Subpart C—Special Rules for Multiemployer Plans
Amendments
1980—
§418. Reorganization status
(a) General rule
A multiemployer plan is in reorganization for a plan year if the plan's reorganization index for that year is greater than zero.
(b) Reorganization index
For purposes of this subpart—
(1) In general
A plan's reorganization index for any plan year is the excess of—
(A) the vested benefits charge for such year, over
(B) the net charge to the funding standard account for such year.
(2) Net charge to funding standard account
The net charge to the funding standard account for any plan year is the excess (if any) of—
(A) the charges to the funding standard account for such year under section 412(b)(2),1 over
(B) the credits to the funding standard account under section 412(b)(3)(B).1
(3) Vested benefits charge
The vested benefits charge for any plan year is the amount which would be necessary to amortize the plan's unfunded vested benefits as of the end of the base plan year in equal annual installments—
(A) over 10 years, to the extent such benefits are attributable to persons in pay status, and
(B) over 25 years, to the extent such benefits are attributable to other participants.
(4) Determination of vested benefits charge
(A) In general
The vested benefits charge for a plan year shall be based on an actuarial valuation of the plan as of the end of the base plan year, adjusted to reflect—
(i) any—
(I) decrease of 5 percent or more in the value of plan assets, or increase of 5 percent or more in the number of persons in pay status, during the period beginning on the first day of the plan year following the base plan year and ending on the adjustment date, or
(II) at the election of the plan sponsor, actuarial valuation of the plan as of the adjustment date or any later date not later than the last day of the plan year for which the determination is being made,
(ii) any change in benefits under the plan which is not otherwise taken into account under this subparagraph and which is pursuant to any amendment—
(I) adopted before the end of the plan year for which the determination is being made, and
(II) effective after the end of the base plan year and on or before the end of the plan year referred to in subclause (I), and
(iii) any other event (including an event described in subparagraph (B)(i)(I)) which, as determined in accordance with regulations prescribed by the Secretary, would substantially increase the plan's vested benefit charge.
(B) Certain changes in benefit levels
(i) In general
In determining the vested benefits charge for a plan year following a plan year in which the plan was not in reorganization, any change in benefits which—
(I) results from the changing of a group of participants from one benefit level to another benefit level under a schedule of plan benefits as a result of changes in a collective bargaining agreement, or
(II) results from any other change in a collective bargaining agreement,
shall not be taken into account except to the extent provided in regulations prescribed by the Secretary.
(ii) Plan in reorganization
Except as otherwise determined by the Secretary, in determining the vested benefits charge for any plan year following any plan year in which the plan was in reorganization, any change in benefits—
(I) described in clause (i)(I), or
(II) described in clause (i)(II) as determined under regulations prescribed by the Secretary,
shall, for purposes of subparagraph (A)(ii), be treated as a change in benefits pursuant to an amendment to a plan.
(5) Base plan year
(A) In general
The base plan year for any plan year is—
(i) if there is a relevant collective bargaining agreement, the last plan year ending at least 6 months before the relevant effective date, or
(ii) if there is no relevant collective bargaining agreement, the last plan year ending at least 12 months before the beginning of the plan year.
(B) Relevant collective bargaining agreement
A relevant collective bargaining agreement is a collective bargaining agreement—
(i) which is in effect for at least 6 months during the plan year, and
(ii) which has not been in effect for more than 36 months as of the end of the plan year.
(C) Relevant effective date
The relevant effective date is the earliest of the effective dates for the relevant collective bargaining agreements.
(D) Adjustment date
The adjustment date is the date which is—
(i) 90 days before the relevant effective date, or
(ii) if there is no relevant effective date, 90 days before the beginning of the plan year.
(6) Person in pay status
The term "person in pay status" means—
(A) a participant or beneficiary on the last day of the base plan year who, at any time during such year, was paid an early, late, normal, or disability retirement benefit (or a death benefit related to a retirement benefit), and
(B) to the extent provided in regulations prescribed by the Secretary, any other person who is entitled to such a benefit under the plan.
(7) Other definitions and special rules
(A) Unfunded vested benefits
The term "unfunded vested benefits" means, in connection with a plan, an amount (determined in accordance with regulations prescribed by the Secretary) equal to—
(i) the value of vested benefits under the plan, less
(ii) the value of the assets of the plan.
