SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Continued Participation Pension Act 
of 1996''.

SEC. 2. CONTINUED PARTICIPATION IN DEFINED BENEFIT PLANS.

    Part 2 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1051 et seq.) is amended by redesignating section 211 as section 
212 and by inserting after section 210 (29 U.S.C. 1060) the following 
new section:

     ``continued participation in defined benefit plans for certain 
                              individuals

    ``Sec. 211. (a) In General.--A defined benefit plan shall provide, 
in accordance with this section, that each qualified beneficiary who 
would lose eligibility to accrue benefits under the plan as a result of 
a qualifying event, may elect, within the election period, continued 
participation under the plan.
    ``(b) Continued Participation.--For purposes of this section, the 
term `continued participation' means continued accrual of benefits by a 
qualified beneficiary in accordance with section 204(b)(1), if the 
following requirements are met:
            ``(1) Determination of service.--A participant shall be 
        treated as having not incurred a break in service with the 
        employer or employers maintaining the plan. The period of 
        continued participation shall be deemed to constitute service 
        with the employer or employers maintaining the plan for the 
        purpose of determining the nonforfeitability of the qualified 
        beneficiary's accrued benefits and for the purpose of 
        determining the accrual of benefits. The period of continued 
        participation shall be deemed to be service with the employer 
        under the terms of the plan or any applicable collective 
        bargaining agreement.
            ``(2) Terms of continued participation.--For purposes of 
        determining the amount of any liability and any obligation of 
        the plan, earnings and forfeitures shall not be included. In 
        the case of a multiemployer plan, any liability of the plan 
        described in this section shall be allocated--
                    ``(A) by the plan in such manner as the sponsor 
                maintaining the plan shall provide; or
                    ``(B) if the sponsor does not so provide, to the 
                last employer employing the person before the 
                qualifying event.
            ``(3) Period of continued participation.--The period of 
        participation shall extend for the period beginning on the date 
        of the qualifying event and ending not earlier than the 
        earliest of the following:
                    ``(A) Maximum required period.--The date on which 
                the participant reaches (or would have reached) normal 
                retirement age under the plan.
                    ``(B) End of plan.--The date on which the employer 
                ceases to provide any defined benefit plan to any 
                employee.
                    ``(C) Failure to pay contribution.--The date on 
                which benefits cease to accrue under the plan by reason 
                of a failure to make timely payment of any contribution 
                required under the plan with respect to the qualified 
                beneficiary.
            ``(4) Contribution requirements.--
                    ``(A) In general.--A qualified beneficiary electing 
                continued participation is liable to the defined 
                benefit plan for funding any obligation of the plan to 
                provide the benefits described in paragraph (1). The 
                plan shall allocate to qualified beneficiaries the 
                amount of applicable contribution attributable to 
                employer contributions and mandatory employee 
                contributions under the plan, in the same manner that 
                employer contributions and mandatory employee 
                contributions are allocated to similarly situated 
                beneficiaries with respect to whom a qualifying event 
                has not occurred. The plan shall provide for benefit 
accruals attributable to voluntary employee contributions only to the 
extent such benefit accruals attributable to such contributions were 
available to the participant prior to the qualifying event. For 
purposes of computing the beneficiary's contributions, the participant 
shall be deemed to have received compensation during the period of 
continued participation, at the rate in effect prior to the occurrence 
of the qualifying event, as if the participant had continued in service 
under the plan at the rate of 1,000 hours of work during any 12-month 
period.
                    ``(B) Limitation.--For any period of continued 
                participation, the contribution made by the qualified 
                beneficiary--
                            ``(i) shall not exceed 102 percent of the 
                        applicable contribution for such period, and
                            ``(ii) may, at the election of the payor, 
                        be made in monthly installments.
                In no event may the plan require the payment of any 
                contribution before the day which is 45 days after the 
                day on which the qualified beneficiary made the initial 
                election for continued participation.
    ``(c) Election Period.--
            ``(1) In general.--The election period--
                    ``(A) begins not later than the date on which 
                benefits accrual would, but for continued participation 
                in accordance with the section, cease, and
                    ``(B) is of at least 90 days' duration.
            ``(2) Effect of election on other beneficiaries.--Except as 
        otherwise specified in an election, any election of continued 
        participation by a qualified beneficiary shall be deemed to 
        include an election of continued participation on behalf of any 
        other qualified beneficiary who would cease to be a beneficiary 
        under the plan by reason of the qualifying event.
    ``(d) Exception for Certain Plans.--Subsection (a) shall not apply 
to any defined benefit plan for any calendar year if all employers 
maintaining such plan normally employed fewer than 20 employees on a 
typical business day during the preceding calendar year.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Applicable contribution.--The applicable contribution 
        for any period of continued participation of qualified 
        beneficiaries shall be equal to the actuarial value of benefit 
        accruals attributable to the period of continued participation, 
        as determined under regulations of the Secretary.
            ``(2) Qualified beneficiary.--The term `qualified 
        beneficiary' means any beneficiary under the plan on the day 
        before the qualifying event, including the participant in the 
        case of a qualifying event described in paragraph (3)(A).
            ``(3) Qualifying event.--The term `qualifying event' means 
        any of the following events occurring within seven years of 
        attainment by the participant of normal retirement age, which, 
        but for the continued participation provided under this 
        section, would result in the cessation of benefit accruals of a 
        qualified beneficiary:
                    ``(A) The termination (other than by reason of such 
                employee's gross misconduct), or reduction of hours, of 
                the participant's employment.
                    ``(B) The death of the participant.''.

SEC. 3. EFFECTIVE DATES.

    (a) General Rule.--This Act shall apply to plan years beginning on 
or after July 1, 1996.
    (b) Special Rule for Collective Bargaining Agreements.--In the case 
of a defined benefit plan maintained pursuant to one or more collective 
bargaining agreements between employee representatives and one or more 
employers ratified before the date of the enactment of this Act, this 
section shall not apply to plan years beginning before the later of--
            (1) the date on which the last of the collective bargaining 
        agreements relating to the plan terminates (determined without 
        regard to any extension thereof agreed to after the date of the 
        enactment of this Act), or
            (2) January 1, 2000.
Continued Participation Pension Act of 1996 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to provide for continued participation under a defined benefit plan for employees who are terminated from employment within seven years of attaining normal retirement age under the plan.
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