Subpart A—Minimum Funding Standards for Pension Plans
Editorial Notes
Amendments
2018—
2006—
§430. Minimum funding standards for single-employer defined benefit pension plans
(a) Minimum required contribution
For purposes of this section and section 412(a)(2)(A), except as provided in subsection (f), the term "minimum required contribution" means, with respect to any plan year of a defined benefit plan which is not a multiemployer plan—
(1) in any case in which the value of plan assets of the plan (as reduced under subsection (f)(4)(B)) is less than the funding target of the plan for the plan year, the sum of—
(A) the target normal cost of the plan for the plan year,
(B) the shortfall amortization charge (if any) for the plan for the plan year determined under subsection (c), and
(C) the waiver amortization charge (if any) for the plan for the plan year as determined under subsection (e);
(2) in any case in which the value of plan assets of the plan (as reduced under subsection (f)(4)(B)) equals or exceeds the funding target of the plan for the plan year, the target normal cost of the plan for the plan year reduced (but not below zero) by such excess.
(b) Target normal cost
For purposes of this section:
(1) In general
Except as provided in subsection (i)(2) with respect to plans in at-risk status, the term "target normal cost" means, for any plan year, the excess of—
(A) the sum of—
(i) the present value of all benefits which are expected to accrue or to be earned under the plan during the plan year, plus
(ii) the amount of plan-related expenses expected to be paid from plan assets during the plan year, over
(B) the amount of mandatory employee contributions expected to be made during the plan year.
(2) Special rule for increase in compensation
For purposes of this subsection, if any benefit attributable to services performed in a preceding plan year is increased by reason of any increase in compensation during the current plan year, the increase in such benefit shall be treated as having accrued during the current plan year.
(c) Shortfall amortization charge
(1) In general
For purposes of this section, the shortfall amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization installments for such plan year with respect to any shortfall amortization base which has not been fully amortized under this subsection.
(2) Shortfall amortization installment
For purposes of paragraph (1)—
(A) Determination
The shortfall amortization installments are the amounts necessary to amortize the shortfall amortization base of the plan for any plan year in level annual installments over the 7-plan-year period beginning with such plan year.
(B) Shortfall installment
The shortfall amortization installment for any plan year in the 7-plan-year period under subparagraph (A) with respect to any shortfall amortization base is the annual installment determined under subparagraph (A) for that year for that base.
(C) Segment rates
In determining any shortfall amortization installment under this paragraph, the plan sponsor shall use the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2).
(D) Special election for eligible plan years
(i) In general
If a plan sponsor elects to apply this subparagraph with respect to the shortfall amortization base of a plan for any eligible plan year (in this subparagraph and paragraph (7) referred to as an "election year"), then, notwithstanding subparagraphs (A) and (B)—
(I) the shortfall amortization installments with respect to such base shall be determined under clause (ii) or (iii), whichever is specified in the election, and
(II) the shortfall amortization installment for any plan year in the 9-plan-year period described in clause (ii) or the 15-plan-year period described in clause (iii), respectively, with respect to such shortfall amortization base is the annual installment determined under the applicable clause for that year for that base.
(ii) 2 plus 7 amortization schedule
The shortfall amortization installments determined under this clause are—
(I) in the case of the first 2 plan years in the 9-plan-year period beginning with the election year, interest on the shortfall amortization base of the plan for the election year (determined using the effective interest rate for the plan for the election year), and
(II) in the case of the last 7 plan years in such 9-plan-year period, the amounts necessary to amortize the remaining balance of the shortfall amortization base of the plan for the election year in level annual installments over such last 7 plan years (using the segment rates under subparagraph (C) for the election year).
(iii) 15-year amortization
The shortfall amortization installments determined under this subparagraph are the amounts necessary to amortize the shortfall amortization base of the plan for the election year in level annual installments over the 15-plan-year period beginning with the election year (using the segment rates under subparagraph (C) for the election year).
(iv) Election
(I) In general
The plan sponsor of a plan may elect to have this subparagraph apply to not more than 2 eligible plan years with respect to the plan, except that in the case of a plan described in section 106 of the Pension Protection Act of 2006, the plan sponsor may only elect to have this subparagraph apply to a plan year beginning in 2011.
(II) Amortization schedule
Such election shall specify whether the amortization schedule under clause (ii) or (iii) shall apply to an election year, except that if a plan sponsor elects to have this subparagraph apply to 2 eligible plan years, the plan sponsor must elect the same schedule for both years.
(III) Other rules
Such election shall be made at such time, and in such form and manner, as shall be prescribed by the Secretary, and may be revoked only with the consent of the Secretary. The Secretary shall, before granting a revocation request, provide the Pension Benefit Guaranty Corporation an opportunity to comment on the conditions applicable to the treatment of any portion of the election year shortfall amortization base that remains unamortized as of the revocation date.
(v) Eligible plan year
For purposes of this subparagraph, the term "eligible plan year" means any plan year beginning in 2008, 2009, 2010, or 2011, except that a plan year shall only be treated as an eligible plan year if the due date under subsection (j)(1) for the payment of the minimum required contribution for such plan year occurs on or after the date of the enactment of this subparagraph.
(vi) Reporting
A plan sponsor of a plan who makes an election under clause (i) shall—
(I) give notice of the election to participants and beneficiaries of the plan, and
(II) inform the Pension Benefit Guaranty Corporation of such election in such form and manner as the Director of the Pension Benefit Guaranty Corporation may prescribe.
(vii) Increases in required installments in certain cases
For increases in required contributions in cases of excess compensation or extraordinary dividends or stock redemptions, see paragraph (7).
(3) Shortfall amortization base
For purposes of this section, the shortfall amortization base of a plan for a plan year is—
(A) the funding shortfall of such plan for such plan year, minus
(B) the present value (determined using the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of the shortfall amortization installments and waiver amortization installments which have been determined for such plan year and any succeeding plan year with respect to the shortfall amortization bases and waiver amortization bases of the plan for any plan year preceding such plan year.
(4) Funding shortfall
For purposes of this section, the funding shortfall of a plan for any plan year is the excess (if any) of—
(A) the funding target of the plan for the plan year, over
(B) the value of plan assets of the plan (as reduced under subsection (f)(4)(B)) for the plan year which are held by the plan on the valuation date.
(5) Exemption from new shortfall amortization base
In any case in which the value of plan assets of the plan (as reduced under subsection (f)(4)(A)) is equal to or greater than the funding target of the plan for the plan year, the shortfall amortization base of the plan for such plan year shall be zero.
(6) Early deemed amortization upon attainment of funding target
In any case in which the funding shortfall of a plan for a plan year is zero, for purposes of determining the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero.
(7) Increases in alternate required installments in cases of excess compensation or extraordinary dividends or stock redemptions
(A) In general
If there is an installment acceleration amount with respect to a plan for any plan year in the restriction period with respect to an election year under paragraph (2)(D), then the shortfall amortization installment otherwise determined and payable under such paragraph for such plan year shall, subject to the limitation under subparagraph (B), be increased by such amount.
(B) Total installments limited to shortfall base
Subject to rules prescribed by the Secretary, if a shortfall amortization installment with respect to any shortfall amortization base for an election year is required to be increased for any plan year under subparagraph (A)—
(i) such increase shall not result in the amount of such installment exceeding the present value of such installment and all succeeding installments with respect to such base (determined without regard to such increase but after application of clause (ii)), and
(ii) subsequent shortfall amortization installments with respect to such base shall, in reverse order of the otherwise required installments, be reduced to the extent necessary to limit the present value of such subsequent shortfall amortization installments (after application of this paragraph) to the present value of the remaining unamortized shortfall amortization base.
(C) Installment acceleration amount
For purposes of this paragraph—
(i) In general
The term "installment acceleration amount" means, with respect to any plan year in a restriction period with respect to an election year, the sum of—
(I) the aggregate amount of excess employee compensation determined under subparagraph (D) with respect to all employees for the plan year, plus
(II) the aggregate amount of extraordinary dividends and redemptions determined under subparagraph (E) for the plan year.
(ii) Annual limitation
The installment acceleration amount for any plan year shall not exceed the excess (if any) of—
(I) the sum of the shortfall amortization installments for the plan year and all preceding plan years in the amortization period elected under paragraph (2)(D) with respect to the shortfall amortization base with respect to an election year, determined without regard to paragraph (2)(D) and this paragraph, over
(II) the sum of the shortfall amortization installments for such plan year and all such preceding plan years, determined after application of paragraph (2)(D) (and in the case of any preceding plan year, after application of this paragraph).
(iii) Carryover of excess installment acceleration amounts
(I) In general
If the installment acceleration amount for any plan year (determined without regard to clause (ii)) exceeds the limitation under clause (ii), then, subject to subclause (II), such excess shall be treated as an installment acceleration amount with respect to the succeeding plan year.
(II) Cap to apply
If any amount treated as an installment acceleration amount under subclause (I) or this subclause with respect any succeeding plan year, when added to other installment acceleration amounts (determined without regard to clause (ii)) with respect to the plan year, exceeds the limitation under clause (ii), the portion of such amount representing such excess shall be treated as an installment acceleration amount with respect to the next succeeding plan year.
(III) Limitation on years to which amounts carried for
No amount shall be carried under subclause (I) or (II) to a plan year which begins after the first plan year following the last plan year in the restriction period (or after the second plan year following such last plan year in the case of an election year with respect to which 15-year amortization was elected under paragraph (2)(D)).
(IV) Ordering rules
For purposes of applying subclause (II), installment acceleration amounts for the plan year (determined without regard to any carryover under this clause) shall be applied first against the limitation under clause (ii) and then carryovers to such plan year shall be applied against such limitation on a first-in, first-out basis.
(D) Excess employee compensation
For purposes of this paragraph—
(i) In general
The term "excess employee compensation" means, with respect to any employee for any plan year, the excess (if any) of—
(I) the aggregate amount includible in income under this chapter for remuneration during the calendar year in which such plan year begins for services performed by the employee for the plan sponsor (whether or not performed during such calendar year), over
(II) $1,000,000.
(ii) Amounts set aside for nonqualified deferred compensation
If during any calendar year assets are set aside or reserved (directly or indirectly) in a trust (or other arrangement as determined by the Secretary), or transferred to such a trust or other arrangement, by a plan sponsor for purposes of paying deferred compensation of an employee under a nonqualified deferred compensation plan (as defined in section 409A) of the plan sponsor, then, for purposes of clause (i), the amount of such assets shall be treated as remuneration of the employee includible in income for the calendar year unless such amount is otherwise includible in income for such year. An amount to which the preceding sentence applies shall not be taken into account under this paragraph for any subsequent calendar year.
(iii) Only remuneration for certain post-2009 services counted
Remuneration shall be taken into account under clause (i) only to the extent attributable to services performed by the employee for the plan sponsor after February 28, 2010.
(iv) Exception for certain equity payments
(I) In general
There shall not be taken into account under clause (i)(I) any amount includible in income with respect to the granting after February 28, 2010, of service recipient stock (within the meaning of section 409A) that, upon such grant, is subject to a substantial risk of forfeiture (as defined under section 83(c)(1)) for at least 5 years from the date of such grant.
(II) Secretarial authority
The Secretary may by regulation provide for the application of this clause in the case of a person other than a corporation.
(v) Other exceptions
The following amounts includible in income shall not be taken into account under clause (i)(I):
(I) Commissions
Any remuneration payable on a commission basis solely on account of income directly generated by the individual performance of the individual to whom such remuneration is payable.
(II) Certain payments under existing contracts
Any remuneration consisting of nonqualified deferred compensation, restricted stock, stock options, or stock appreciation rights payable or granted under a written binding contract that was in effect on March 1, 2010, and which was not modified in any material respect before such remuneration is paid.
(vi) Self-employed individual treated as employee
The term "employee" includes, with respect to a calendar year, a self-employed individual who is treated as an employee under section 401(c) for the taxable year ending during such calendar year, and the term "compensation" shall include earned income of such individual with respect to such self-employment.
(vii) Indexing of amount
In the case of any calendar year beginning after 2010, the dollar amount under clause (i)(II) shall be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting "calendar year 2009" for "calendar year 2016" in subparagraph (A)(ii) thereof.
If the amount of any increase under clause (i) is not a multiple of $1,000, such increase shall be rounded to the next lowest multiple of $1,000.
(E) Extraordinary dividends and redemptions
(i) In general
The amount determined under this subparagraph for any plan year is the excess (if any) of the sum of the dividends declared during the plan year by the plan sponsor plus the aggregate amount paid for the redemption of stock of the plan sponsor redeemed during the plan year over the greater of—
(I) the adjusted net income (within the meaning of section 4043 of the Employee Retirement Income Security Act of 1974) of the plan sponsor for the preceding plan year, determined without regard to any reduction by reason of interest, taxes, depreciation, or amortization, or
(II) in the case of a plan sponsor that determined and declared dividends in the same manner for at least 5 consecutive years immediately preceding such plan year, the aggregate amount of dividends determined and declared for such plan year using such manner.
(ii) Only certain post-2009 dividends and redemptions counted
For purposes of clause (i), there shall only be taken into account dividends declared, and redemptions occurring, after February 28, 2010.
(iii) Exception for intra-group dividends
Dividends paid by one member of a controlled group (as defined in section 412(d)(3)) to another member of such group shall not be taken into account under clause (i).
(iv) Exception for certain redemptions
Redemptions that are made pursuant to a plan maintained with respect to employees, or that are made on account of the death, disability, or termination of employment of an employee or shareholder, shall not be taken into account under clause (i).
(v) Exception for certain preferred stock
(I) In general
Dividends and redemptions with respect to applicable preferred stock shall not be taken into account under clause (i) to the extent that dividends accrue with respect to such stock at a specified rate in all events and without regard to the plan sponsor's income, and interest accrues on any unpaid dividends with respect to such stock.
(II) Applicable preferred stock
For purposes of subclause (I), the term "applicable preferred stock" means preferred stock which was issued before March 1, 2010 (or which was issued after such date and is held by an employee benefit plan subject to the provisions of title I of the Employee Retirement Income Security Act of 1974).
(F) Other definitions and rules
For purposes of this paragraph—
(i) Plan sponsor
The term "plan sponsor" includes any member of the plan sponsor's controlled group (as defined in section 412(d)(3)).
(ii) Restriction period
The term "restriction period" means, with respect to any election year—
(I) except as provided in subclause (II), the 3-year period beginning with the election year (or, if later, the first plan year beginning after December 31, 2009), and
(II) if the plan sponsor elects 15-year amortization for the shortfall amortization base for the election year, the 5-year period beginning with the election year (or, if later, the first plan year beginning after December 31, 2009).
(iii) Elections for multiple plans
If a plan sponsor makes elections under paragraph (2)(D) with respect to 2 or more plans, the Secretary shall provide rules for the application of this paragraph to such plans, including rules for the ratable allocation of any installment acceleration amount among such plans on the basis of each plan's relative reduction in the plan's shortfall amortization installment for the first plan year in the amortization period described in subparagraph (A) (determined without regard to this paragraph).