(B) Vested benefits
The term "vested benefits" means any nonforfeitable benefit (within the meaning of section 4001(a)(8) of the Employee Retirement Income Security Act of 1974).
(C) Allocation of assets
In determining the plan's unfunded vested benefits, plan assets shall first be allocated to the vested benefits attributable to persons in pay status.
(D) Treatment of certain benefit reductions
The vested benefits charge shall be determined without regard to reductions in accrued benefits under section 418D which are first effective in the plan year.
(E) Withdrawal liability
For purposes of this part, any outstanding claim for withdrawal liability shall not be considered a plan asset, except as otherwise provided in regulations prescribed by the Secretary.
(c) Prohibition of nonannuity payments
Except as provided in regulations prescribed by the Pension Benefit Guaranty Corporation, while a plan is in reorganization a benefit with respect to a participant (other than a death benefit) which is attributable to employer contributions and which has a value of more than $1,750 may not be paid in a form other than an annuity which (by itself or in combination with social security, railroad retirement, or workers' compensation benefits) provides substantially level payments over the life of the participant.
(d) Terminated plans
Any multiemployer plan which terminates under section 4041A(a)(2) of the Employee Retirement Income Security Act of 1974 shall not be considered in reorganization after the last day of the plan year in which the plan is treated as having terminated.
(Added
References in Text
Section 412, referred to in subsec. (b)(2), was amended generally by
Section 4001(a)(8) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (b)(7)(B), is classified to
Section 4041A(a)(2) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (d), is classified to
Effective Date
Section 210 of title II of
"(a) Except as otherwise provided in this section, the amendments made by this title [amending
"(b) Subpart C of part I of subchapter D of
"(1) the date on which the last collective-bargaining agreement providing for employer contributions under the plan, which was in effect on the date of the enactment of this Act [Sept. 26, 1980], expires, without regard to extensions agreed to after such date of enactment, or
"(2) 3 years after the date of the enactment of this Act [Sept. 26, 1980].
"(c) The amendments made by section 209 [enacting
1 See References in Text note below.
§418A. Notice of reorganization and funding requirements
(a) Notice requirement
(1) In general
If—
(A) a multiemployer plan is in reorganization for a plan year, and
(B) section 418B would require an increase in contributions for such plan year,
the plan sponsor shall notify the persons described in paragraph (2) that the plan is in reorganization and that, if contributions to the plan are not increased, accrued benefits under the plan may be reduced or an excise tax may be imposed (or both such reduction and imposition may occur).
(2) Persons to whom notice is to be given
The persons described in this paragraph are—
(A) each employer who has an obligation to contribute under the plan (within the meaning of section 4212(a) of the Employee Retirement Income Security Act of 1974), and
(B) each employee organization which, for purposes of collective bargaining, represents plan participants employed by such an employer.
(3) Overburden credit not taken into account
The determination under paragraph (1)(B) shall be made without regard to the overburden credit provided by section 418C.
(b) Additional requirements
The Pension Benefit Guaranty Corporation may prescribe additional or alternative requirements for assuring, in the case of a plan with respect to which notice is required by subsection (a)(1), that the persons described in subsection (a)(2)—
(1) receive appropriate notice that the plan is in reorganization,
(2) are adequately informed of the implications of reorganization status, and
(3) have reasonable access to information relevant to the plan's reorganization status.
(Added
References in Text
Section 4212(a) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (a)(2)(A), is classified to
§418B. Minimum contribution requirement
(a) Accumulated funding deficiency in reorganization
(1) In general
For any plan year in which a multiemployer plan is in reorganization—
(A) the plan shall continue to maintain its funding standard account, and
(B) the plan's accumulated funding deficiency under section 412(a) 1 for such plan year shall be equal to the excess (if any) of—
(i) the sum of the minimum contribution requirement for such plan year (taking into account any overburden credit under section 418C(a)) plus the plan's accumulated funding deficiency for the preceding plan year (determined under this section if the plan was in reorganization during such plan year or under section 412(a) 1 if the plan was not in reorganization), over
(ii) amounts considered contributed by employers to or under the plan for the plan year (increased by any amount waived under subsection (f) for the plan year).
