, the
    plan shall not disregard service as provided in subsection (d) of
    this section unless the plan provides an opportunity for the
    participant to repay the full amount of a distribution described in
    subsection (d) of this section with, in the case of a defined
    benefit plan, interest at the rate determined for purposes of
    subsection (c)(2)(C) of this section and provides that upon such
    repayment the employee's accrued benefit shall be recomputed by
    taking into account service so disregarded. This subsection shall
    apply only in the case of a participant who - 
        (1) received such a distribution in any plan year to which this
      section applies which distribution was less than the present
      value of his accrued benefit,
        (2) resumes employment covered under the plan, and
        (3) repays the full amount of such distribution with, in the
      case of a defined benefit plan, interest at the rate determined
      for purposes of subsection (c)(2)(C) of this section.

    The plan provision required under this subsection may provide that
    such repayment must be made (A) in the case of a withdrawal on
    account of separation from service, before the earlier of 5 years
    after the first date on which the participant is subsequently re-
    employed by the employer, or the close of the first period of 5
    consecutive 1-year breaks in service commencing after the
    withdrawal; or (B) in the case of any other withdrawal, 5 years
    after the date of the withdrawal.
    (f) Employer treated as maintaining a plan
      For the purposes of this part, an employer shall be treated as
    maintaining a plan if any employee of such employer accrues
    benefits under such plan by reason of service with such employer.
    (g) Decrease of accrued benefits through amendment of plan
      (1) The accrued benefit of a participant under a plan may not be
    decreased by an amendment of the plan, other than an amendment
    described in section 1082(d)(2) or 1441 of this title.
      (2) For purposes of paragraph (1), a plan amendment which has the
    effect of - 
        (A) eliminating or reducing an early retirement benefit or a
      retirement-type subsidy (as defined in regulations), or
        (B) eliminating an optional form of benefit,

    with respect to benefits attributable to service before the
    amendment shall be treated as reducing accrued benefits. In the
    case of a retirement-type subsidy, the preceding sentence shall
    apply only with respect to a participant who satisfies (either
    before or after the amendment) the preamendment conditions for the
    subsidy. The Secretary of the Treasury shall by regulations provide
    that this paragraph shall not apply to any plan amendment which
    reduces or eliminates benefits or subsidies which create
    significant burdens or complexities for the plan and plan
    participants, unless such amendment adversely affects the rights of
    any participant in a more than de minimis manner. The Secretary of
    the Treasury may by regulations provide that this subparagraph
    shall not apply to a plan amendment described in subparagraph (B)
    (other than a plan amendment having an effect described in
    subparagraph (A)).
      (3) For purposes of this subsection, any - 
        (A) tax credit employee stock ownership plan (as defined in
      section 409(a) of title 26, or
        (B) employee stock ownership plan (as defined in section
      4975(e)(7) of title 26),

    shall not be treated as failing to meet the requirements of this
    subsection merely because it modifies distribution options in a
    nondiscriminatory manner.
      (4)(A) A defined contribution plan (in this subparagraph referred
    to as the "transferee plan") shall not be treated as failing to
    meet the requirements of this subsection merely because the
    transferee plan does not provide some or all of the forms of
    distribution previously available under another defined
    contribution plan (in this subparagraph referred to as the
    "transferor plan") to the extent that - 
        (i) the forms of distribution previously available under the
      transferor plan applied to the account of a participant or
      beneficiary under the transferor plan that was transferred from
      the transferor plan to the transferee plan pursuant to a direct
      transfer rather than pursuant to a distribution from the
      transferor plan;
        (ii) the terms of both the transferor plan and the transferee
      plan authorize the transfer described in clause (i);
        (iii) the transfer described in clause (i) was made pursuant to
      a voluntary election by the participant or beneficiary whose
      account was transferred to the transferee plan;
        (iv) the election described in clause (iii) was made after the
      participant or beneficiary received a notice describing the
      consequences of making the election; and
        (v) the transferee plan allows the participant or beneficiary
      described in clause (iii) to receive any distribution to which
      the participant or beneficiary is entitled under the transferee
      plan in the form of a single sum distribution.