(iv) Mergers and acquisitions
The Secretary shall prescribe rules for the application of paragraph (2)(D) and this paragraph in any case where there is a merger or acquisition involving a plan sponsor making the election under paragraph (2)(D).
(8) 15-year amortization
With respect to plan years beginning after December 31, 2021 (or, at the election of the plan sponsor, plan years beginning after December 31, 2018, December 31, 2019, or December 31, 2020)—
(A) the shortfall amortization bases for all plan years preceding the first plan year beginning after December 31, 2021 (or after whichever earlier date is elected pursuant to this paragraph), and all shortfall amortization installments determined with respect to such bases, shall be reduced to zero, and
(B) subparagraphs (A) and (B) of paragraph (2) shall each be applied by substituting "15-plan-year period" for "7-plan-year period".
(d) Rules relating to funding target
For purposes of this section—
(1) Funding target
Except as provided in subsection (i)(1) with respect to plans in at-risk status, the funding target of a plan for a plan year is the present value of all benefits accrued or earned under the plan as of the beginning of the plan year.
(2) Funding target attainment percentage
The "funding target attainment percentage" of a plan for a plan year is the ratio (expressed as a percentage) which—
(A) the value of plan assets for the plan year (as reduced under subsection (f)(4)(B)), bears to
(B) the funding target of the plan for the plan year (determined without regard to subsection (i)(1)).
(e) Waiver amortization charge
(1) Determination of waiver amortization charge
The waiver amortization charge (if any) for a plan for any plan year is the aggregate total of the waiver amortization installments for such plan year with respect to the waiver amortization bases for each of the 5 preceding plan years.
(2) Waiver amortization installment
For purposes of paragraph (1)—
(A) Determination
The waiver amortization installments are the amounts necessary to amortize the waiver amortization base of the plan for any plan year in level annual installments over a period of 5 plan years beginning with the succeeding plan year.
(B) Waiver installment
The waiver amortization installment for any plan year in the 5-year period under subparagraph (A) with respect to any waiver amortization base is the annual installment determined under subparagraph (A) for that year for that base.
(3) Interest rate
In determining any waiver amortization installment under this subsection, the plan sponsor shall use the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2).
(4) Waiver amortization base
The waiver amortization base of a plan for a plan year is the amount of the waived funding deficiency (if any) for such plan year under section 412(c).
(5) Early deemed amortization upon attainment of funding target
In any case in which the funding shortfall of a plan for a plan year is zero, for purposes of determining the waiver amortization charge for such plan year and succeeding plan years, the waiver amortization bases for all preceding plan years (and all waiver amortization installments determined with respect to such bases) shall be reduced to zero.
(f) Reduction of minimum required contribution by prefunding balance and funding standard carryover balance
(1) Election to maintain balances
(A) Prefunding balance
The plan sponsor of a defined benefit plan which is not a multiemployer plan may elect to maintain a prefunding balance.
(B) Funding standard carryover balance
(i) In general
In the case of a defined benefit plan (other than a multiemployer plan) described in clause (ii), the plan sponsor may elect to maintain a funding standard carryover balance, until such balance is reduced to zero.
(ii) Plans maintaining funding standard account in 2007
A plan is described in this clause if the plan—
(I) was in effect for a plan year beginning in 2007, and
(II) had a positive balance in the funding standard account under section 412(b) as in effect for such plan year and determined as of the end of such plan year.
(2) Application of balances
A prefunding balance and a funding standard carryover balance maintained pursuant to this paragraph—
(A) shall be available for crediting against the minimum required contribution, pursuant to an election under paragraph (3),
(B) shall be applied as a reduction in the amount treated as the value of plan assets for purposes of this section, to the extent provided in paragraph (4), and
(C) may be reduced at any time, pursuant to an election under paragraph (5).
(3) Election to apply balances against minimum required contribution
(A) In general
Except as provided in subparagraphs (B) and (C), in the case of any plan year in which the plan sponsor elects to credit against the minimum required contribution for the current plan year all or a portion of the prefunding balance or the funding standard carryover balance for the current plan year (not in excess of such minimum required contribution), the minimum required contribution for the plan year shall be reduced as of the first day of the plan year by the amount so credited by the plan sponsor. For purposes of the preceding sentence, the minimum required contribution shall be determined after taking into account any waiver under section 412(c).
(B) Coordination with funding standard carryover balance
To the extent that any plan has a funding standard carryover balance greater than zero, no amount of the prefunding balance of such plan may be credited under this paragraph in reducing the minimum required contribution.
(C) Limitation for underfunded plans
The preceding provisions of this paragraph shall not apply for any plan year if the ratio (expressed as a percentage) which—
(i) the value of plan assets for the preceding plan year (as reduced under paragraph (4)(C)), bears to
(ii) the funding target of the plan for the preceding plan year (determined without regard to subsection (i)(1)),
is less than 80 percent. In the case of plan years beginning in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary may prescribe.
(D) Special rule for certain years of plans maintained by charities
(i) In general
For purposes of applying subparagraph (C) for plan years beginning after August 31, 2009, and before September 1, 2011, the ratio determined under such subparagraph for the preceding plan year of a plan shall be the greater of—
(I) such ratio, as determined without regard to this subsection, or
(II) the ratio for such plan for the plan year beginning after August 31, 2007 and before September 1, 2008, as determined under rules prescribed by the Secretary.
(ii) Special rule
In the case of a plan for which the valuation date is not the first day of the plan year—
(I) clause (i) shall apply to plan years beginning after December 31, 2007, and before January 1, 2010, and
(II) clause (i)(II) shall apply based on the last plan year beginning before September 1, 2007, as determined under rules prescribed by the Secretary.
(iii) Limitation to charities
This subparagraph shall not apply to any plan unless such plan is maintained exclusively by one or more organizations described in section 501(c)(3).
(4) Effect of balances on amounts treated as value of plan assets
In the case of any plan maintaining a prefunding balance or a funding standard carryover balance pursuant to this subsection, the amount treated as the value of plan assets shall be deemed to be such amount, reduced as provided in the following subparagraphs:
(A) Applicability of shortfall amortization base
For purposes of subsection (c)(5), the value of plan assets is deemed to be such amount, reduced by the amount of the prefunding balance, but only if an election under paragraph (3) applying any portion of the prefunding balance in reducing the minimum required contribution is in effect for the plan year.
(B) Determination of excess assets, funding shortfall, and funding target attainment percentage
(i) In general
For purposes of subsections (a), (c)(4)(B), and (d)(2)(A), the value of plan assets is deemed to be such amount, reduced by the amount of the prefunding balance and the funding standard carryover balance.
(ii) Special rule for certain binding agreements with PBGC
For purposes of subsection (c)(4)(B), the value of plan assets shall not be deemed to be reduced for a plan year by the amount of the specified balance if, with respect to such balance, there is in effect for a plan year a binding written agreement with the Pension Benefit Guaranty Corporation which provides that such balance is not available to reduce the minimum required contribution for the plan year. For purposes of the preceding sentence, the term "specified balance" means the prefunding balance or the funding standard carryover balance, as the case may be.
(C) Availability of balances in plan year for crediting against minimum required contribution
For purposes of paragraph (3)(C)(i) of this subsection, the value of plan assets is deemed to be such amount, reduced by the amount of the prefunding balance.
(5) Election to reduce balance prior to determinations of value of plan assets and crediting against minimum required contribution
(A) In general
The plan sponsor may elect to reduce by any amount the balance of the prefunding balance and the funding standard carryover balance for any plan year (but not below zero). Such reduction shall be effective prior to any determination of the value of plan assets for such plan year under this section and application of the balance in reducing the minimum required contribution for such plan for such plan year pursuant to an election under paragraph (2).
(B) Coordination between prefunding balance and funding standard carryover balance
To the extent that any plan has a funding standard carryover balance greater than zero, no election may be made under subparagraph (A) with respect to the prefunding balance.
(6) Prefunding balance
(A) In general
A prefunding balance maintained by a plan shall consist of a beginning balance of zero, increased and decreased to the extent provided in subparagraphs (B) and (C), and adjusted further as provided in paragraph (8).
(B) Increases
(i) In general
As of the first day of each plan year beginning after 2008, the prefunding balance of a plan shall be increased by the amount elected by the plan sponsor for the plan year. Such amount shall not exceed the excess (if any) of—
(I) the aggregate total of employer contributions to the plan for the preceding plan year, over—
(II) the minimum required contribution for such preceding plan year.
(ii) Adjustments for interest
Any excess contributions under clause (i) shall be properly adjusted for interest accruing for the periods between the first day of the current plan year and the dates on which the excess contributions were made, determined by using the effective interest rate for the preceding plan year and by treating contributions as being first used to satisfy the minimum required contribution.
(iii) Certain contributions necessary to avoid benefit limitations disregarded
The excess described in clause (i) with respect to any preceding plan year shall be reduced (but not below zero) by the amount of contributions an employer would be required to make under subsection (b), (c), or (e) of section 436 to avoid a benefit limitation which would otherwise be imposed under such paragraph for the preceding plan year. Any contribution which may be taken into account in satisfying the requirements of more than 1 of such paragraphs shall be taken into account only once for purposes of this clause.
(C) Decreases
The prefunding balance of a plan shall be decreased (but not below zero) by—
(i) as of the first day of each plan year after 2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required contribution of the plan for the preceding plan year, and
(ii) as of the time specified in paragraph (5)(A), any reduction in such balance elected under paragraph (5).
(7) Funding standard carryover balance
(A) In general
A funding standard carryover balance maintained by a plan shall consist of a beginning balance determined under subparagraph (B), decreased to the extent provided in subparagraph (C), and adjusted further as provided in paragraph (8).
(B) Beginning balance
The beginning balance of the funding standard carryover balance shall be the positive balance described in paragraph (1)(B)(ii)(II).
(C) Decreases
The funding standard carryover balance of a plan shall be decreased (but not below zero) by—
(i) as of the first day of each plan year after 2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required contribution of the plan for the preceding plan year, and
(ii) as of the time specified in paragraph (5)(A), any reduction in such balance elected under paragraph (5).
(8) Adjustments for investment experience
In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, the plan sponsor shall, in accordance with regulations prescribed by the Secretary, adjust such balance to reflect the rate of return on plan assets for the preceding plan year. Notwithstanding subsection (g)(3), such rate of return shall be determined on the basis of fair market value and shall properly take into account, in accordance with such regulations, all contributions, distributions, and other plan payments made during such period.
(9) Elections
Elections under this subsection shall be made at such times, and in such form and manner, as shall be prescribed in regulations of the Secretary.
(g) Valuation of plan assets and liabilities
(1) Timing of determinations
Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date of the plan for such plan year.
(2) Valuation date
For purposes of this section—
(A) In general
Except as provided in subparagraph (B), the valuation date of a plan for any plan year shall be the first day of the plan year.
(B) Exception for small plans
If, on each day during the preceding plan year, a plan had 100 or fewer participants, the plan may designate any day during the plan year as its valuation date for such plan year and succeeding plan years. For purposes of this subparagraph, all defined benefit plans (other than multiemployer plans) maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only participants with respect to such employer or member shall be taken into account.
(C) Application of certain rules in determination of plan size
For purposes of this paragraph—
(i) Plans not in existence in preceding year
In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into account the number of participants that the plan is reasonably expected to have on days during such first plan year.
(ii) Predecessors
Any reference in subparagraph (B) to an employer shall include a reference to any predecessor of such employer.
(3) Determination of value of plan assets
For purposes of this section—
(A) In general
Except as provided in subparagraph (B), the value of plan assets shall be the fair market value of the assets.
(B) Averaging allowed
A plan may determine the value of plan assets on the basis of the averaging of fair market values, but only if such method—
(i) is permitted under regulations prescribed by the Secretary,
(ii) does not provide for averaging of such values over more than the period beginning on the last day of the 25th month preceding the month in which the valuation date occurs and ending on the valuation date (or a similar period in the case of a valuation date which is not the 1st day of a month), and
(iii) does not result in a determination of the value of plan assets which, at any time, is lower than 90 percent or greater than 110 percent of the fair market value of such assets at such time.
Any such averaging shall be adjusted for contributions, distributions, and expected earnings (as determined by the plan's actuary on the basis of an assumed earnings rate specified by the actuary but not in excess of the third segment rate applicable under subsection (h)(2)(C)(iii)), as specified by the Secretary.
(4) Accounting for contribution receipts
For purposes of determining the value of assets under paragraph (3)—
(A) Prior year contributions
If—
(i) an employer makes any contribution to the plan after the valuation date for the plan year in which the contribution is made, and
(ii) the contribution is for a preceding plan year,
the contribution shall be taken into account as an asset of the plan as of the valuation date, except that in the case of any plan year beginning after 2008, only the present value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the preceding sentence, present value shall be determined using the effective interest rate for the preceding plan year to which the contribution is properly allocable.
(B) Special rule for current year contributions made before valuation date
If any contributions for any plan year are made to or under the plan during the plan year but before the valuation date for the plan year, the assets of the plan as of the valuation date shall not include—
(i) such contributions, and
(ii) interest on such contributions for the period between the date of the contributions and the valuation date, determined by using the effective interest rate for the plan year.
(h) Actuarial assumptions and methods
(1) In general
Subject to this subsection, the determination of any present value or other computation under this section shall be made on the basis of actuarial assumptions and methods—
(A) each of which is reasonable (taking into account the experience of the plan and reasonable expectations), and
(B) which, in combination, offer the actuary's best estimate of anticipated experience under the plan.
(2) Interest rates
(A) Effective interest rate
For purposes of this section, the term "effective interest rate" means, with respect to any plan for any plan year, the single rate of interest which, if used to determine the present value of the plan's accrued or earned benefits referred to in subsection (d)(1), would result in an amount equal to the funding target of the plan for such plan year.
(B) Interest rates for determining funding target
For purposes of determining the funding target and target normal cost of a plan for any plan year, the interest rate used in determining the present value of the benefits of the plan shall be—
(i) in the case of benefits reasonably determined to be payable during the 5-year period beginning on the valuation date for the plan year, the first segment rate with respect to the applicable month,
(ii) in the case of benefits reasonably determined to be payable during the 15-year period beginning at the end of the period described in clause (i), the second segment rate with respect to the applicable month, and
(iii) in the case of benefits reasonably determined to be payable after the period described in clause (ii), the third segment rate with respect to the applicable month.
(C) Segment rates
For purposes of this paragraph—
(i) First segment rate
The term "first segment rate" means, with respect to any month, the single rate of interest which shall be determined by the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into account only that portion of such yield curve which is based on bonds maturing during the 5-year period commencing with such month.
(ii) Second segment rate
The term "second segment rate" means, with respect to any month, the single rate of interest which shall be determined by the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into account only that portion of such yield curve which is based on bonds maturing during the 15-year period beginning at the end of the period described in clause (i).
(iii) Third segment rate
The term "third segment rate" means, with respect to any month, the single rate of interest which shall be determined by the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into account only that portion of such yield curve which is based on bonds maturing during periods beginning after the period described in clause (ii).