(2) Treatment of withdrawal liability payments
For purposes of paragraph (1), withdrawal liability payments (whether or not received) which are due with respect to withdrawals before the end of the base plan year shall be considered amounts contributed by the employer to or under the plan if, as of the adjustment date, it was reasonable for the plan sponsor to anticipate that such payments would be made during the plan year.
(b) Minimum contribution requirement
(1) In general
Except as otherwise provided in this section for purposes of this subpart the minimum contribution requirement for a plan year in which a plan is in reorganization is an amount equal to the excess of—
(A) the sum of—
(i) the plan's vested benefits charge for the plan year; and
(ii) the increase in normal cost for the plan year determined under the entry age normal funding method which is attributable to plan amendments adopted while the plan was in reorganization, over
(B) the amount of the overburden credit (if any) determined under section 418C for the plan year.
(2) Adjustment for reductions in contribution base units
If the plan's current contribution base for the plan year is less than the plan's valuation contribution base for the plan year, the minimum contribution requirement for such plan year shall be equal to the product of the amount determined under paragraph (1) (after any adjustment required by this subpart other than this paragraph) multiplied by a fraction—
(A) the numerator of which is the plan's current contribution base for the plan year, and
(B) the denominator of which is the plan's valuation contribution base for the plan year.
(3) Special rule where cash-flow amount exceeds vested benefits charge
(A) In general
If the vested benefits charge for a plan year of a plan in reorganization is less than the plan's cash-flow amount for the plan year, the plan's minimum contribution requirement for the plan year is the amount determined under paragraph (1) (determined before the application of paragraph (2)) after substituting the term "cash-flow amount" for the term "vested benefits charge" in paragraph (1)(A).
(B) Cash-flow amount
For purposes of subparagraph (A), a plan's cash-flow amount for a plan year is an amount equal to—
(i) the amount of the benefits payable under the plan for the base plan year, plus the amount of the plan's administrative expenses for the base plan year, reduced by
(ii) the value of the available plan assets for the base plan year determined under regulations prescribed by the Secretary,
adjusted in a manner consistent with section 418(b)(4).
(c) Current contribution base; valuation contribution base
(1) Current contribution base
For purposes of this subpart, a plan's current contribution base for a plan year is the number of contribution base units with respect to which contributions are required to be made under the plan for that plan year, determined in accordance with regulations prescribed by the Secretary.
(2) Valuation contribution base
(A) In general
Except as provided in subparagraph (B), for purposes of this subpart a plan's valuation contribution base is the number of contribution base units for which contributions were received for the base plan year—
(i) adjusted to reflect declines in the contribution base which have occurred (or could reasonably be anticipated) as of the adjustment date for the plan year referred to in paragraph (1),
(ii) adjusted upward (in accordance with regulations prescribed by the Secretary) for any contribution base reduction in the base plan year caused by a strike or lockout or by unusual events, such as fire, earthquake, or severe weather conditions, and
(iii) adjusted (in accordance with regulations prescribed by the Secretary) for reductions in the contribution base resulting from transfers of liabilities.
(B) Insolvent plans
For any plan year—
(i) in which the plan is insolvent (within the meaning of section 418E(b)(1)), and
(ii) beginning with the first plan year beginning after the expiration of all relevant collective bargaining agreements which were in effect in the plan year in which the plan became insolvent,
the plan's valuation contribution base is the greater of the number of contribution base units for which contributions were received for the first or second plan year preceding the first plan year in which the plan is insolvent, adjusted as provided in clause (ii) or (iii) of subparagraph (A).
(3) Contribution base unit
For purposes of this subpart, the term "contribution base unit" means a unit with respect to which an employer has an obligation to contribute under a multiemployer plan (as defined in regulations prescribed by the Secretary).