      (B) Subparagraph (A) shall apply to plan mergers and other
    transactions having the effect of a direct transfer, including
    consolidations of benefits attributable to different employers
    within a multiple employer plan.
      (5) Except to the extent provided in regulations promulgated by
    the Secretary of the Treasury, a defined contribution plan shall
    not be treated as failing to meet the requirements of this
    subsection merely because of the elimination of a form of
    distribution previously available thereunder. This paragraph shall
    not apply to the elimination of a form of distribution with respect
    to any participant unless - 
        (A) a single sum payment is available to such participant at
      the same time or times as the form of distribution being
      eliminated; and
        (B) such single sum payment is based on the same or greater
      portion of the participant's account as the form of distribution
      being eliminated.
    (h) Notice of significant reduction in benefit accruals
      (1) An applicable pension plan may not be amended so as to
    provide for a significant reduction in the rate of future benefit
    accrual unless the plan administrator provides the notice described
    in paragraph (2) to each applicable individual (and to each
    employee organization representing applicable individuals) and to
    each employer who has an obligation to contribute to the plan.
      (2) The notice required by paragraph (1) shall be written in a
    manner calculated to be understood by the average plan participant
    and shall provide sufficient information (as determined in
    accordance with regulations prescribed by the Secretary of the
    Treasury) to allow applicable individuals to understand the effect
    of the plan amendment. The Secretary of the Treasury may provide a
    simplified form of notice for, or exempt from any notice
    requirement, a plan - 
        (A) which has fewer than 100 participants who have accrued a
      benefit under the plan, or
        (B) which offers participants the option to choose between the
      new benefit formula and the old benefit formula.

      (3) Except as provided in regulations prescribed by the Secretary
    of the Treasury, the notice required by paragraph (1) shall be
    provided within a reasonable time before the effective date of the
    plan amendment.
      (4) Any notice under paragraph (1) may be provided to a person
    designated, in writing, by the person to which it would otherwise
    be provided.
      (5) A plan shall not be treated as failing to meet the
    requirements of paragraph (1) merely because notice is provided
    before the adoption of the plan amendment if no material
    modification of the amendment occurs before the amendment is
    adopted.
      (6)(A) In the case of any egregious failure to meet any
    requirement of this subsection with respect to any plan amendment,
    the provisions of the applicable pension plan shall be applied as
    if such plan amendment entitled all applicable individuals to the
    greater of - 
        (i) the benefits to which they would have been entitled without
      regard to such amendment, or
        (ii) the benefits under the plan with regard to such amendment.

      (B) For purposes of subparagraph (A), there is an egregious
    failure to meet the requirements of this subsection if such failure
    is within the control of the plan sponsor and is - 
        (i) an intentional failure (including any failure to promptly
      provide the required notice or information after the plan
      administrator discovers an unintentional failure to meet the
      requirements of this subsection),
        (ii) a failure to provide most of the individuals with most of
      the information they are entitled to receive under this
      subsection, or
        (iii) a failure which is determined to be egregious under
      regulations prescribed by the Secretary of the Treasury.

      (7) The Secretary of the Treasury may by regulations allow any
    notice under this subsection to be provided by using new
    technologies.
      (8) For purposes of this subsection - 
        (A) The term "applicable individual" means, with respect to any
      plan amendment - 
          (i) each participant in the plan; and
          (ii) any beneficiary who is an alternate payee (within the
        meaning of section 1056(d)(3)(K) of this title) under an
        applicable qualified domestic relations order (within the
        meaning of section 1056(d)(3)(B)(i) of this title),

      whose rate of future benefit accrual under the plan may
      reasonably be expected to be significantly reduced by such plan
      amendment.
        (B) The term "applicable pension plan" means - 
          (i) any defined benefit plan; or
          (ii) an individual account plan which is subject to the
        funding standards of section 412 of title 26.