(iv) Segment rate stabilization
(I) In general
If a segment rate described in clause (i), (ii), or (iii) with respect to any applicable month (determined without regard to this clause) is less than the applicable minimum percentage, or more than the applicable maximum percentage, of the average of the segment rates described in such clause for years in the 25-year period ending with September 30 of the calendar year preceding the calendar year in which the plan year begins, then the segment rate described in such clause with respect to the applicable month shall be equal to the applicable minimum percentage or the applicable maximum percentage of such average, whichever is closest. The Secretary shall determine such average on an annual basis and may prescribe equivalent rates for years in any such 25-year period for which the rates described in any such clause are not available. Notwithstanding anything in this subclause, if the average of the first, second, or third segment rate for any 25-year period is less than 5 percent, such average shall be deemed to be 5 percent.
(II) Applicable minimum percentage; applicable maximum percentage
For purposes of subclause (I), the applicable minimum percentage and the applicable maximum percentage for a plan year beginning in a calendar year shall be determined in accordance with the following table:
| If the calendar year is: | The applicable minimum percentage is: | The applicable maximum percentage is: |
|---|---|---|
| Any year in the period starting in 2012 and ending in 2019 | 90% | 110% |
| Any year in the period starting in 2020 and ending in 2030 | 95% | 105% |
| 2031 | 90% | 110% |
| 2032 | 85% | 115% |
| 2033 | 80% | 120% |
| 2034 | 75% | 125% |
| After 2034 | 70% | 130%. |
(D) Corporate bond yield curve
For purposes of this paragraph—
(i) In general
The term "corporate bond yield curve" means, with respect to any month, a yield curve which is prescribed by the Secretary for such month and which reflects the average, for the 24-month period ending with the month preceding such month, of monthly yields on investment grade corporate bonds with varying maturities and that are in the top 3 quality levels available.
(ii) Election to use yield curve
Solely for purposes of determining the minimum required contribution under this section, the plan sponsor may, in lieu of the segment rates determined under subparagraph (C), elect to use interest rates under the corporate bond yield curve. For purposes of the preceding sentence such curve shall be determined without regard to the 24-month averaging described in clause (i). Such election, once made, may be revoked only with the consent of the Secretary.
(E) Applicable month
For purposes of this paragraph, the term "applicable month" means, with respect to any plan for any plan year, the month which includes the valuation date of such plan for such plan year or, at the election of the plan sponsor, any of the 4 months which precede such month. Any election made under this subparagraph shall apply to the plan year for which the election is made and all succeeding plan years, unless the election is revoked with the consent of the Secretary.
(F) Publication requirements
The Secretary shall publish for each month the corporate bond yield curve (and the corporate bond yield curve reflecting the modification described in section 417(e)(3)(D) for such month) and each of the rates determined under subparagraph (C) and the averages determined under subparagraph (C)(iv) for such month. The Secretary shall also publish a description of the methodology used to determine such yield curve and such rates which is sufficiently detailed to enable plans to make reasonable projections regarding the yield curve and such rates for future months based on the plan's projection of future interest rates.
(3) Mortality tables
(A) In general
Except as provided in subparagraph (C) or (D), the Secretary shall by regulation prescribe mortality tables to be used in determining any present value or making any computation under this section. Such tables shall be based on the actual experience of pension plans and projected trends in such experience. In prescribing such tables, the Secretary shall take into account results of available independent studies of mortality of individuals covered by pension plans.
(B) Periodic revision
The Secretary shall (at least every 10 years) make revisions in any table in effect under subparagraph (A) to reflect the actual experience of pension plans and projected trends in such experience.
(C) Substitute mortality table
(i) In general
Upon request by the plan sponsor and approval by the Secretary, a mortality table which meets the requirements of clause (iii) shall be used in determining any present value or making any computation under this section during the period of consecutive plan years (not to exceed 10) specified in the request.
(ii) Early termination of period
Notwithstanding clause (i), a mortality table described in clause (i) shall cease to be in effect as of the earliest of—
(I) the date on which there is a significant change in the participants in the plan by reason of a plan spinoff or merger or otherwise, or
(II) the date on which the plan actuary determines that such table does not meet the requirements of clause (iii).
(iii) Requirements
A mortality table meets the requirements of this clause if—
(I) there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible information necessary for purposes of subclause (II), and
(II) such table reflects the actual experience of the pension plans maintained by the sponsor and projected trends in general mortality experience.
(iv) All plans in controlled group must use separate table
Except as provided by the Secretary, a plan sponsor may not use a mortality table under this subparagraph for any plan maintained by the plan sponsor unless—
(I) a separate mortality table is established and used under this subparagraph for each other plan maintained by the plan sponsor and if the plan sponsor is a member of a controlled group, each member of the controlled group, and
(II) the requirements of clause (iii) are met separately with respect to the table so established for each such plan, determined by only taking into account the participants of such plan, the time such plan has been in existence, and the actual experience of such plan.
(v) Deadline for submission and disposition of application
(I) Submission
The plan sponsor shall submit a mortality table to the Secretary for approval under this subparagraph at least 7 months before the 1st day of the period described in clause (i).
(II) Disposition
Any mortality table submitted to the Secretary for approval under this subparagraph shall be treated as in effect as of the 1st day of the period described in clause (i) unless the Secretary, during the 180-day period beginning on the date of such submission, disapproves of such table and provides the reasons that such table fails to meet the requirements of clause (iii). The 180-day period shall be extended upon mutual agreement of the Secretary and the plan sponsor.
(D) Separate mortality tables for the disabled
Notwithstanding subparagraph (A)—
(i) In general
The Secretary shall establish mortality tables which may be used (in lieu of the tables under subparagraph (A)) under this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals whose disabilities occur in plan years beginning on or after such date.
(ii) Special rule for disabilities occurring after 1994
In the case of disabilities occurring in plan years beginning after December 31, 1994, the tables under clause (i) shall apply only with respect to individuals described in such subclause who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder.
(iii) Periodic revision
The Secretary shall (at least every 10 years) make revisions in any table in effect under clause (i) to reflect the actual experience of pension plans and projected trends in such experience.
(4) Probability of benefit payments in the form of lump sums or other optional forms
For purposes of determining any present value or making any computation under this section, there shall be taken into account—
(A) the probability that future benefit payments under the plan will be made in the form of optional forms of benefits provided under the plan (including lump sum distributions, determined on the basis of the plan's experience and other related assumptions), and
(B) any difference in the present value of such future benefit payments resulting from the use of actuarial assumptions, in determining benefit payments in any such optional form of benefits, which are different from those specified in this subsection.
(5) Approval of large changes in actuarial assumptions
(A) In general
No actuarial assumption used to determine the funding target for a plan to which this paragraph applies may be changed without the approval of the Secretary.
(B) Plans to which paragraph applies
This paragraph shall apply to a plan only if—
(i) the plan is a defined benefit plan (other than a multiemployer plan) to which title IV of the Employee Retirement Income Security Act of 1974 applies,
(ii) the aggregate unfunded vested benefits as of the close of the preceding plan year (as determined under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974) of such plan and all other plans maintained by the contributing sponsors (as defined in section 4001(a)(13) of such Act) and members of such sponsors' controlled groups (as defined in section 4001(a)(14) of such Act) which are covered by title IV (disregarding plans with no unfunded vested benefits) exceed $50,000,000, and
(iii) the change in assumptions (determined after taking into account any changes in interest rate and mortality table) results in a decrease in the funding shortfall of the plan for the current plan year that exceeds $50,000,000, or that exceeds $5,000,000 and that is 5 percent or more of the funding target of the plan before such change.
(i) Special rules for at-risk plans
(1) Funding target for plans in at-risk status
(A) In general
In the case of a plan which is in at-risk status for a plan year, the funding target of the plan for the plan year shall be equal to the sum of—
(i) the present value of all benefits accrued or earned under the plan as of the beginning of the plan year, as determined by using the additional actuarial assumptions described in subparagraph (B), and
(ii) in the case of a plan which also has been in at-risk status for at least 2 of the 4 preceding plan years, a loading factor determined under subparagraph (C).
(B) Additional actuarial assumptions
The actuarial assumptions described in this subparagraph are as follows:
(i) All employees who are not otherwise assumed to retire as of the valuation date but who will be eligible to elect benefits during the plan year and the 10 succeeding plan years shall be assumed to retire at the earliest retirement date under the plan but not before the end of the plan year for which the at-risk funding target and at-risk target normal cost are being determined.
(ii) All employees shall be assumed to elect the retirement benefit available under the plan at the assumed retirement age (determined after application of clause (i)) which would result in the highest present value of benefits.
(C) Loading factor
The loading factor applied with respect to a plan under this paragraph for any plan year is the sum of—
(i) $700, times the number of participants in the plan, plus
(ii) 4 percent of the funding target (determined without regard to this paragraph) of the plan for the plan year.
(2) Target normal cost of at-risk plans
In the case of a plan which is in at-risk status for a plan year, the target normal cost of the plan for such plan year shall be equal to the sum of—
(A) the excess of—
(i) the sum of—
(I) the present value of all benefits which are expected to accrue or to be earned under the plan during the plan year, determined using the additional actuarial assumptions described in paragraph (1)(B), plus
(II) the amount of plan-related expenses expected to be paid from plan assets during the plan year, over
(ii) the amount of mandatory employee contributions expected to be made during the plan year, plus
(B) in the case of a plan which also has been in at-risk status for at least 2 of the 4 preceding plan years, a loading factor equal to 4 percent of the amount determined under subsection (b)(1)(A)(i) with respect to the plan for the plan year.
(3) Minimum amount
In no event shall—
(A) the at-risk funding target be less than the funding target, as determined without regard to this subsection, or
(B) the at-risk target normal cost be less than the target normal cost, as determined without regard to this subsection.
(4) Determination of at-risk status
For purposes of this subsection—
(A) In general
A plan is in at-risk status for a plan year if—
(i) the funding target attainment percentage for the preceding plan year (determined under this section without regard to this subsection) is less than 80 percent, and
(ii) the funding target attainment percentage for the preceding plan year (determined under this section by using the additional actuarial assumptions described in paragraph (1)(B) in computing the funding target) is less than 70 percent.
(B) Transition rule
In the case of plan years beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall be applied by substituting the following percentages for "80 percent":
(i) 65 percent in the case of 2008.
(ii) 70 percent in the case of 2009.
(iii) 75 percent in the case of 2010.
In the case of plan years beginning in 2008, the funding target attainment percentage for the preceding plan year under subparagraph (A) may be determined using such methods of estimation as the Secretary may provide.
(C) Special rule for employees offered early retirement in 2006
(i) In general
For purposes of subparagraph (A)(ii), the additional actuarial assumptions described in paragraph (1)(B) shall not be taken into account with respect to any employee if—
(I) such employee is employed by a specified automobile manufacturer,
(II) such employee is offered a substantial amount of additional cash compensation, substantially enhanced retirement benefits under the plan, or materially reduced employment duties on the condition that by a specified date (not later than December 31, 2010) the employee retires (as defined under the terms of the plan),
(III) such offer is made during 2006 and pursuant to a bona fide retirement incentive program and requires, by the terms of the offer, that such offer can be accepted not later than a specified date (not later than December 31, 2006), and
(IV) such employee does not elect to accept such offer before the specified date on which the offer expires.
(ii) Specified automobile manufacturer
For purposes of clause (i), the term "specified automobile manufacturer" means—
(I) any manufacturer of automobiles, and
(II) any manufacturer of automobile parts which supplies such parts directly to a manufacturer of automobiles and which, after a transaction or series of transactions ending in 1999, ceased to be a member of a controlled group which included such manufacturer of automobiles.
(5) Transition between applicable funding targets and between applicable target normal costs
(A) In general
In any case in which a plan which is in at-risk status for a plan year has been in such status for a consecutive period of fewer than 5 plan years, the applicable amount of the funding target and of the target normal cost shall be, in lieu of the amount determined without regard to this paragraph, the sum of—
(i) the amount determined under this section without regard to this subsection, plus
(ii) the transition percentage for such plan year of the excess of the amount determined under this subsection (without regard to this paragraph) over the amount determined under this section without regard to this subsection.
(B) Transition percentage
For purposes of subparagraph (A), the transition percentage shall be determined in accordance with the following table:
| If the consecutive number of years (including the plan year) the plan is in at-risk status is— | The transition percentage is— |
|---|---|
| 1 | 20 |
| 2 | 40 |
| 3 | 60 |
| 4 | 80. |
(C) Years before effective date
For purposes of this paragraph, plan years beginning before 2008 shall not be taken into account.
(6) Small plan exception
If, on each day during the preceding plan year, a plan had 500 or fewer participants, the plan shall not be treated as in at-risk status for the plan year. For purposes of this paragraph, all defined benefit plans (other than multiemployer plans) maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only participants with respect to such employer or member shall be taken into account and the rules of subsection (g)(2)(C) shall apply.
(j) Payment of minimum required contributions
(1) In general
For purposes of this section, the due date for any payment of any minimum required contribution for any plan year shall be 8½ months after the close of the plan year.
(2) Interest
Any payment required under paragraph (1) for a plan year that is made on a date other than the valuation date for such plan year shall be adjusted for interest accruing for the period between the valuation date and the payment date, at the effective rate of interest for the plan for such plan year.
(3) Accelerated quarterly contribution schedule for underfunded plans
(A) Failure to timely make required installment
In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining the plan shall make the required installments under this paragraph and if the employer fails to pay the full amount of a required installment for the plan year, then the amount of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise used under paragraph (2) plus 5 percentage points. In the case of plan years beginning in 2008, the funding shortfall for the preceding plan year may be determined using such methods of estimation as the Secretary may provide.
(B) Amount of underpayment, period of underpayment
For purposes of subparagraph (A)—
(i) Amount
The amount of the underpayment shall be the excess of—
(I) the required installment, over
(II) the amount (if any) of the installment contributed to or under the plan on or before the due date for the installment.
(ii) Period of underpayment
The period for which any interest is charged under this paragraph with respect to any portion of the underpayment shall run from the due date for the installment to the date on which such portion is contributed to or under the plan.
(iii) Order of crediting contributions
For purposes of clause (i)(II), contributions shall be credited against unpaid required installments in the order in which such installments are required to be paid.
(C) Number of required installments; due dates
For purposes of this paragraph—
(i) Payable in 4 installments
There shall be 4 required installments for each plan year.
(ii) Time for payment of installments
The due dates for required installments are set forth in the following table:
| In the case of the following required installment: | The due date is: | |
|---|---|---|
| 1st | April 15 | |
| 2nd | July 15 | |
| 3rd | October 15 | |
| 4th | January 15 of the following year. |
(D) Amount of required installment
For purposes of this paragraph—
(i) In general
The amount of any required installment shall be 25 percent of the required annual payment.
(ii) Required annual payment
For purposes of clause (i), the term "required annual payment" means the lesser of—
(I) 90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this section, or
(II) 100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section 412(c)) to the plan for the preceding plan year.
Subclause (II) shall not apply if the preceding plan year referred to in such clause was not a year of 12 months.
(E) Fiscal years, short years, and years with alternate valuation date
(i) Fiscal years
In applying this paragraph to a plan year beginning on any date other than January 1, there shall be substituted for the months specified in this paragraph, the months which correspond thereto.