(d) Limitation on required increases in rate of employer contributions
(1) In general
Under regulations prescribed by the Secretary, the minimum contribution requirement applicable to any plan for any plan year which is determined under subsection (b) (without regard to subsection (b)(2)) shall not exceed an amount which is equal to the sum of—
(A) the greater of—
(i) the funding standard requirement for such plan year, or
(ii) 107 percent of—
(I) if the plan was not in reorganization in the preceding plan year, the funding standard requirement for such preceding plan year, or
(II) if the plan was in reorganization in the preceding plan year, the sum of the amount determined under this subparagraph for the preceding plan year and the amount (if any) determined under subparagraph (B) for the preceding plan year, plus
(B) if for the plan year a change in benefits is first required to be considered in computing the charges under section 412(b)(2)(A) or (B),1 the sum of—
(i) the increase in normal cost for a plan year determined under the entry age normal funding method due to increases in benefits described in section 418(b)(4)(A)(ii) (determined without regard to section 418(b)(4)(B)(ii)), and
(ii) the amount necessary to amortize in equal annual installments the increase in the value of vested benefits under the plan due to increases in benefits described in clause (i) over—
(I) 10 years, to the extent such increase in value is attributable to persons in pay status, or
(II) 25 years, to the extent such increase in value is attributable to other participants.
(2) Funding standard requirement
For purposes of paragraph (1), the funding standard requirement for any plan year is an amount equal to the net charge to the funding standard account for such plan year (as defined in section 418(b)(2)).
(3) Special rule for certain plans
(A) In general
In the case of a plan described in section 4216(b) of the Employee Retirement Income Security Act of 1974, if a plan amendment which increases benefits is adopted after January 1, 1980—
(i) paragraph (1) shall apply only if the plan is a plan described in subparagraph (B), and
(ii) the amount under paragraph (1) shall be determined without regard to subparagraph (1)(B).
(B) Eligible plans
A plan is described in this subparagraph if—
(i) the rate of employer contributions under the plan for the first plan year beginning on or after the date on which an amendment increasing benefits is adopted, multiplied by the valuation contribution base for that plan year, equals or exceeds the sum of—
(I) the amount that would be necessary to amortize fully, in equal annual installments, by July 1, 1986, the unfunded vested benefits attributable to plan provisions in effect on July 1, 1977 (determined as of the last day of the base plan year); and
(II) the amount that would be necessary to amortize fully, in equal annual installments, over the period described in subparagraph (C), beginning with the first day of the first plan year beginning on or after the date on which the amendment is adopted, the unfunded vested benefits (determined as of the last day of the base plan year) attributable to each plan amendment after July 1, 1977; and
(ii) the rate of employer contributions for each subsequent plan year is not less than the lesser of—
(I) the rate which when multiplied by the valuation contribution base for that subsequent plan year produces the annual amount that would be necessary to complete the amortization schedule described in clause (i), or
(II) the rate for the plan year immediately preceding such subsequent plan year, plus 5 percent of such rate.
(C) Period
The period determined under this subparagraph is the lesser of—
(i) 12 years, or
(ii) a period equal in length to the average of the remaining expected lives of all persons receiving benefits under the plan.
(4) Exception in case of certain benefit increases
Paragraph (1) shall not apply with respect to a plan, other than a plan described in paragraph (3), for the period of consecutive plan years in each of which the plan is in reorganization, beginning with a plan year in which occurs the earlier of the date of the adoption or the effective date of any amendment of the plan which increases benefits with respect to service performed before the plan year in which the adoption of the amendment occurred.
(e) Certain retroactive plan amendments
In determining the minimum contribution requirement with respect to a plan for a plan year under subsection (b), the vested benefits charge may be adjusted to reflect a plan amendment reducing benefits under section 412(c)(8).1
(f) Waiver of accumulated funding deficiency
(1) In general
The Secretary may waive any accumulated funding deficiency under this section in accordance with the provisions of section 412(d)(1).1
(2) Treatment of waiver
Any waiver under paragraph (1) shall not be treated as a waived funding deficiency (within the meaning of section 412(d)(3)).1
(g) Actuarial assumptions must be reasonable
For purposes of making any determination under this subpart, the requirements of section 412(c)(3) 1 shall apply.
(Added
References in Text
Section 412, referred to in subsecs. (a)(1)(B), (d)(1)(B), and (e) to (g), was amended generally by
Section 4216(b) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (d)(3)(A), is classified to
1 See References in Text note below.
§418C. Overburden credit against minimum contribution requirement
(a) General rule
For purposes of determining the contribution under section 418B (before the application of section 418B(b)(2) or (d)), the plan sponsor of a plan which is overburdened for the plan year shall apply an overburden credit against the plan's minimum contribution requirement for the plan year (determined without regard to section 418B(b)(2) or (d) and without regard to this section).