      (9) For purposes of this subsection, a plan amendment which
    eliminates or reduces any early retirement benefit or retirement-
    type subsidy (within the meaning of subsection (g)(2)(A) of this
    section) shall be treated as having the effect of reducing the rate
    of future benefit accrual.
    (i) Prohibition on benefit increases where plan sponsor is in
      bankruptcy
      (1) In the case of a plan described in paragraph (3) which is
    maintained by an employer that is a debtor in a case under title 11
    or similar Federal or State law, no amendment of the plan which
    increases the liabilities of the plan by reason of - 
        (A) any increase in benefits,
        (B) any change in the accrual of benefits, or
        (C) any change in the rate at which benefits become
      nonforfeitable under the plan,

    with respect to employees of the debtor, shall be effective prior
    to the effective date of such employer's plan of reorganization.
      (2) Paragraph (1) shall not apply to any plan amendment that - 
        (A) the Secretary of the Treasury determines to be reasonable
      and that provides for only de minimis increases in the
      liabilities of the plan with respect to employees of the debtor,
        (B) only repeals an amendment described in section 1082(d)(2)
      of this title,
        (C) is required as a condition of qualification under part I of
      subchapter D of chapter 1 of title 26, or
        (D) was adopted prior to, or pursuant to a collective
      bargaining agreement entered into prior to, the date on which the
      employer became a debtor in a case under title 11 or similar
      Federal or State law.

      (3) This subsection shall apply only to plans (other than
    multiemployer plans) covered under section 1321 of this title for
    which the funding target attainment percentage (as defined in
    section 1083(d)(2) of this title) is less than 100 percent after
    taking into account the effect of the amendment.
      (4) For purposes of this subsection, the term "employer" has the
    meaning set forth in section 1082(b)(1) of this title, without
    regard to section 1082(b)(2) of this title.
    (j) Diversification requirements for certain individual account
      plans
      (1) In general
        An applicable individual account plan shall meet the
      diversification requirements of paragraphs (2), (3), and (4).
      (2) Employee contributions and elective deferrals invested in
        employer securities
        In the case of the portion of an applicable individual's
      account attributable to employee contributions and elective
      deferrals which is invested in employer securities, a plan meets
      the requirements of this paragraph if the applicable individual
      may elect to direct the plan to divest any such securities and to
      reinvest an equivalent amount in other investment options meeting
      the requirements of paragraph (4).
      (3) Employer contributions invested in employer securities
        In the case of the portion of the account attributable to
      employer contributions other than elective deferrals which is
      invested in employer securities, a plan meets the requirements of
      this paragraph if each applicable individual who - 
          (A) is a participant who has completed at least 3 years of
        service, or
          (B) is a beneficiary of a participant described in
        subparagraph (A) or of a deceased participant,