(ii) Short plan year
This subparagraph shall be applied to plan years of less than 12 months in accordance with regulations prescribed by the Secretary.
(iii) Plan with alternate valuation date
The Secretary shall prescribe regulations for the application of this paragraph in the case of a plan which has a valuation date other than the first day of the plan year.
(F) Quarterly contributions not to include certain increased contributions
Subparagraph (D) shall be applied without regard to any increase under subsection (c)(7).
(4) Liquidity requirement in connection with quarterly contributions
(A) In general
A plan to which this paragraph applies shall be treated as failing to pay the full amount of any required installment under paragraph (3) to the extent that the value of the liquid assets paid in such installment is less than the liquidity shortfall (whether or not such liquidity shortfall exceeds the amount of such installment required to be paid but for this paragraph).
(B) Plans to which paragraph applies
This paragraph shall apply to a plan (other than a plan described in subsection (g)(2)(B)) which—
(i) is required to pay installments under paragraph (3) for a plan year, and
(ii) has a liquidity shortfall for any quarter during such plan year.
(C) Period of underpayment
For purposes of paragraph (3)(A), any portion of an installment that is treated as not paid under subparagraph (A) shall continue to be treated as unpaid until the close of the quarter in which the due date for such installment occurs.
(D) Limitation on increase
If the amount of any required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the amount which, when added to prior installments for the plan year, is necessary to increase the funding target attainment percentage of the plan for the plan year (taking into account the expected increase in funding target due to benefits accruing or earned during the plan year) to 100 percent.
(E) Definitions
For purposes of this paragraph—
(i) Liquidity shortfall
The term "liquidity shortfall" means, with respect to any required installment, an amount equal to the excess (as of the last day of the quarter for which such installment is made) of—
(I) the base amount with respect to such quarter, over
(II) the value (as of such last day) of the plan's liquid assets.
(ii) Base amount
(I) In general
The term "base amount" means, with respect to any quarter, an amount equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending on the last day of such quarter.
(II) Special rule
If the amount determined under subclause (I) exceeds an amount equal to 2 times the sum of the adjusted disbursements from the plan for the 36 months ending on the last day of the quarter and an enrolled actuary certifies to the satisfaction of the Secretary that such excess is the result of nonrecurring circumstances, the base amount with respect to such quarter shall be determined without regard to amounts related to those nonrecurring circumstances.
(iii) Disbursements from the plan
The term "disbursements from the plan" means all disbursements from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses.
(iv) Adjusted disbursements
The term "adjusted disbursements" means disbursements from the plan reduced by the product of—
(I) the plan's funding target attainment percentage for the plan year, and
(II) the sum of the purchases of annuities, payments of single sums, and such other disbursements as the Secretary shall provide in regulations.
(v) Liquid assets
The term "liquid assets" means cash, marketable securities, and such other assets as specified by the Secretary in regulations.
(vi) Quarter
The term "quarter" means, with respect to any required installment, the 3-month period preceding the month in which the due date for such installment occurs.
(F) Regulations
The Secretary may prescribe such regulations as are necessary to carry out this paragraph.
(k) Imposition of lien where failure to make required contributions
(1) In general
In the case of a plan to which this subsection applies (as provided under paragraph (2)), if—
(A) any person fails to make a contribution payment required by section 412 and this section before the due date for such payment, and
(B) the unpaid balance of such payment (including interest), when added to the aggregate unpaid balance of all preceding such payments for which payment was not made before the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount determined under paragraph (3) upon all property and rights to property, whether real or personal, belonging to such person and any other person who is a member of the same controlled group of which such person is a member.
(2) Plans to which subsection applies
This subsection shall apply to a defined benefit plan (other than a multiemployer plan) covered under section 4021 of the Employee Retirement Income Security Act of 1974 for any plan year for which the funding target attainment percentage (as defined in subsection (d)(2)) of such plan is less than 100 percent.
(3) Amount of lien
For purposes of paragraph (1), the amount of the lien shall be equal to the aggregate unpaid balance of contribution payments required under this section and section 412 for which payment has not been made before the due date.
(4) Notice of failure; lien
(A) Notice of failure
A person committing a failure described in paragraph (1) shall notify the Pension Benefit Guaranty Corporation of such failure within 10 days of the due date for the required contribution payment.
(B) Period of lien
The lien imposed by paragraph (1) shall arise on the due date for the required contribution payment and shall continue until the last day of the first plan year in which the plan ceases to be described in paragraph (1)(B). Such lien shall continue to run without regard to whether such plan continues to be described in paragraph (2) during the period referred to in the preceding sentence.
(C) Certain rules to apply
Any amount with respect to which a lien is imposed under paragraph (1) shall be treated as taxes due and owing the United States and rules similar to the rules of subsections (c), (d), and (e) of section 4068 of the Employee Retirement Income Security Act of 1974 shall apply with respect to a lien imposed by subsection (a) and the amount with respect to such lien.
(5) Enforcement
Any lien created under paragraph (1) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Pension Benefit Guaranty Corporation, by the contributing sponsor (or any member of the controlled group of the contributing sponsor).
(6) Definitions
For purposes of this subsection—
(A) Contribution payment
The term "contribution payment" means, in connection with a plan, a contribution payment required to be made to the plan, including any required installment under paragraphs (3) and (4) of subsection (j).
(B) Due date; required installment
The terms "due date" and "required installment" have the meanings given such terms by subsection (j).
(C) Controlled group
The term "controlled group" means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414.
(l) Qualified transfers to health benefit accounts
In the case of a qualified transfer (as defined in section 420), any assets so transferred shall not, for purposes of this section, be treated as assets in the plan.
(m) Special rules for community newspaper plans
(1) In general
An eligible newspaper plan sponsor of a plan under which no participant has had the participant's accrued benefit increased (whether because of service or compensation) after April 2, 2019, may elect to have the alternative standards described in paragraph (4) apply to such plan.
(2) Eligible newspaper plan sponsor
The term "eligible newspaper plan sponsor" means the plan sponsor of—
(A) any community newspaper plan, or
(B) any other plan sponsored, as of April 2, 2019, by a member of the same controlled group of a plan sponsor of a community newspaper plan if such member is in the trade or business of publishing 1 or more newspapers.
(3) Election
An election under paragraph (1) shall be made at such time and in such manner as prescribed by the Secretary. Such election, once made with respect to a plan year, shall apply to all subsequent plan years unless revoked with the consent of the Secretary.
(4) Alternative minimum funding standards
The alternative standards described in this paragraph are the following:
(A) Interest rates
(i) In general
Notwithstanding subsection (h)(2)(C) and except as provided in clause (ii), the first, second, and third segment rates in effect for any month for purposes of this section shall be 8 percent.
(ii) New benefit accruals
Notwithstanding subsection (h)(2), for purposes of determining the funding target and normal cost of a plan for any plan year, the present value of any benefits accrued or earned under the plan for a plan year with respect to which an election under paragraph (1) is in effect shall be determined on the basis of the United States Treasury obligation yield curve for the day that is the valuation date of such plan for such plan year.
(iii) United States Treasury obligation yield curve
For purposes of this subsection, the term "United States Treasury obligation yield curve" means, with respect to any day, a yield curve which shall be prescribed by the Secretary for such day on interest-bearing obligations of the United States.
(B) Shortfall amortization base
(i) Previous shortfall amortization bases
The shortfall amortization bases determined under subsection (c)(3) for all plan years preceding the first plan year to which the election under paragraph (1) applies (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero under rules similar to the rules of subsection (c)(6).
(ii) New shortfall amortization base
Notwithstanding subsection (c)(3), the shortfall amortization base for the first plan year to which the election under paragraph (1) applies shall be the funding shortfall of such plan for such plan year (determined using the interest rates as modified under subparagraph (A)).
(C) Determination of shortfall amortization installments
(i) 30-year period
Subparagraphs (A) and (B) of subsection (c)(2) shall be applied by substituting "30-plan-year" for "7-plan-year" each place it appears.
(ii) No special election
The election under subparagraph (D) of subsection (c)(2) shall not apply to any plan year to which the election under paragraph (1) applies.
(D) Exemption from at-risk treatment
Subsection (i) shall not apply.
(5) Community newspaper plan
For purposes of this subsection—
(A) In general
The term "community newspaper plan" means any plan to which this section applies maintained as of December 31, 2018, by an employer which—
(i) maintains the plan on behalf of participants and beneficiaries with respect to employment in the trade or business of publishing 1 or more newspapers which were published by the employer at any time during the 11-year period ending on December 20, 2019,
(ii)(I) is not a company the stock of which is publicly traded (on a stock exchange or in an over-the-counter market), and is not controlled, directly or indirectly, by such a company, or
(II) is controlled, directly or indirectly, during the entire 30-year period ending on December 20, 2019, by individuals who are members of the same family, and does not publish or distribute a daily newspaper that is carrier-distributed in printed form in more than 5 States, and
(iii) is controlled, directly or indirectly—
(I) by 1 or more persons residing primarily in a State in which the community newspaper has been published on newsprint or carrier-distributed,
(II) during the entire 30-year period ending on December 20, 2019, by individuals who are members of the same family,
(III) by 1 or more trusts, the sole trustees of which are persons described in subclause (I) or (II), or
(IV) by a combination of persons described in subclause (I), (II), or (III).
(B) Newspaper
The term "newspaper" does not include any newspaper (determined without regard to this subparagraph) to which any of the following apply:
(i) Is not in general circulation.
(ii) Is published (on newsprint or electronically) less frequently than 3 times per week.
(iii) Has not ever been regularly published on newsprint.
(iv) Does not have a bona fide list of paid subscribers.
(C) Control
A person shall be treated as controlled by another person if such other person possesses, directly or indirectly, the power to direct or cause the direction and management of such person (including the power to elect a majority of the members of the board of directors of such person) through the ownership of voting securities.
(6) Controlled group
For purposes of this subsection, the term "controlled group" means all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 as of December 20, 2019.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under
Editorial Notes
References in Text
Section 106 of the Pension Protection Act of 2006, referred to in subsec. (c)(2)(D)(iv)(I), is section 106 of
The date of the enactment of this subparagraph, referred to in subsec. (c)(2)(D)(v), is the date of enactment of
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (c)(7)(E)(i)(I), (v)(II), (h)(5)(B)(i), (ii), and (k)(2), (4)(C), is
The Social Security Act, referred to in subsec. (h)(3)(D)(ii), is act Aug. 14, 1935, ch. 531,
Amendments
2021—Subsec. (c)(8).
Subsec. (h)(2)(C)(iv)(I).
Subsec. (h)(2)(C)(iv)(II).
Subsec. (m).
2019—Subsec. (m).
2018—Subsec. (c)(7)(E)(v)(II).
Subsec. (h)(2)(F).
2017—Subsec. (c)(7)(D)(vii)(II).
2015—Subsec. (h)(2)(C)(iv)(II).
2014—Subsec. (c)(5).
Subsec. (h)(2)(B)(i).
Subsec. (h)(2)(C)(iv)(II).
Subsec. (h)(2)(G).
2012—Subsec. (h)(2)(C)(iv).
Subsec. (h)(2)(F).
2010—Subsec. (c)(1).
Subsec. (c)(2)(D).
Subsec. (c)(7).
Subsec. (f)(3)(D).
Subsec. (j)(3)(F).
2008—Subsec. (b).
Subsec. (c)(5)(B)(i).
Subsec. (c)(5)(B)(iii).
Subsec. (c)(5)(B)(iv).
Subsec. (c)(5)(B)(iv)(II).
Subsec. (f)(3)(A).
Subsec. (f)(4)(A).
Subsec. (f)(6)(B)(iii).
Subsec. (f)(6)(C).
Subsec. (f)(8).
Subsec. (g)(3)(B).
Subsec. (h)(2)(B).
Subsec. (h)(2)(F).
Subsec. (i)(2)(A).
Subsec. (i)(2)(B).
Subsec. (i)(4)(B).
Subsec. (j)(3)(A).
Subsec. (j)(3)(D)(ii)(II).
Subsec. (j)(3)(E).
Subsec. (k)(1).
Subsec. (k)(6)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
"(1)
"(2)
"(A) for all purposes for which such amendments apply, or
"(B) solely for purposes of determining the adjusted funding target attainment percentage under sections 436 of the Internal Revenue Code of 1986 and 206(g) of the Employee Retirement Income Security Act of 1974 [
A plan shall not be treated as failing to meet the requirements of sections 204(g) of such Act [
Effective Date of 2019 Amendment
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by
"(1)
"(2)
"(A) for all purposes for which such amendments apply, or
"(B) solely for purposes of determining the adjusted funding target attainment percentage under sections 436 of the Internal Revenue Code of 1986 [
A plan shall not be treated as failing to meet the requirements of section 204(g) of such Act [
Effective Date of 2012 Amendment
Amendment by
Effective Date of 2010 Amendment
"(1)
"(2)
Effective Date of 2008 Amendment
"(A)
"(B)
Amendment by section 101(b)(2)(B)–(E), (F)(ii)–(H) of
Effective Date
Single-Employer Plan Funding Rules
"(a)
"(1) the due date for such contributions shall be January 1, 2021, and
"(2) the amount of each such minimum required contribution shall be increased by interest accruing for the period between the original due date (without regard to this section) for the contribution and the payment date, at the effective rate of interest for the plan for the plan year which includes such payment date.
"(b)
Mortality Tables
"(a)
"(b)
"(a)
"(1) is materially different from rules under such section of such Code, including Revenue Procedure 2007–37, that are in effect on the date of the enactment of this Act [Nov. 2, 2015]; and
"(2) permits the use of tables that reflect adjustments to the tables described in subparagraphs (A) and (B) of section 430(h)(3) of such Code, and subparagraphs (A) and (B) of section 303(h)(3) of such Act, if such adjustments are based on the experience described in subclause (II) of section 430(h)(3)(C)(iii) of such Code and in subclause (II) of section 303(h)(3)(C)(iii) of such Act.
"(b)
Applicability of Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of subtitles A (§§101–108) and B (§§111–116) of title I of
Modification of Transition Rule to Pension Funding Requirements
"(a)
"(1) was not required to pay a variable rate premium for the plan year beginning in 1996,
"(2) has not, in any plan year beginning after 1995, merged with another plan (other than a plan sponsored by an employer that was in 1996 within the controlled group of the plan sponsor), and
"(3) is sponsored by a company that is engaged primarily in the interurban or interstate passenger bus service,
the rules described in subsection (b) shall apply for any plan year beginning after December 31, 2007.
"(b)
"(1) For purposes of section 430(j)(3) of the Internal Revenue Code of 1986 and section 303(j)(3) of the Employee Retirement Income Security Act of 1974 [
"(2) For purposes of—
"(A) determining unfunded vested benefits under section 4006(a)(3)(E)(iii) of such Act [
"(B) determining any present value or making any computation under section 412 of such Code or section 302 of such Act [
the mortality table shall be the mortality table used by the plan.