(b) Definition of overburdened plan
A plan is overburdened for a plan year if—
(1) the average number of pay status participants under the plan in the base plan year exceeds the average of the number of active participants in the base plan year and the 2 plan years preceding the base plan year, and
(2) the rate of employer contributions under the plan equals or exceeds the greater of—
(A) such rate for the preceding plan year, or
(B) such rate for the plan year preceding the first year in which the plan is in reorganization.
(c) Amount of overburden credit
The amount of the overburden credit for a plan year is the product of—
(1) one-half of the average guaranteed benefit paid for the base plan year, and
(2) the overburden factor for the plan year.
The amount of the overburden credit for a plan year shall not exceed the amount of the minimum contribution requirement for such year (determined without regard to this section).
(d) Overburden factor
For purposes of this section, the overburden factor of a plan for the plan year is an amount equal to—
(1) the average number of pay status participants for the base plan year, reduced by
(2) the average of the number of active participants for the base plan year and for each of the 2 plan years preceding the base plan year.
(e) Definitions
For purposes of this section—
(1) Pay status participant
The term "pay status participant" means, with respect to a plan, a participant receiving retirement benefits under the plan.
(2) Number of active participants
The number of active participants for a plan year shall be the sum of—
(A) the number of active employees who are participants in the plan and on whose behalf contributions are required to be made during the plan year;
(B) the number of active employees who are not participants in the plan but who are in an employment unit covered by a collective bargaining agreement which requires the employees' employer to contribute to the plan unless service in such employment unit was never covered under the plan or a predecessor thereof, and
(C) the total number of active employees attributed to employers who made payments to the plan for the plan year of withdrawal liability pursuant to part 1 of subtitle E of title IV of the Employee Retirement Income Security Act of 1974, determined by dividing—
(i) the total amount of such payments, by
(ii) the amount equal to the total contributions received by the plan during the plan year divided by the average number of active employees who were participants in the plan during the plan year.
The Secretary shall by regulations provide alternative methods of determining active participants where (by reason of irregular employment, contributions on a unit basis, or otherwise) this paragraph does not yield a representative basis for determining the credit.
(3) Average number
The term "average number" means, with respect to pay status participants for a plan year, a number equal to one-half the sum of—
(A) the number with respect to the plan as of the beginning of the plan year, and
(B) the number with respect to the plan as of the end of the plan year.
(4) Average guaranteed benefit
The average guaranteed benefit paid is 12 times the average monthly pension payment guaranteed under section 4022A(c)(1) of the Employee Retirement Income Security Act of 1974 determined under the provisions of the plan in effect at the beginning of the first plan year in which the plan is in reorganization and without regard to section 4022A(c)(2).
(5) First year in reorganization
The first year in which the plan is in reorganization is the first of a period of 1 or more consecutive plan years in which the plan has been in reorganization not taking into account any plan years the plan was in reorganization prior to any period of 3 or more consecutive plan years in which the plan was not in reorganization.
(f) No overburden credit in case of certain reductions in contributions
(1) In general
Notwithstanding any other provision of this section, a plan is not eligible for an overburden credit for a plan year if the Secretary finds that the plan's current contribution base for any plan year was reduced, without a corresponding reduction in the plan's unfunded vested benefits attributable to pay status participants, as a result of a change in an agreement providing for employer contributions under the plan.
(2) Treatment of certain withdrawals
For purposes of paragraph (1), a complete or partial withdrawal of an employer (within the meaning of part 1 of subtitle E of title IV of the Employee Retirement Income Security Act of 1974) does not impair a plan's eligibility for an overburden credit, unless the Secretary finds that a contribution base reduction described in paragraph (1) resulted from a transfer of liabilities to another plan in connection with the withdrawal.
(g) Mergers
Notwithstanding any other provision of this section, if 2 or more multiemployer plans merge, the amount of the overburden credit which may be applied under this section with respect to the plan resulting from the merger for any of the 3 plan years ending after the effective date of the merger shall not exceed the sum of the used overburden credit for each of the merging plans for its last plan year ending before the effective date of the merger. For purposes of the preceding sentence, the used overburden credit is that portion of the credit which does not exceed the excess of the minimum contribution requirement determined without regard to any overburden credit under this section over the employer contributions required under the plan.