      may elect to direct the plan to divest any such securities and to
      reinvest an equivalent amount in other investment options meeting
      the requirements of paragraph (4).
      (4) Investment options
        (A) In general
          The requirements of this paragraph are met if the plan offers
        not less than 3 investment options, other than employer
        securities, to which an applicable individual may direct the
        proceeds from the divestment of employer securities pursuant to
        this subsection, each of which is diversified and has
        materially different risk and return characteristics.
        (B) Treatment of certain restrictions and conditions
          (i) Time for making investment choices
            A plan shall not be treated as failing to meet the
          requirements of this paragraph merely because the plan limits
          the time for divestment and reinvestment to periodic,
          reasonable opportunities occurring no less frequently than
          quarterly.
          (ii) Certain restrictions and conditions not allowed
            Except as provided in regulations, a plan shall not meet
          the requirements of this paragraph if the plan imposes
          restrictions or conditions with respect to the investment of
          employer securities which are not imposed on the investment
          of other assets of the plan. This subparagraph shall not
          apply to any restrictions or conditions imposed by reason of
          the application of securities laws.
      (5) Applicable individual account plan
        For purposes of this subsection - 
        (A) In general
          The term "applicable individual account plan" means any
        individual account plan (as defined in section 1002(34) of this
        title) which holds any publicly traded employer securities.
        (B) Exception for certain ESOPS
          Such term does not include an employee stock ownership plan
        if - 
            (i) there are no contributions to such plan (or earnings
          thereunder) which are held within such plan and are subject
          to subsection (k) or (m) of section 401 of title 26, and
            (ii) such plan is a separate plan (for purposes of section
          414(l) of title 26) with respect to any other defined benefit
          plan or individual account plan maintained by the same
          employer or employers.
        (C) Exception for one participant plans
          Such term shall not include a one-participant retirement plan
        (as defined in section 1021(i)(8)(B) of this title).
        (D) Certain plans treated as holding publicly traded employer
          securities
          (i) In general
            Except as provided in regulations or in clause (ii), a plan
          holding employer securities which are not publicly traded
          employer securities shall be treated as holding publicly
          traded employer securities if any employer corporation, or
          any member of a controlled group of corporations which
          includes such employer corporation, has issued a class of
          stock which is a publicly traded employer security.
          (ii) Exception for certain controlled groups with publicly
            traded securities
            Clause (i) shall not apply to a plan if - 
              (I) no employer corporation, or parent corporation of an
            employer corporation, has issued any publicly traded
            employer security, and
              (II) no employer corporation, or parent corporation of an
            employer corporation, has issued any special class of stock
            which grants particular rights to, or bears particular
            risks for, the holder or issuer with respect to any
            corporation described in clause (i) which has issued any
            publicly traded employer security.
          (iii) Definitions
            For purposes of this subparagraph, the term - 
              (I) "controlled group of corporations" has the meaning
            given such term by section 1563(a) of title 26, except that
            "50 percent" shall be substituted for "80 percent" each
            place it appears,
              (II) "employer corporation" means a corporation which is
            an employer maintaining the plan, and
              (III) "parent corporation" has the meaning given such
            term by section 424(e) of title 26.
      (6) Other definitions
        For purposes of this paragraph - 
        (A) Applicable individual
          The term "applicable individual" means - 
            (i) any participant in the plan, and
            (ii) any beneficiary who has an account under the plan with
          respect to which the beneficiary is entitled to exercise the
          rights of a participant.
        (B) Elective deferral
          The term "elective deferral" means an employer contribution
        described in section 402(g)(3)(A) of title 26.
        (C) Employer security
          The term "employer security" has the meaning given such term
        by section 1107(d)(1) of this title.
        (D) Employee stock ownership plan
          The term "employee stock ownership plan" has the meaning
        given such term by section 4975(e)(7) of title 26.
        (E) Publicly traded employer securities
          The term "publicly traded employer securities" means employer
        securities which are readily tradable on an established
        securities market.
        (F) Year of service
          The term "year of service" has the meaning given such term by
        section 1053(b)(2) of this title.
      (7) Transition rule for securities attributable to employer
        contributions
        (A) Rules phased in over 3 years
          (i) In general
            In the case of the portion of an account to which paragraph
          (3) applies and which consists of employer securities
          acquired in a plan year beginning before January 1, 2007,
          paragraph (3) shall only apply to the applicable percentage
          of such securities. This subparagraph shall be applied
          separately with respect to each class of securities.
          (ii) Exception for certain participants aged 55 or over
            Clause (i) shall not apply to an applicable individual who
          is a participant who has attained age 55 and completed at
          least 3 years of service before the first plan year beginning
          after December 31, 2005.
        (B) Applicable percentage
          For purposes of subparagraph (A), the applicable percentage
        shall be determined as follows:

    Plan year to which                                    The applicable
    paragraph (3) applies:                                percentage is:
      1st                                                      33     
      2d                                                       66     
      3d                                                       100.   

    (k) Cross reference
          For special rules relating to plan provisions adopted to
        preclude discrimination, see section 1053(c)(2) of this title.