"(3) [Former] Section 430(c)(5)(B) of such Code and [former] section 303(c)(5)(B) of such Act [
| "In the case of a plan year beginning in calendar year: | The applicable percentage is: |
|---|---|
| 2008 | 90 percent |
| 2009 | 92 percent |
| 2010 | 94 percent |
| 2011 | 96 percent. |
"(c)
Special Funding Rules for Certain Plans Maintained by Commercial Airlines
"(a)
"(1) have the rules of subsection (b) apply, or
"(2) have section 303 of the Employee Retirement Income Security Act of 1974 [
"(b)
"(1)
"(A) in the case of any applicable plan year beginning before January 1, 2008, the plan shall not have an accumulated funding deficiency for purposes of section 302 of the Employee Retirement Income Security Act of 1974 [
"(B) in the case of any applicable plan year beginning on or after January 1, 2008, the minimum required contribution determined under sections 303 of such Act [
"(2)
"(A)
"(i) the accrued benefit, any death or disability benefit, and any social security supplement described in the last sentence of section 411(a)(9) of such Code and section 204(b)(1)(G) of such Act [
"(ii) all other benefits under the plan are eliminated,
but only to the extent the freezing or elimination of such benefits would have been permitted under section 411(d)(6) of such Code and section 204(g) of such Act if they had been implemented by a plan amendment adopted immediately before such first day.
"(B)
"(3)
"(A)
"(B)
"(i) any increase in benefits,
"(ii) any change in the accrual of benefits, or
"(iii) any change in the rate at which benefits become nonforfeitable under the plan.
"(4)
"(A) was receiving disability benefits as of such date, or
"(B) was receiving sick pay and subsequently determined to be eligible for disability benefits as of such date.
"(c)
"(1)
"(A) which is a commercial passenger airline, or
"(B) the principal business of which is providing catering services to a commercial passenger airline.
"(2)
"(d)
"(1)
"(A)
"(i) not later than December 31, 2006, in the case of an election for a plan year beginning in 2006, or
"(ii) not later than December 31, 2007, in the case of an election for a plan year beginning in 2007.
"(B) 10
"(C)
"(2)
"(e)
"(1)
"(2)
"(3)
"(A)
"(B)
"(4)
"(A) the provisions of section 302(c)(3) of such Act and section 412(c)(3) of such Code, as in effect before the date of enactment of this section [Aug. 17, 2006], shall apply,
"(B) a rate of interest of 8.85 percent shall be used for all calculations requiring an interest rate, and
"(C) the value of plan assets shall be determined under sections 303(g)(3) of such Act [
"(5)
"(A) any applicable plan year includes the date of the enactment of this Act,
"(B) a plan was spun off from the eligible plan during the plan year but before such date of enactment,
the minimum required contribution under paragraph (1) for the eligible plan for such applicable plan year shall be an aggregate amount determined as if the plans were a single plan for that plan year (based on the full 12-month plan year in effect prior to the spin-off). The employer shall designate the allocation of such aggregate amount between such plans for the applicable plan year.
"(f)
"(1)
"(2)
"(g)
"(1)
"(A) an election under paragraph (1) or (2) of subsection (a) is in effect with respect to any eligible plan, and
"(B) the eligible plan is maintained by an employer that establishes or maintains 1 or more other defined benefit plans (other than any multiemployer plan), and such other plans in combination provide benefit accruals to any substantial number of successor employees,
the Secretary of the Treasury may, in the Secretary's discretion, determine that any trust of which any other such plan is a part does not constitute a qualified trust under section 401(a) of the Internal Revenue Code of 1986 unless all benefit obligations of the eligible plan have been satisfied. For purposes of this paragraph, the term 'successor employee' means any employee who is or was covered by the eligible plan and any employees who perform substantially the same type of work with respect to the same business operations as an employee covered by such eligible plan.
"(2)
"(A) PBGC
"(B)
"(i) '$2,500' shall be substituted for '$1,250' in such section if such plan terminates during the 5-year period beginning on the first day of the first applicable plan year with respect to such plan, and
"(ii) such section shall be applied without regard to subparagraph (B) of section 8101(d)(2) of the Deficit Reduction Act of 2005 [
The substitution described in clause (i) shall not apply with respect to any plan if the Secretary of Labor determines that such plan terminated as a result of extraordinary circumstances such as a terrorist attack or other similar event.
"(3)
"(4)
"(h)
"(1)
"(2)
"(i)
"(1) by substituting 'January 1, 2008' for 'December 28, 2005' in subparagraph (D)(i) thereof, and
"(2) without regard to subparagraph (D)(ii).
"(j)
[
[
[
§431. Minimum funding standards for multiemployer plans
(a) In general
For purposes of section 412, the accumulated funding deficiency of a multiemployer plan for any plan year is the amount, determined as of the end of the plan year, equal to the excess (if any) of the total charges to the funding standard account of the plan for all plan years (beginning with the first plan year for which this part applies to the plan) over the total credits to such account for such years.
(b) Funding standard account
(1) Account required
Each multiemployer plan to which this part applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section.
(2) Charges to account
For a plan year, the funding standard account shall be charged with the sum of—
(A) the normal cost of the plan for the plan year,
(B) the amounts necessary to amortize in equal annual installments (until fully amortized)—
(i) in the case of a plan which comes into existence on or after January 1, 2008, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 15 plan years,
(ii) separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
(iii) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years, and
(iv) separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 15 plan years,
(C) the amount necessary to amortize each waived funding deficiency (within the meaning of section 412(c)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years,
(D) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under section 412(b)(3)(D) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006), and
(E) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 20 years the contributions which would be required to be made under the plan but for the provisions of section 412(c)(7)(A)(i)(I) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006).
(3) Credits to account
For a plan year, the funding standard account shall be credited with the sum of—
(A) the amount considered contributed by the employer to or under the plan for the plan year,
(B) the amount necessary to amortize in equal annual installments (until fully amortized)—
(i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
(ii) separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 15 plan years, and
(iii) separately, with respect to each plan year, the net gain (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 15 plan years,
(C) the amount of the waived funding deficiency (within the meaning of section 412(c)(3)) for the plan year, and
(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard under section 412(g) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006), the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account.
(4) Special rule for amounts first amortized in plan years before 2008
In the case of any amount amortized under section 412(b) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006) over any period beginning with a plan year beginning before 2008 in lieu of the amortization described in paragraphs (2)(B) and (3)(B), such amount shall continue to be amortized under such section as so in effect.
(5) Combining and offsetting amounts to be amortized
Under regulations prescribed by the Secretary, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—
(A) may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and
(B) may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater.
(6) Interest
The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary of the Treasury) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs.
(7) Special rules relating to charges and credits to funding standard account
For purposes of this part—
(A) Withdrawal liability
Any amount received by a multiemployer plan in payment of all or part of an employer's withdrawal liability under part 1 of subtitle E of title IV of the Employee Retirement Income Security Act of 1974 shall be considered an amount contributed by the employer to or under the plan. The Secretary may prescribe by regulation additional charges and credits to a multiemployer plan's funding standard account to the extent necessary to prevent withdrawal liability payments from being unduly reflected as advance funding for plan liabilities.
(B) Adjustments when a multiemployer plan leaves reorganization
If a multiemployer plan is not in reorganization in the plan year but was in reorganization in the immediately preceding plan year, any balance in the funding standard account at the close of such immediately preceding plan year—
(i) shall be eliminated by an offsetting credit or charge (as the case may be), but
(ii) shall be taken into account in subsequent plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any accumulated funding deficiency under section 4243(a) of such Act as of the end of the last plan year that the plan was in reorganization.
(C) Plan payments to supplemental program or withdrawal liability payment fund
Any amount paid by a plan during a plan year to the Pension Benefit Guaranty Corporation pursuant to section 4222 of such Act or to a fund exempt under section 501(c)(22) pursuant to section 4223 of such Act shall reduce the amount of contributions considered received by the plan for the plan year.
(D) Interim withdrawal liability payments
Any amount paid by an employer pending a final determination of the employer's withdrawal liability under part 1 of subtitle E of title IV of such Act and subsequently refunded to the employer by the plan shall be charged to the funding standard account in accordance with regulations prescribed by the Secretary.
(E) Election for deferral of charge for portion of net experience loss
If an election is in effect under section 412(b)(7)(F) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006) for any plan year, the funding standard account shall be charged in the plan year to which the portion of the net experience loss deferred by such election was deferred with the amount so deferred (and paragraph (2)(B)(iii) shall not apply to the amount so charged).
(F) 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 section and section 412 in such manner as is determined by the Secretary.
(G) Short-term benefits
To the extent that any plan amendment increases the unfunded past service liability under the plan by reason of an increase in benefits which are not payable as a life annuity but are payable under the terms of the plan for a period that does not exceed 14 years from the effective date of the amendment, paragraph (2)(B)(ii) shall be applied separately with respect to such increase in unfunded past service liability by substituting the number of years of the period during which such benefits are payable for "15".
(8) Special relief rules
Notwithstanding any other provision of this subsection—
(A) Amortization of net investment losses
(i) In general
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met may treat the portion of any experience loss or gain attributable to net investment losses incurred in either or both of the first two plan years ending after August 31, 2008, as an item separate from other experience losses, to be amortized in equal annual installments (until fully amortized) over the period—
(I) beginning with the plan year in which such portion is first recognized in the actuarial value of assets, and
(II) ending with the last plan year in the 30-plan year period beginning with the plan year in which such net investment loss was incurred.
(ii) Coordination with extensions
If this subparagraph applies for any plan year—
(I) no extension of the amortization period under clause (i) shall be allowed under subsection (d), and
(II) if an extension was granted under subsection (d) for any plan year before the election to have this subparagraph apply to the plan year, such extension shall not result in such amortization period exceeding 30 years.
(iii) Net investment losses
For purposes of this subparagraph—
(I) In general
Net investment losses shall be determined in the manner prescribed by the Secretary on the basis of the difference between actual and expected returns (including any difference attributable to any criminally fraudulent investment arrangement).
(II) Criminally fraudulent investment arrangements
The determination as to whether an arrangement is a criminally fraudulent investment arrangement shall be made under rules substantially similar to the rules prescribed by the Secretary for purposes of section 165.
(B) Expanded smoothing period
(i) In general
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met may change its asset valuation method in a manner which—
(I) spreads the difference between expected and actual returns for either or both of the first 2 plan years ending after August 31, 2008, over a period of not more than 10 years,
(II) provides that for either or both of the first 2 plan years beginning after August 31, 2008, the value of plan assets at any time shall not be less than 80 percent or greater than 130 percent of the fair market value of such assets at such time, or
(III) makes both changes described in subclauses (I) and (II) to such method.
(ii) Asset valuation methods
If this subparagraph applies for any plan year—
(I) the Secretary shall not treat the asset valuation method of the plan as unreasonable solely because of the changes in such method described in clause (i), and
(II) such changes shall be deemed approved by the Secretary under section 302(d)(1) of the Employee Retirement Income Security Act of 1974 and section 412(d)(1).
(iii) Amortization of reduction in unfunded accrued liability
If this subparagraph and subparagraph (A) both apply for any plan year, the plan shall treat any reduction in unfunded accrued liability resulting from the application of this subparagraph as a separate experience amortization base, to be amortized in equal annual installments (until fully amortized) over a period of 30 plan years rather than the period such liability would otherwise be amortized over.
(C) Solvency test
The solvency test under this paragraph is met only if the plan actuary certifies that the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period, taking into account the changes in the funding standard account under this paragraph.
(D) Restriction on benefit increases
If subparagraph (A) or (B) apply to a multiemployer plan for any plan year, then, in addition to any other applicable restrictions on benefit increases, a plan amendment increasing benefits may not go into effect during either of the 2 plan years immediately following such plan year unless—
(i) the plan actuary certifies that—
(I) any such increase is paid for out of additional contributions not allocated to the plan immediately before the application of this paragraph to the plan, and
(II) the plan's funded percentage and projected credit balances for such 2 plan years are reasonably expected to be at least as high as such percentage and balances would have been if the benefit increase had not been adopted, or
(ii) the amendment is required as a condition of qualification under part I of subchapter D or to comply with other applicable law.
(E) Reporting
A plan sponsor of a plan to which this paragraph applies shall—
(i) give notice of such application to participants and beneficiaries of the plan, and
(ii) inform the Pension Benefit Guaranty Corporation of such application in such form and manner as the Director of the Pension Benefit Guaranty Corporation may prescribe.
(F) Relief for 2020 and 2021
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met as of February 29, 2020, may elect to apply this paragraph (without regard to whether such plan previously elected the application of this paragraph)—
(i) by substituting "February 29, 2020" for "August 31, 2008" each place it appears in subparagraphs (A)(i), (B)(i)(I), and (B)(i)(II),
(ii) by inserting "and other losses related to the virus SARS–CoV–2 or coronavirus disease 2019 (COVID–19) (including experience losses related to reductions in contributions, reductions in employment, and deviations from anticipated retirement rates, as determined by the plan sponsor)" after "net investment losses" in subparagraph (A)(i), and
(iii) by substituting "this subparagraph or subparagraph (A)" for "this subparagraph and subparagraph (A) both" in subparagraph (B)(iii).
The preceding sentence shall not apply to a plan to which special financial assistance is granted under section 4262 of the Employee Retirement Income Security Act of 1974. For purposes of the application of this subparagraph, the Secretary shall rely on the plan sponsor's calculations of plan losses unless such calculations are clearly erroneous.
(c) Additional rules
(1) Determinations to be made under funding method
For purposes of this part, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan.
(2) Valuation of assets
(A) In general
For purposes of this part, the value of the plan's assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary.
(B) Election with respect to bonds
The value of a bond or other evidence of indebtedness which is not in default as to principal or interest may, at the election of the plan administrator, be determined on an amortized basis running from initial cost at purchase to par value at maturity or earliest call date. Any election under this subparagraph shall be made at such time and in such manner as the Secretary shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary.
(3) Actuarial assumptions must be reasonable
For purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods—
(A) each of which is reasonable (taking into account the experience of the plan and reasonable expectations), and
(B) which, in combination, offer the actuary's best estimate of anticipated experience under the plan.
(4) Treatment of certain changes as experience gain or loss
For purposes of this section, if—
(A) a change in benefits under the Social Security Act or in other retirement benefits created under Federal or State law, or
(B) a change in the definition of the term "wages" under section 3121, or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5),
results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain.
(5) Full funding
If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency in excess of the full funding limitation—
(A) the funding standard account shall be credited with the amount of such excess, and
(B) all amounts described in subparagraphs (B), (C), and (D) of subsection (b)(2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall be considered fully amortized for purposes of such subparagraphs.
(6) Full-funding limitation
(A) In general
For purposes of paragraph (5), the term "full-funding limitation" means the excess (if any) of—
(i) the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over
(ii) the lesser of—
(I) the fair market value of the plan's assets, or
(II) the value of such assets determined under paragraph (2).
(B) Minimum amount
(i) In general
In no event shall the full-funding limitation determined under subparagraph (A) be less than the excess (if any) of—
(I) 90 percent of the current liability of the plan (including the expected increase in current liability due to benefits accruing during the plan year), over
(II) the value of the plan's assets determined under paragraph (2).