(Added
References in Text
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (e)(2)(C), (4), and (f)(2), is
§418D. Adjustments in accrued benefits
(a) Adjustments in accrued benefits
(1) In general
Notwithstanding section 411, a multiemployer plan in reorganization may be amended, in accordance with this section, to reduce or eliminate accrued benefits attributable to employer contributions which, under section 4022A(b) of the Employee Retirement Income Security Act of 1974, are not eligible for the Pension Benefit Guaranty Corporation's guarantee. The preceding sentence shall only apply to accrued benefits under plan amendments (or plans) adopted after March 26, 1980, or under collective bargaining agreement entered into after March 26, 1980.
(2) Adjustment of vested benefits charge
In determining the minimum contribution requirement with respect to a plan for a plan year under section 418B(b), the vested benefits charge may be adjusted to reflect a plan amendment reducing benefits under this section or section 412(c)(8),1 but only if the amendment is adopted and effective no later than 2½ months after the end of the plan year, or within such extended period as the Secretary may prescribe by regulations under section 412(c)(10).1
(b) Limitation on reduction
(1) In general
Accrued benefits may not be reduced under this section unless—
(A) notice has been given, at least 6 months before the first day of the plan year in which the amendment reducing benefits is adopted, to—
(i) plan participants and beneficiaries,
(ii) each employer who has an obligation to contribute (within the meaning of section 4212(a) of the Employee Retirement Income Security Act of 1974) under the plan, and
(iii) each employee organization which, for purposes of collective bargaining, represents plan participants employed by such an employer,
that the plan is in reorganization and that, if contributions under the plan are not increased, accrued benefits under the plan will be reduced or an excise tax will be imposed on employers;
(B) in accordance with regulations prescribed by the Secretary—
(i) any category of accrued benefits is not reduced with respect to inactive participants to a greater extent proportionally that such category of accrued benefits is reduced with respect to active participants,
(ii) benefits attributable to employer contributions other than accrued benefits and the rate of future benefit accruals are reduced at least to an extent equal to the reduction in accrued benefits of inactive participants, and
(iii) in any case in which the accrued benefit of a participant or beneficiary is reduced by changing the benefit form or the requirements which the participant or beneficiary must satisfy to be entitled to the benefit, such reduction is not applicable to—
(I) any participant or beneficiary in pay status on the effective date of the amendment, or the beneficiary of such a participant, or
(II) any participant who has attained normal retirement age, or who is within 5 years of attaining normal retirement age, on the effective date of the amendment, or the beneficiary of any such participant; and
(C) the rate of employer contributions for the plan year in which the amendment becomes effective and for all succeeding plan years in which the plan is in reorganization equals or exceeds the greater of—
(i) the rate of employer contributions, calculated without regard to the amendment, for the plan year in which the amendment becomes effective, or
(ii) the rate of employer contributions for the plan year preceding the plan year in which the amendment becomes effective.
(2) Information required to be included in notice
The plan sponsors shall include in any notice required to be sent to plan participants and beneficiaries under paragraph (1) information as to the rights and remedies of plan participants and beneficiaries as well as how to contact the Department of Labor for further information and assistance where appropriate.
(c) No recoupment
A plan may not recoup a benefit payment which is in excess of the amount payable under the plan because of an amendment retroactively reducing accrued benefits under this section.
(d) Benefit increases under multiemployer plan in reorganization
(1) Restoration of previously reduced benefits
(A) In general
A plan which has been amended to reduce accrued benefits under this section may be amended to increase or restore accrued benefits, or the rate of future benefit accruals, only if the plan is amended to restore levels of previously reduced accrued benefits of inactive participants and of participants who are within 5 years of attaining normal retirement age to at least the same extent as any such increase in accrued benefits or in the rate of future benefit accruals.
(B) Benefit increases and benefit restorations
For purposes of this subsection, in the case of a plan which has been amended under this section to reduce accrued benefits—
(i) an increase in a benefit, or in the rate of future benefit accruals, shall be considered a benefit increase to the extent that the benefit, or the accrual rate, is thereby increased above the highest benefit level, or accrual rate, which was in effect under the terms of the plan before the effective date of the amendment reducing accrued benefits, and
(ii) an increase in a benefit, or in the rate of future benefit accruals, shall be considered a benefit restoration to the extent that the benefit, or the accrual rate, is not thereby increased above the highest benefit level, or accrual rate, which was in effect under the terms of the plan immediately before the effective date of the amendment reducing accrued benefits.