(ii) Assets
For purposes of clause (i), assets shall not be reduced by any credit balance in the funding standard account.
(C) Full funding limitation
For purposes of this paragraph, unless otherwise provided by the plan, the accrued liability under a multiemployer plan shall not include benefits which are not nonforfeitable under the plan after the termination of the plan (taking into consideration section 411(d)(3)).
(D) Current liability
For purposes of this paragraph—
(i) In general
The term "current liability" means all liabilities to employees and their beneficiaries under the plan.
(ii) Treatment of unpredictable contingent event benefits
For purposes of clause (i), any benefit contingent on an event other than—
(I) age, service, compensation, death, or disability, or
(II) an event which is reasonably and reliably predictable (as determined by the Secretary),
shall not be taken into account until the event on which the benefit is contingent occurs.
(iii) Interest rate used
The rate of interest used to determine current liability under this paragraph shall be the rate of interest determined under subparagraph (E).
(iv) Mortality tables
(I) Commissioners' standard table
In the case of plan years beginning before the first plan year to which the first tables prescribed under subclause (II) apply, the mortality table used in determining current liability under this paragraph shall be the table prescribed by the Secretary which is based on the prevailing commissioners' standard table (described in section 807(d)(5)(A)) 1 used to determine reserves for group annuity contracts issued on January 1, 1993.
(II) Secretarial authority
The Secretary may by regulation prescribe for plan years beginning after December 31, 1999, mortality tables to be used in determining current liability under this subsection. Such tables shall be based upon the actual experience of pension plans and projected trends in such experience. In prescribing such tables, the Secretary shall take into account results of available independent studies of mortality of individuals covered by pension plans.
(v) Separate mortality tables for the disabled
Notwithstanding clause (iv)—
(I) In general
The Secretary shall establish mortality tables which may be used (in lieu of the tables under clause (iv)) to determine current liability under this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals whose disabilities occur in plan years beginning on or after such date.
(II) Special rule for disabilities occurring after 1994
In the case of disabilities occurring in plan years beginning after December 31, 1994, the tables under subclause (I) shall apply only with respect to individuals described in such subclause who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder.
(vi) Periodic review
The Secretary shall periodically (at least every 5 years) review any tables in effect under this subparagraph and shall, to the extent such Secretary determines necessary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experience.
(E) Required change of interest rate
For purposes of determining a plan's current liability for purposes of this paragraph—
(i) In general
If any rate of interest used under the plan under subsection (b)(6) to determine cost is not within the permissible range, the plan shall establish a new rate of interest within the permissible range.
(ii) Permissible range
For purposes of this subparagraph—
(I) In general
Except as provided in subclause (II), the term "permissible range" means a rate of interest which is not more than 5 percent above, and not more than 10 percent below, the weighted average of the rates of interest on 30-year Treasury securities during the 4-year period ending on the last day before the beginning of the plan year.
(II) Secretarial authority
If the Secretary finds that the lowest rate of interest permissible under subclause (I) is unreasonably high, the Secretary may prescribe a lower rate of interest, except that such rate may not be less than 80 percent of the average rate determined under such subclause.
(iii) Assumptions
Notwithstanding paragraph (3)(A), the interest rate used under the plan shall be—
(I) determined without taking into account the experience of the plan and reasonable expectations, but
(II) consistent with the assumptions which reflect the purchase rates which would be used by insurance companies to satisfy the liabilities under the plan.
(7) Annual valuation
(A) In general
For purposes of this section, a determination of experience gains and losses and a valuation of the plan's liability shall be made not less frequently than once every year, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.
(B) Valuation date
(i) Current year
Except as provided in clause (ii), the valuation referred to in subparagraph (A) shall be made as of a date within the plan year to which the valuation refers or within one month prior to the beginning of such year.
(ii) Use of prior year valuation
The valuation referred to in subparagraph (A) may be made as of a date within the plan year prior to the year to which the valuation refers if, as of such date, the value of the assets of the plan are not less than 100 percent of the plan's current liability (as defined in paragraph (6)(D) without regard to clause (iv) thereof).
(iii) Adjustments
Information under clause (ii) shall, in accordance with regulations, be actuarially adjusted to reflect significant differences in participants.
(iv) Limitation
A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (6)(D) without regard to clause (iv) thereof).
(8) Time when certain contributions deemed made
For purposes of this section, any contributions for a plan year made by an employer after the last day of such plan year, but not later than two and one-half months after such day, shall be deemed to have been made on such last day. For purposes of this subparagraph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary.
(d) Extension of amortization periods for multiemployer plans
(1) Automatic extension upon application by certain plans
(A) In general
If the plan sponsor of a multiemployer plan—
(i) submits to the Secretary an application for an extension of the period of years required to amortize any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), and
(ii) includes with the application a certification by the plan's actuary described in subparagraph (B),
the Secretary shall extend the amortization period for the period of time (not in excess of 5 years) specified in the application. Such extension shall be in addition to any extension under paragraph (2).
(B) Criteria
A certification with respect to a multiemployer plan is described in this subparagraph if the plan's actuary certifies that, based on reasonable assumptions—
(i) absent the extension under subparagraph (A), the plan would have an accumulated funding deficiency in the current plan year or any of the 9 succeeding plan years,
(ii) the plan sponsor has adopted a plan to improve the plan's funding status,
(iii) the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended, and
(iv) the notice required under paragraph (3)(A) has been provided.
(2) Alternative extension
(A) In general
If the plan sponsor of a multiemployer plan submits to the Secretary an application for an extension of the period of years required to amortize any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), the Secretary may extend the amortization period for a period of time (not in excess of 10 years reduced by the number of years of any extension under paragraph (1) with respect to such unfunded liability) if the Secretary makes the determination described in subparagraph (B). Such extension shall be in addition to any extension under paragraph (1).
(B) Determination
The Secretary may grant an extension under subparagraph (A) if the Secretary determines that—
(i) such extension would carry out the purposes of the Pension Protection Act of 2006 and would provide adequate protection for participants under the plan and their beneficiaries, and
(ii) the failure to permit such extension would—
(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial curtailment of pension benefit levels or employee compensation, and
(II) be adverse to the interests of plan participants in the aggregate.
(C) Action by Secretary
The Secretary shall act upon any application for an extension under this paragraph within 180 days of the submission of such application. If the Secretary rejects the application for an extension under this paragraph, the Secretary shall provide notice to the plan detailing the specific reasons for the rejection, including references to the criteria set forth above.
(3) Advance notice
(A) In general
The Secretary shall, before granting an extension under this subsection, require each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing of the application for such extension to each affected party (as defined in section 4001(a)(21) of the Employee Retirement Income Security Act of 1974) with respect to the affected plan. Such notice shall include a description of the extent to which the plan is funded for benefits which are guaranteed under title IV of such Act and for benefit liabilities.
(B) Consideration of relevant information
The Secretary shall consider any relevant information provided by a person to whom notice was given under paragraph (1).
(Added
Editorial Notes
References in Text
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(7)(A) to (D), (8)(B)(ii)(II), (F) and (d)(3)(A), is
The date of the enactment of the Pension Protection Act of 2006, referred to in subsec. (b)(2)(D), (E), (3)(D), (4), (7)(E), is the date of enactment of
The Social Security Act, referred to in subsec. (c)(4)(A), (6)(D)(v)(II), is act Aug. 14, 1935, ch. 531,
Section 807(d)(5), referred to in subsec. (c)(6)(D)(iv)(I), was repealed by
The Pension Protection Act of 2006, referred to in subsec. (d)(2)(B)(i), is
Amendments
2021—Subsec. (b)(8)(F).
2018—Subsec. (d)(2)(B)(i).
2014—Subsec. (a).
Subsec. (d)(1)(C).
2010—Subsec. (b)(8).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Amendment by section 108(b)(3)(A) of
Effective Date of 2010 Amendment
"(1)
"(2)
Effective Date
"(1)
"(2)
Special Rule for Certain Benefits Funded Under an Agreement Approved by the Pension Benefit Guaranty Corporation
For applicability of this section to a multiemployer plan that is a party to an agreement that was approved by the Pension Benefit Guaranty Corporation prior to June 30, 2005, and that increases benefits and provides for certain withdrawal liability rules, see section 206 of
1 See References in Text note below.
§432. Additional funding rules for multiemployer plans in endangered status or critical status
(a) General rule
For purposes of this part, in the case of a multiemployer plan in effect on July 16, 2006—
(1) if the plan is in endangered status—
(A) the plan sponsor shall adopt and implement a funding improvement plan in accordance with the requirements of subsection (c), and
(B) the requirements of subsection (d) shall apply during the funding plan adoption period and the funding improvement period,
(2) if the plan is in critical status—
(A) the plan sponsor shall adopt and implement a rehabilitation plan in accordance with the requirements of subsection (e), and
(B) the requirements of subsection (f) shall apply during the rehabilitation plan adoption period and the rehabilitation period,
(3) if the plan is in critical and declining status—
(A) the requirements of paragraph (2) shall apply to the plan; and
(B) the plan sponsor may, by plan amendment, suspend benefits in accordance with the requirements of subsection (e)(9), and
(4) if the plan is an eligible multiemployer plan which is applying for or receiving special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974, the requirements of subsection (k) shall apply to the plan.
(b) Determination of endangered and critical status
For purposes of this section—
(1) Endangered status
A multiemployer plan is in endangered status for a plan year if, as determined by the plan actuary under paragraph (3), the plan is not in critical status for the plan year and is not described in paragraph (5), and, as of the beginning of the plan year, either—
(A) the plan's funded percentage for such plan year is less than 80 percent, or
(B) the plan has an accumulated funding deficiency for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan years, taking into account any extension of amortization periods under section 431(d).
For purposes of this section, a plan shall be treated as in seriously endangered status for a plan year if the plan is described in both subparagraphs (A) and (B).
(2) Critical status
A multiemployer plan is in critical status for a plan year if, as determined by the plan actuary under paragraph (3), the plan is described in 1 or more of the following subparagraphs as of the beginning of the plan year:
(A) A plan is described in this subparagraph if—
(i) the funded percentage of the plan is less than 65 percent, and
(ii) the sum of—
(I) the fair market value of plan assets, plus
(II) the present value of the reasonably anticipated employer contributions for the current plan year and each of the 6 succeeding plan years, assuming that the terms of all collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years,
is less than the present value of all nonforfeitable benefits projected to be payable under the plan during the current plan year and each of the 6 succeeding plan years (plus administrative expenses for such plan years).
(B) A plan is described in this subparagraph if—
(i) the plan has an accumulated funding deficiency for the current plan year, not taking into account any extension of amortization periods under section 431(d), or
(ii) the plan is projected to have an accumulated funding deficiency for any of the 3 succeeding plan years (4 succeeding plan years if the funded percentage of the plan is 65 percent or less), not taking into account any extension of amortization periods under section 431(d).
(C) A plan is described in this subparagraph if—
(i)(I) the plan's normal cost for the current plan year, plus interest (determined at the rate used for determining costs under the plan) for the current plan year on the amount of unfunded benefit liabilities under the plan as of the last date of the preceding plan year, exceeds
(II) the present value of the reasonably anticipated employer and employee contributions for the current plan year,
(ii) the present value, as of the beginning of the current plan year, of nonforfeitable benefits of inactive participants is greater than the present value of nonforfeitable benefits of active participants, and
(iii) the plan has an accumulated funding deficiency for the current plan year, or is projected to have such a deficiency for any of the 4 succeeding plan years, not taking into account any extension of amortization periods under section 431(d).
(D) A plan is described in this subparagraph if the sum of—
(i) the fair market value of plan assets, plus
(ii) the present value of the reasonably anticipated employer contributions for the current plan year and each of the 4 succeeding plan years, assuming that the terms of all collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years,
is less than the present value of all benefits projected to be payable under the plan during the current plan year and each of the 4 succeeding plan years (plus administrative expenses for such plan years).
(3) Annual certification by plan actuary
(A) In general
Not later than the 90th day of each plan year of a multiemployer plan, the plan actuary shall certify to the Secretary and to the plan sponsor—
(i) whether or not the plan is in endangered status for such plan year, or would be in endangered status for such plan year but for paragraph (5), whether or not the plan is or will be in critical status for such plan year or for any of the succeeding 5 plan years, and whether or not the plan is or will be in critical and declining status for such plan year, and
(ii) in the case of a plan which is in a funding improvement or rehabilitation period, whether or not the plan is making the scheduled progress in meeting the requirements of its funding improvement or rehabilitation plan.
(B) Actuarial projections of assets and liabilities
(i) In general
Except as provided in clause (iv), in making the determinations and projections under this subsection, the plan actuary shall make projections required for the current and succeeding plan years of the current value of the assets of the plan and the present value of all liabilities to participants and beneficiaries under the plan for the current plan year as of the beginning of such year. The actuary's projections shall be based on reasonable actuarial estimates, assumptions, and methods that, except as provided in clause (iii), offer the actuary's best estimate of anticipated experience under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—
(I) the actuarial statement required under section 103(d) of the Employee Retirement Income Security Act of 1974 with respect to the most recently filed annual report, or
(II) the actuarial valuation for the preceding plan year.
(ii) Determinations of future contributions
Any actuarial projection of plan assets shall assume—
(I) reasonably anticipated employer contributions for the current and succeeding plan years, assuming that the terms of the one or more collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years, or
(II) that employer contributions for the most recent plan year will continue indefinitely, but only if the plan actuary determines there have been no significant demographic changes that would make such assumption unreasonable.
(iii) Projected industry activity
Any projection of activity in the industry or industries covered by the plan, including future covered employment and contribution levels, shall be based on information provided by the plan sponsor, which shall act reasonably and in good faith.
(iv) Projections relating to critical status in succeeding plan years
Clauses (i) and (ii) (other than the 2nd sentence of clause (i)) may be disregarded by a plan actuary in the case of any certification of whether a plan will be in critical status in a succeeding plan year, except that a plan sponsor may not elect to be in critical status for a plan year under paragraph (4) in any case in which the certification upon which such election would be based is made without regard to such clauses.
(v) Projections of critical and declining status
In determining whether a plan is in critical and declining status as described in subsection (e)(9), clauses (i), (ii), and (iii) shall apply, except that—
(I) if reasonable, the plan actuary shall assume that each contributing employer in compliance continues to comply through the end of the rehabilitation period or such later time as provided in subsection (e)(3)(A)(ii) with the terms of the rehabilitation plan that correspond to the schedule adopted or imposed under subsection (e), and
(II) the plan actuary shall take into account any suspensions of benefits described in subsection (e)(9) adopted in a prior plan year that are still in effect.
(C) Penalty for failure to secure timely actuarial certification
Any failure of the plan's actuary to certify the plan's status under this subsection by the date specified in subparagraph (A) shall be treated for purposes of section 502(c)(2) of the Employee Retirement Income Security Act of 1974 as a failure or refusal by the plan administrator to file the annual report required to be filed with the Secretary under section 101(b)(1) of such Act.
(D) Notice
(i) In general
In any case in which it is certified under subparagraph (A) that a multiemployer plan is or will be in endangered or critical status for a plan year or in which a plan sponsor elects to be in critical status for a plan year under paragraph (4), the plan sponsor shall, not later than 30 days after the date of the certification, provide notification of the endangered or critical status to the participants and beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, and the Secretary of Labor. In any case in which a plan sponsor elects to be in critical status for a plan year under paragraph (4), the plan sponsor shall notify the Secretary of such election not later than 30 days after the date of such certification or such other time as the Secretary may prescribe by regulations or other guidance.
(ii) Plans in critical status
If it is certified under subparagraph (A) that a multiemployer plan is or will be in critical status, the plan sponsor shall include in the notice under clause (i) an explanation of the possibility that—
(I) adjustable benefits (as defined in subsection (e)(8)) may be reduced, and
(II) such reductions may apply to participants and beneficiaries whose benefit commencement date is on or after the date such notice is provided for the first plan year in which the plan is in critical status.
(iii) In the case of a multiemployer plan that would be in endangered status but for paragraph (5), the plan sponsor shall provide notice to the bargaining parties and the Pension Benefit Guaranty Corporation that the plan would be in endangered status but for such paragraph.
(iv) Model notice
The Secretary, in consultation with the Secretary of Labor, shall prescribe a model notice that a multiemployer plan may use to satisfy the requirements under clauses (ii) and (iii).
(v) Notice of projection to be in critical status in a future plan year
In any case in which it is certified under subparagraph (A)(i) that a multiemployer plan will be in critical status for any of 5 succeeding plan years (but not for the current plan year) and the plan sponsor of such plan has not made an election to be in critical status for the plan year under paragraph (4), the plan sponsor shall, not later than 30 days after the date of the certification, provide notification of the projected critical status to the Pension Benefit Guaranty Corporation.
(4) Election to be in critical status
Notwithstanding paragraph (2) and subject to paragraph (3)(B)(iv)—
(A) the plan sponsor of a multiemployer plan that is not in critical status for a plan year but that is projected by the plan actuary, pursuant to the determination under paragraph (3), to be in critical status in any of the succeeding 5 plan years may, not later than 30 days after the date of the certification under paragraph (3)(A), elect to be in critical status effective for the current plan year,
(B) the plan year in which the plan sponsor elects to be in critical status under subparagraph (A) shall be treated for purposes of this section as the first year in which the plan is in critical status, regardless of the date on which the plan first satisfies the criteria for critical status under paragraph (2), and
(C) a plan that is in critical status under this paragraph shall not emerge from critical status except in accordance with subsection (e)(4)(B).
(5) Special rule
A plan is described in this paragraph if—
(A) as part of the actuarial certification of endangered status under paragraph (3)(A) for the plan year, the plan actuary certifies that the plan is projected to no longer be described in either paragraph (1)(A) or paragraph (1)(B) as of the end of the tenth plan year ending after the plan year to which the certification relates, and
(B) the plan was not in critical or endangered status for the immediately preceding plan year.
(6) Critical and declining status
For purposes of this section, a plan in critical status shall be treated as in critical and declining status if the plan is described in one or more of subparagraphs (A), (B), (C), and (D) of paragraph (2) and the plan is projected to become insolvent within the meaning of section 418E during the current plan year or any of the 14 succeeding plan years (19 succeeding plan years if the plan has a ratio of inactive participants to active participants that exceeds 2 to 1 or if the funded percentage of the plan is less than 80 percent).
(7) Plans receiving special financial assistance
If an eligible multiemployer plan receiving special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974 meets the requirements of subsection (k)(2), notwithstanding the preceding paragraphs of this subsection, the plan shall be deemed to be in critical status for plan years beginning with the plan year in which the effective date for such assistance occurs and ending with the last plan year ending in 2051.
(c) Funding improvement plan must be adopted for multiemployer plans in endangered status
(1) In general
In any case in which a multiemployer plan is in endangered status for a plan year, the plan sponsor, in accordance with this subsection—
(A) shall adopt a funding improvement plan not later than 240 days following the required date for the actuarial certification of endangered status under subsection (b)(3)(A), and
(B) within 30 days after the adoption of the funding improvement plan—
(i) shall provide to the bargaining parties 1 or more schedules showing revised benefit structures, revised contribution structures, or both, which, if adopted, may reasonably be expected to enable the multiemployer plan to meet the applicable benchmarks in accordance with the funding improvement plan, including—
(I) one proposal for reductions in the amount of future benefit accruals necessary to achieve the applicable benchmarks, assuming no amendments increasing contributions under the plan (other than amendments increasing contributions necessary to achieve the applicable benchmarks after amendments have reduced future benefit accruals to the maximum extent permitted by law), and
(II) one proposal for increases in contributions under the plan necessary to achieve the applicable benchmarks, assuming no amendments reducing future benefit accruals under the plan, and
(ii) may, if the plan sponsor deems appropriate, prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks in accordance with the funding improvement plan.
For purposes of this section, the term "applicable benchmarks" means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph (5)).
(2) Exception for years after process begins
Paragraph (1) shall not apply to a plan year if such year is in a funding plan adoption period or funding improvement period by reason of the plan being in endangered status for a preceding plan year. For purposes of this section, such preceding plan year shall be the initial determination year with respect to the funding improvement plan to which it relates.
(3) Funding improvement plan
For purposes of this section—
(A) In general
A funding improvement plan is a plan which consists of the actions, including options or a range of options to be proposed to the bargaining parties, formulated to provide, based on reasonably anticipated experience and reasonable actuarial assumptions, for the attainment by the plan during the funding improvement period of the following requirements:
(i) Increase in plan's funding percentage
The plan's funded percentage as of the close of the funding improvement period equals or exceeds a percentage equal to the sum of—
(I) such percentage as of the beginning of the first plan year for which the plan is certified to be in endangered status pursuant to paragraph (b)(3), plus
(II) 33 percent of the difference between 100 percent and the percentage under subclause (I).
(ii) Avoidance of accumulated funding deficiencies
No accumulated funding deficiency for the last plan year during the funding improvement period (taking into account any extension of amortization periods under section 431(d)).
(B) Seriously endangered plans
In the case of a plan in seriously endangered status, except as provided in paragraph (5), subparagraph (A)(i)(II) shall be applied by substituting "20 percent" for "33 percent".
(4) Funding improvement period
For purposes of this section—
(A) In general
The funding improvement period for any funding improvement plan adopted pursuant to this subsection is the 10-year period beginning on the first day of the first plan year of the multiemployer plan beginning after the earlier of—
(i) the second anniversary of the date of the adoption of the funding improvement plan, or
(ii) the expiration of the collective bargaining agreements in effect on the due date for the actuarial certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering, as of such due date, at least 75 percent of the active participants in such multiemployer plan.
(B) Seriously endangered plans
In the case of a plan in seriously endangered status, except as provided in paragraph (5), subparagraph (A) shall be applied by substituting "15-year period" for "10-year period".
(C) Coordination with changes in status
(i) Plans no longer in endangered status
If the plan's actuary certifies under subsection (b)(3)(A) for a plan year in any funding plan adoption period or funding improvement period that the plan is no longer in endangered status and is not in critical status, the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of the close of the preceding plan year.
(ii) Plans in critical status
If the plan's actuary certifies under subsection (b)(3)(A) for a plan year in any funding plan adoption period or funding improvement period that the plan is in critical status, the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of the close of the plan year preceding the first plan year in the rehabilitation period with respect to such status.
(D) Plans in endangered status at end of period
If the plan's actuary certifies under subsection (b)(3)(A) for the first plan year following the close of the period described in subparagraph (A) that the plan is in endangered status, the provisions of this subsection and subsection (d) shall be applied as if such first plan year were an initial determination year, except that the plan may not be amended in a manner inconsistent with the funding improvement plan in effect for the preceding plan year until a new funding improvement plan is adopted.
(5) Special rules for seriously endangered plans more than 70 percent funded
(A) In general
If the funded percentage of a plan in seriously endangered status was more than 70 percent as of the beginning of the initial determination year—
(i) paragraphs (3)(B) and (4)(B) shall apply only if the plan's actuary certifies, within 30 days after the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of the plan and the collective bargaining agreements in effect at the time of such certification, the plan is not projected to meet the requirements of paragraph (3)(A) (without regard to paragraphs (3)(B) and (4)(B)), and
(ii) if there is a certification under clause (i), the plan may, in formulating its funding improvement plan, only take into account the rules of paragraph (3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which the last of the collective bargaining agreements described in paragraph (4)(A)(ii) expires.
(B) Special rule after expiration of agreements
Notwithstanding subparagraph (A)(ii), if, for any plan year ending after the date described in subparagraph (A)(ii), the plan actuary certifies (at the time of the annual certification under subsection (b)(3)(A) for such plan year) that, based on the terms of the plan and collective bargaining agreements in effect at the time of that annual certification, the plan is not projected to be able to meet the requirements of paragraph (3)(A) (without regard to paragraphs (3)(B) and (4)(B)), paragraphs (3)(B) and (4)(B) shall continue to apply for such year.
(6) Updates to funding improvement plans and schedules
(A) Funding improvement plan
The plan sponsor shall annually update the funding improvement plan and shall file the update with the plan's annual report under section 104 of the Employee Retirement Income Security Act of 1974.
(B) Schedules
The plan sponsor shall annually update any schedule of contribution rates provided under this subsection to reflect the experience of the plan.
(C) Duration of schedule
A schedule of contribution rates provided by the plan sponsor and relied upon by bargaining parties in negotiating a collective bargaining agreement shall remain in effect for the duration of that collective bargaining agreement.
(7) Imposition of schedule where failure to adopt funding improvement plan
(A) Initial contribution schedule
If—
(i) a collective bargaining agreement providing for contributions under a multiemployer plan that was in effect at the time the plan entered endangered status expires, and
(ii) after receiving one or more schedules from the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the funding improvement plan and a schedule from the plan sponsor,
the plan sponsor shall implement the schedule described in paragraph (1)(B)(i)(I) beginning on the date specified in subparagraph (C).
(B) Subsequent contribution schedule
If—
(i) a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a funding improvement plan (or imposed under subparagraph (A)) expires while the plan is still in endangered status, and
(ii) after receiving one or more updated schedules from the plan sponsor under paragraph (6)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated funding improvement plan and a schedule from the plan sponsor,
then the contribution schedule applicable under the expired collective bargaining agreement, as updated and in effect on the date the collective bargaining agreement expires, shall be implemented by the plan sponsor beginning on the date specified in subparagraph (C).
(C) Date of implementation
The date specified in this subparagraph is the date which is 180 days after the date on which the collective bargaining agreement described in subparagraph (A) or (B) expires.
(8) Funding plan adoption period
For purposes of this section, the term "funding plan adoption period" means the period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending on the day before the first day of the funding improvement period.
(d) Rules for operation of plan during adoption and improvement periods
(1) Compliance with funding improvement plan
(A) In general
A plan may not be amended after the date of the adoption of a funding improvement plan under subsection (c) so as to be inconsistent with the funding improvement plan.
(B) Special rules for benefit increases
A plan may not be amended after the date of the adoption of a funding improvement plan under subsection (c) so as to increase benefits, including future benefit accruals, unless the plan actuary certifies that such increase is paid for out of additional contributions not contemplated by the funding improvement plan, and, after taking into account the benefit increase, the multiemployer plan still is reasonably expected to meet the applicable benchmark on the schedule contemplated in the funding improvement plan.
(2) Special rules for plan adoption period
During the period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending on the date of the adoption of a funding improvement plan—
(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides for—
(i) a reduction in the level of contributions for any participants,
(ii) a suspension of contributions with respect to any period of service, or
(iii) any new direct or indirect exclusion of younger or newly hired employees from plan participation, and
(B) no amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan may be adopted unless the amendment is required as a condition of qualification under part I of subchapter D of
(e) Rehabilitation plan must be adopted for multiemployer plans in critical status
(1) In general
In any case in which a multiemployer plan is in critical status for a plan year, the plan sponsor, in accordance with this subsection—
(A) shall adopt a rehabilitation plan not later than 240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and
(B) within 30 days after the adoption of the rehabilitation plan—
(i) shall provide to the bargaining parties 1 or more schedules showing revised benefit structures, revised contribution structures, or both, which, if adopted, may reasonably be expected to enable the multiemployer plan to emerge from critical status in accordance with the rehabilitation plan, and
(ii) may, if the plan sponsor deems appropriate, prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan.
The schedule or schedules described in subparagraph (B)(i) shall reflect reductions in future benefit accruals and adjustable benefits, and increases in contributions, that the plan sponsor determines are reasonably necessary to emerge from critical status. One schedule shall be designated as the default schedule and such schedule shall assume that there are no increases in contributions under the plan other than the increases necessary to emerge from critical status after future benefit accruals and other benefits (other than benefits the reduction or elimination of which are not permitted under section 411(d)(6)) have been reduced to the maximum extent permitted by law.
(2) Exception for years after process begins
Paragraph (1) shall not apply to a plan year if such year is in a rehabilitation plan adoption period or rehabilitation period by reason of the plan being in critical status for a preceding plan year. For purposes of this section, such preceding plan year shall be the initial critical year with respect to the rehabilitation plan to which it relates.
(3) Rehabilitation plan
For purposes of this section—
(A) In general
A rehabilitation plan is a plan which consists of—
(i) actions, including options or a range of options to be proposed to the bargaining parties, formulated, based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease to be in critical status by the end of the rehabilitation period and may include reductions in plan expenditures (including plan mergers and consolidations), reductions in future benefit accruals or increases in contributions, if agreed to by the bargaining parties, or any combination of such actions, or
(ii) if the plan sponsor determines that, based on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not reasonably be expected to emerge from critical status by the end of the rehabilitation period, reasonable measures to emerge from critical status at a later time or to forestall possible insolvency (within the meaning of section 4245 of the Employee Retirement Income Security Act of 1974).
A rehabilitation plan must provide annual standards for meeting the requirements of such rehabilitation plan. Such plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies, shall set forth the alternatives considered, explain why the plan is not reasonably expected to emerge from critical status by the end of the rehabilitation period, and specify when, if ever, the plan is expected to emerge from critical status in accordance with the rehabilitation plan.
(B) Updates to rehabilitation plan and schedules
(i) Rehabilitation plan
The plan sponsor shall annually update the rehabilitation plan and shall file the update with the plan's annual report under section 104 of the Employee Retirement Income Security Act of 1974.
(ii) Schedules
The plan sponsor shall annually update any schedule of contribution rates provided under this subsection to reflect the experience of the plan.
(iii) Duration of schedule
A schedule of contribution rates provided by the plan sponsor and relied upon by bargaining parties in negotiating a collective bargaining agreement shall remain in effect for the duration of that collective bargaining agreement.
(C) Imposition of schedule where failure to adopt rehabilitation plan
(i) Initial contribution schedule
If—
(I) a collective bargaining agreement providing for contributions under a multiemployer plan that was in effect at the time the plan entered critical status expires, and
(II) after receiving one or more schedules from the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the rehabilitation plan and a schedule from the plan sponsor under paragraph (1)(B)(i),
the plan sponsor shall implement the schedule described in the last sentence of paragraph (1) beginning on the date specified in clause (iii).