(2) Uniformity in benefit restoration
If a plan is amended to partially restore previously reduced accrued benefit levels, or the rate of future benefit accruals, the benefits of inactive participants shall be restored in at least the same proportions as other accrued benefits which are restored.
(3) No benefit increases in year of benefit reduction
No benefit increase under a plan may take effect in a plan year in which an amendment reducing accrued benefits under the plan, in accordance with this section, is adopted or first becomes effective.
(4) Retroactive payments
A plan is not required to make retroactive benefit payments with respect to that portion of an accrued benefit which was reduced and subsequently restored under this section.
(e) Inactive participant
For purposes of this section, the term "inactive participant" means a person not in covered service under the plan who is in pay status under the plan or who has a nonforfeitable benefit under the plan.
(f) Regulations
The Secretary may prescribe rules under which, notwithstanding any other provision of this section, accrued benefit reductions or benefit increases for different participant groups may be varied equitably to reflect variations in contribution rates and other relevant factors reflecting differences in negotiated levels of financial support for plan benefit obligations.
(Added
References in Text
Section 4022A(b) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (a)(1), is classified to
Section 412, referred to in subsec. (a)(2), was amended generally by
Section 4212(a) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (b)(1)(A)(ii), is classified to
1 See References in Text note below.
§418E. Insolvent plans
(a) Suspension of certain benefit payments
Notwithstanding section 411, in any case in which benefit payments under an insolvent multiemployer plan exceed the resource benefit level, any such payments of benefits which are not basic benefits shall be suspended, in accordance with this section, to the extent necessary to reduce the sum of such payments and the payments of such basic benefits to the greater of the resource benefit level or the level of basic benefits, unless an alternative procedure is prescribed by the Pension Benefit Guaranty Corporation under section 4022A(g)(5) of the Employee Retirement Income Security Act of 1974.
(b) Definitions
For purposes of this section, for a plan year—
(1) Insolvency
A multiemployer plan is insolvent if the plan's available resources are not sufficient to pay benefits under the plan when due for the plan year, or if the plan is determined to be insolvent under subsection (d).
(2) Resource benefit level
The term "resource benefit level" means the level of monthly benefits determined under subsections (c)(1) and (3) and (d)(3) to be the highest level which can be paid out of the plan's available resources.
(3) Available resources
The term "available resources" means the plan's cash, marketable assets, contributions, withdrawal liability payments, and earnings, less reasonable administrative expenses and amounts owed for such plan year to the Pension Benefit Guaranty Corporation under section 4261(b)(2) of the Employee Retirement Income Security Act of 1974.
(4) Insolvency year
The term "insolvency year" means a plan year in which a plan is insolvent.
(c) Benefit payments under insolvent plans
(1) Determination of resource benefit level
The plan sponsor of a plan in reorganization shall determine in writing the plan's resource benefit level for each insolvency year, based on the plan sponsor's reasonable projection of the plan's available resources and the benefits payable under the plan.
(2) Uniformity of the benefit suspension
The suspension of benefit payments under this section shall, in accordance with regulations prescribed by the Secretary, apply in substantially uniform proportions to the benefits of all persons in pay status (within the meaning of section 418(b)(6)) under the plan, except that the Secretary may prescribe rules under which benefit suspensions for different participant groups may be varied equitably to reflect variations in contribution rates and other relevant factors including differences in negotiated levels of financial support for plan benefit obligations.
(3) Resource benefit level below level of basic benefits
Notwithstanding paragraph (2), if a plan sponsor determines in writing a resource benefit level for a plan year which is below the level of basic benefits, the payment of all benefits other than basic benefits shall be suspended for that plan year.
(4) Excess resources
(A) In general
If, by the end of an insolvency year, the plan sponsor determines in writing that the plan's available resources in that insolvency year could have supported benefit payments above the resource benefit level for that insolvency year, the plan sponsor shall distribute the excess resources to the participants and beneficiaries who received benefit payments from the plan in that insolvency year, in accordance with regulations prescribed by the Secretary.
(B) Excess resources
For purposes of this paragraph, the term "excess resources" means available resources above the amount necessary to support the resource benefit level, but no greater than the amount necessary to pay benefits for the plan year at the benefit levels under the plan.
(5) Unpaid benefits
If, by the end of an insolvency year, any benefit has not been paid at the resource benefit level, amounts up to the resource benefit level which were unpaid shall be distributed to the participants and beneficiaries, in accordance with regulations prescribed by the Secretary, to the extent possible taking into account the plan's total available resources in that insolvency year.
(6) Retroactive payments
Except as provided in paragraph (4) or (5), a plan is not required to make retroactive benefit payments with respect to that portion of a benefit which was suspended under this section.
(d) Plan sponsor determination
(1) Triennial test
As of the end of the first plan year in which a plan is in reorganization, and at least every 3 plan years thereafter (unless the plan is no longer in reorganization), the plan sponsor shall compare the value of plan assets (determined in accordance with section 418B(b)(3)(B)(ii)) for that plan year with the total amount of benefit payments made under the plan for that plan year. Unless the plan sponsor determines that the value of plan assets exceeds 3 times the total amount of benefit payments, the plan sponsor shall determine whether the plan will be insolvent in any of the next 5 plan years. If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the comparison under this paragraph at least annually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years.
(2) Determination of insolvency
If, at any time, the plan sponsor of a plan in reorganization reasonably determines, taking into account the plan's recent and anticipated financial experience, that the plan's available resources are not sufficient to pay benefits under the plan when due for the next plan year, the plan sponsor shall make such determination available to interested parties.
(3) Determination of resource benefit level
The plan sponsor of a plan in reorganization shall determine in writing for each insolvency year the resource benefit level and the level of basic benefits no later than 3 months before the insolvency year.
(e) Notice requirements
(1) Impending insolvency
If the plan sponsor of a plan in reorganization determines under subsection (d)(1) or (2) that the plan may become insolvent (within the meaning of subsection (b)(1)), the plan sponsor shall—
(A) notify the Secretary, the Pension Benefit Guaranty Corporation, the parties described in section 418A(a)(2), and the plan participants and beneficiaries of that determination, and
(B) inform the parties described in section 418A(a)(2) and the plan participants and beneficiaries that if insolvency occurs certain benefit payments will be suspended, but that basic benefits will continue to be paid.
(2) Resource benefit level
No later than 2 months before the first day of each insolvency year, the plan sponsor of a plan in reorganization shall notify the Secretary, the Pension Benefit Guaranty Corporation, the parties described in section 418A(a)(2), and the plan participants and beneficiaries of the resource benefit level determined in writing for that insolvency year.
(3) Potential need for financial assistance
In any case in which the plan sponsor anticipates that the resource benefit level for an insolvency year may not exceed the level of basic benefits, the plan sponsor shall notify the Pension Benefit Guaranty Corporation.
(4) Regulations
Notice required by this subsection shall be given in accordance with regulations prescribed by the Pension Benefit Guaranty Corporation, except that notice to the Secretary shall be given in accordance with regulations prescribed by the Secretary.
(5) Corporation may prescribe time
The Pension Benefit Guaranty Corporation may prescribe a time other than the time prescribed by this section for the making of a determination or the filing of a notice under this section.
(f) Financial assistance
(1) Permissive application
If the plan sponsor of an insolvent plan for which the resource benefit level is above the level of basic benefits anticipates that, for any month in an insolvency year, the plan will not have funds sufficient to pay basic benefits, the plan sponsor may apply for financial assistance from the Pension Benefit Guaranty Corporation under section 4261 of the Employee Retirement Income Security Act of 1974.
(2) Mandatory application
A plan sponsor who has determined a resource benefit level for an insolvency year which is below the level of basic benefits shall apply for financial assistance from the Pension Benefit Guaranty Corporation under section 4261 of the Employee Retirement Income Security Act of 1974.
(g) Financial assistance
Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount, shall be taken into account under this subpart in such manner as determined by the Secretary.
(Added
References in Text
Section 4022A(g)(5) of the Employee Retirement Income Security Act of 1974, referred to in subsec. (a), is classified to
Section 4261 of the Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(3) and (f), is classified to
Amendments
2006—Subsec. (d)(1).