(ii) Subsequent contribution schedule
If—
(I) a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a rehabilitation plan (or imposed under subparagraph (C)(i)) expires while the plan is still in critical status, and
(II) after receiving one or more updated schedules from the plan sponsor under subparagraph (B)(ii), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated rehabilitation plan and a schedule from the plan sponsor,
then the contribution schedule applicable under the expired collective bargaining agreement, as updated and in effect on the date the collective bargaining agreement expires, shall be implemented by the plan sponsor beginning on the date specified in clause (iii).
(iii) Date of implementation
The date specified in this subparagraph is the date which is 180 days after the date on which the collective bargaining agreement described in clause (ii) or (iii) expires.
(4) Rehabilitation period
For purposes of this section—
(A) In general
The rehabilitation period for a plan in critical status is the 10-year period beginning on the first day of the first plan year of the multiemployer plan following the earlier of—
(i) the second anniversary of the date of the adoption of the rehabilitation plan, or
(ii) the expiration of the collective bargaining agreements in effect on the due date for the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering, as of such date at least 75 percent of the active participants in such multiemployer plan.
If a plan emerges from critical status as provided under subparagraph (B) before the end of such 10-year period, the rehabilitation period shall end with the plan year preceding the plan year for which the determination under subparagraph (B) is made.
(B) Emergence
(i) In general
A plan in critical status shall remain in such status until a plan year for which the plan actuary certifies, in accordance with subsection (b)(3)(A), that—
(I) the plan is not described in one or more of the subparagraphs in subsection (b)(2) as of the beginning of the plan year,
(II) the plan is not projected to have an accumulated funding deficiency for the plan year or any of the 9 succeeding plan years, without regard to the use of the shortfall method but taking into account any extension of amortization periods under section 431(d)(2) or section 412(e) (as in effect prior to the enactment of the Pension Protection Act of 2006), and
(III) the plan is not projected to become insolvent within the meaning of section 418E for any of the 30 succeeding plan years.
(ii) Plans with certain amortization extensions
(I) Special emergence rule
Notwithstanding clause (i), a plan in critical status that has an automatic extension of amortization periods under section 431(d)(1) shall no longer be in critical status if the plan actuary certifies for a plan year, in accordance with subsection (b)(3)(A), that—
(aa) the plan is not projected to have an accumulated funding deficiency for the plan year or any of the 9 succeeding plan years, without regard to the use of the shortfall method but taking into account any extension of amortization periods under section 431(d)(1), and
(bb) the plan is not projected to become insolvent within the meaning of section 418E for any of the 30 succeeding plan years,
regardless of whether the plan is described in one or more of the subparagraphs in subsection (b)(2) as of the beginning of the plan year.
(II) Reentry into critical status
A plan that emerges from critical status under subclause (I) shall not reenter critical status for any subsequent plan year unless—
(aa) the plan is projected to have an accumulated funding deficiency for the plan year or any of the 9 succeeding plan years, without regard to the use of the shortfall method but taking into account any extension of amortization periods under section 431(d), or
(bb) the plan is projected to become insolvent within the meaning of section 418E for any of the 30 succeeding plan years.
(5) Rehabilitation plan adoption period
For purposes of this section, the term "rehabilitation plan adoption period" means the period beginning on the date of the certification under subsection (b)(3)(A) for the initial critical year and ending on the day before the first day of the rehabilitation period.
(6) Limitation on reduction in rates of future accruals
Any reduction in the rate of future accruals under the default schedule described in the last sentence of paragraph (1) shall not reduce the rate of future accruals below—
(A) a monthly benefit (payable as a single life annuity commencing at the participant's normal retirement age) equal to 1 percent of the contributions required to be made with respect to a participant, or the equivalent standard accrual rate for a participant or group of participants under the collective bargaining agreements in effect as of the first day of the initial critical year, or
(B) if lower, the accrual rate under the plan on such first day.
The equivalent standard accrual rate shall be determined by the plan sponsor based on the standard or average contribution base units which the plan sponsor determines to be representative for active participants and such other factors as the plan sponsor determines to be relevant. Nothing in this paragraph shall be construed as limiting the ability of the plan sponsor to prepare and provide the bargaining parties with alternative schedules to the default schedule that establish lower or higher accrual and contribution rates than the rates otherwise described in this paragraph.
(7) Automatic employer surcharge
(A) Imposition of surcharge
Each employer otherwise obligated to make a contribution for the initial critical year shall be obligated to pay to the plan for such year a surcharge equal to 5 percent of the contribution otherwise required under the applicable collective bargaining agreement (or other agreement pursuant to which the employer contributes). For each succeeding plan year in which the plan is in critical status for a consecutive period of years beginning with the initial critical year, the surcharge shall be 10 percent of the contribution otherwise so required.
(B) Enforcement of surcharge
The surcharges under subparagraph (A) shall be due and payable on the same schedule as the contributions on which the surcharges are based. Any failure to make a surcharge payment shall be treated as a delinquent contribution under section 515 of the Employee Retirement Income Security Act of 1974 and shall be enforceable as such.
(C) Surcharge to terminate upon collective bargaining agreement renegotiation
The surcharge under this paragraph shall cease to be effective with respect to employees covered by a collective bargaining agreement (or other agreement pursuant to which the employer contributes), beginning on the effective date of a collective bargaining agreement (or other such agreement) that includes terms consistent with a schedule presented by the plan sponsor under paragraph (1)(B)(i), as modified under subparagraph (B) of paragraph (3).
(D) Surcharge not to apply until employer receives notice
The surcharge under this paragraph shall not apply to an employer until 30 days after the employer has been notified by the plan sponsor that the plan is in critical status and that the surcharge is in effect.
(E) Surcharge not to generate increased benefit accruals
Notwithstanding any provision of a plan to the contrary, the amount of any surcharge under this paragraph shall not be the basis for any benefit accrual under the plan.
(8) Benefit adjustments
(A) Adjustable benefits
(i) In general
Notwithstanding section 411(d)(6), the plan sponsor shall, subject to the notice requirement under subparagraph (C), make any reductions to adjustable benefits which the plan sponsor deems appropriate, based upon the outcome of collective bargaining over the schedule or schedules provided under paragraph (1)(B)(i).
(ii) Exception for retirees
Except in the case of adjustable benefits described in clause (iv)(III), the plan sponsor of a plan in critical status shall not reduce adjustable benefits of any participant or beneficiary whose benefit commencement date is before the date on which the plan provides notice to the participant or beneficiary under subsection (b)(3)(D) for the initial critical year.
(iii) Plan sponsor flexibility
The plan sponsor shall include in the schedules provided to the bargaining parties an allowance for funding the benefits of participants with respect to whom contributions are not currently required to be made, and shall reduce their benefits to the extent permitted under this title and considered appropriate by the plan sponsor based on the plan's then current overall funding status.
(iv) Adjustable benefit defined
For purposes of this paragraph, the term "adjustable benefit" means—
(I) benefits, rights, and features under the plan, including post-retirement death benefits, 60-month guarantees, disability benefits not yet in pay status, and similar benefits,
(II) any early retirement benefit or retirement-type subsidy (within the meaning of section 411(d)(6)(B)(i)) and any benefit payment option (other than the qualified joint and survivor annuity), and
(III) benefit increases that would not be eligible for a guarantee under section 4022A of the Employee Retirement Income Security Act of 1974 on the first day of initial critical year because the increases were adopted (or, if later, took effect) less than 60 months before such first day.
(B) Normal retirement benefits protected
Except as provided in subparagraph (A)(iv)(III), nothing in this paragraph shall be construed to permit a plan to reduce the level of a participant's accrued benefit payable at normal retirement age.
(C) Notice requirements
(i) In general
No reduction may be made to adjustable benefits under subparagraph (A) unless notice of such reduction has been given at least 30 days before the general effective date of such reduction for all participants and beneficiaries 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.
(ii) Content of notice
The notice under clause (i) shall contain—
(I) sufficient information to enable participants and beneficiaries to understand the effect of any reduction on their benefits, including an estimate (on an annual or monthly basis) of any affected adjustable benefit that a participant or beneficiary would otherwise have been eligible for as of the general effective date described in clause (i), and
(II) 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.
(iii) Form and manner
Any notice under clause (i)—
(I) shall be provided in a form and manner prescribed in regulations of the Secretary, in consultation with the Secretary of Labor,
(II) shall be written in a manner so as to be understood by the average plan participant, and
(III) may be provided in written, electronic, or other appropriate form to the extent such form is reasonably accessible to persons to whom the notice is required to be provided.
The Secretary shall in the regulations prescribed under subclause (I) establish a model notice that a plan sponsor may use to meet the requirements of this subparagraph.
(9) Benefit suspensions for multiemployer plans in critical and declining status
(A) In general
Notwithstanding section 411(d)(6) and subject to subparagraphs (B) through (I), the plan sponsor of a plan in critical and declining status may, by plan amendment, suspend benefits which the sponsor deems appropriate.
(B) Suspension of benefits
(i) Suspension of benefits defined
For purposes of this subsection, the term "suspension of benefits" means the temporary or permanent reduction of any current or future payment obligation of the plan to any participant or beneficiary under the plan, whether or not in pay status at the time of the suspension of benefits.
(ii) Length of suspensions
Any suspension of benefits made under subparagraph (A) shall remain in effect until the earlier of when the plan sponsor provides benefit improvements in accordance with subparagraph (E) or the suspension of benefits expires by its own terms.
(iii) No liability
The plan shall not be liable for any benefit payments not made as a result of a suspension of benefits under this paragraph.
(iv) Applicability
For purposes of this paragraph, all references to suspensions of benefits, increases in benefits, or resumptions of suspended benefits with respect to participants shall also apply with respect to benefits of beneficiaries or alternative payees of participants.
(v) Retiree representative
(I) In general
In the case of a plan with 10,000 or more participants, not later than 60 days prior to the plan sponsor submitting an application to suspend benefits, the plan sponsor shall select a participant of the plan in pay status to act as a retiree representative. The retiree representative shall advocate for the interests of the retired and deferred vested participants and beneficiaries of the plan throughout the suspension approval process.
(II) Reasonable expenses from plan
The plan shall provide for reasonable expenses by the retiree representative, including reasonable legal and actuarial support, commensurate with the plan's size and funded status.
(III) Special rule relating to fiduciary status
Duties performed pursuant to subclause (I) shall not be subject to section 4975. The preceding sentence shall not apply to those duties associated with an application to suspend benefits pursuant to subparagraph (G) that are performed by the retiree representative who is also a plan trustee.
(C) Conditions for suspensions
The plan sponsor of a plan in critical and declining status for a plan year may suspend benefits only if the following conditions are met:
(i) Taking into account the proposed suspensions of benefits (and, if applicable, a proposed partition of the plan under section 4233 of the Employee Retirement Income Security Act of 1974), the plan actuary certifies that the plan is projected to avoid insolvency within the meaning of section 418E, assuming the suspensions of benefits continue until the suspensions of benefits expire by their own terms or if no such expiration date is set, indefinitely.
(ii) The plan sponsor determines, in a written record to be maintained throughout the period of the benefit suspension, that the plan is still projected to become insolvent unless benefits are suspended under this paragraph, although all reasonable measures to avoid insolvency have been taken (and continue to be taken during the period of the benefit suspension). In its determination, the plan sponsor may take into account factors including the following:
(I) Current and past contribution levels.
(II) Levels of benefit accruals (including any prior reductions in the rate of benefit accruals).
(III) Prior reductions (if any) of adjustable benefits.
(IV) Prior suspensions (if any) of benefits under this subsection.
(V) The impact on plan solvency of the subsidies and ancillary benefits available to active participants.
(VI) Compensation levels of active participants relative to employees in the participants' industry generally.
(VII) Competitive and other economic factors facing contributing employers.
(VIII) The impact of benefit and contribution levels on retaining active participants and bargaining groups under the plan.
(IX) The impact of past and anticipated contribution increases under the plan on employer attrition and retention levels.
(X) Measures undertaken by the plan sponsor to retain or attract contributing employers.
(D) Limitations on suspensions
Any suspensions of benefits made by a plan sponsor pursuant to this paragraph shall be subject to the following limitations:
(i) The monthly benefit of any participant or beneficiary may not be reduced below 110 percent of the monthly benefit which is guaranteed by the Pension Benefit Guaranty Corporation under section 4022A of the Employee Retirement Income Security Act of 1974 on the date of the suspension.
(ii)(I) In the case of a participant or beneficiary who has attained 75 years of age as of the effective date of the suspension, not more than the applicable percentage of the maximum suspendable benefits of such participant or beneficiary may be suspended under this paragraph.
(II) For purposes of subclause (I), the maximum suspendable benefits of a participant or beneficiary is the portion of the benefits of such participant or beneficiary that would be suspended pursuant to this paragraph without regard to this clause;
(III) For purposes of subclause (I), the applicable percentage is a percentage equal to the quotient obtained by dividing—
(aa) the number of months during the period beginning with the month after the month in which occurs the effective date of the suspension and ending with the month during which the participant or beneficiary attains the age of 80, by
(bb) 60 months.
(iii) No benefits based on disability (as defined under the plan) may be suspended under this paragraph.
(iv) Any suspensions of benefits, in the aggregate (and, if applicable, considered in combination with a partition of the plan under section 4233 of the Employee Retirement Income Security Act of 1974), shall be reasonably estimated to achieve, but not materially exceed, the level that is necessary to avoid insolvency.
(v) In any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan under section 4233 of the Employee Retirement Income Security Act of 1974, the suspension of benefits may not take effect prior to the effective date of such partition.
(vi) Any suspensions of benefits shall be equitably distributed across the participant and beneficiary population, taking into account factors, with respect to participants and beneficiaries and their benefits, that may include one or more of the following:
(I) Age and life expectancy.
(II) Length of time in pay status.
(III) Amount of benefit.
(IV) Type of benefit: survivor, normal retirement, early retirement.
(V) Extent to which participant or beneficiary is receiving a subsidized benefit.
(VI) Extent to which participant or beneficiary has received post-retirement benefit increases.
(VII) History of benefit increases and reductions.
(VIII) Years to retirement for active employees.
(IX) Any discrepancies between active and retiree benefits.
(X) Extent to which active participants are reasonably likely to withdraw support for the plan, accelerating employer withdrawals from the plan and increasing the risk of additional benefit reductions for participants in and out of pay status.
(XI) Extent to which benefits are attributed to service with an employer that failed to pay its full withdrawal liability.
(vii) In the case of a plan that includes the benefits described in clause (III), benefits suspended under this paragraph shall—
(I) first, be applied to the maximum extent permissible to benefits attributable to a participant's service for an employer which withdrew from the plan and failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under section 4201(b)(1) of the Employee Retirement Income Security Act of 1974 or an agreement with the plan,
(II) second, except as provided by subclause (III), be applied to all other benefits that may be suspended under this paragraph, and
(III) third, be applied to benefits under a plan that are directly attributable to a participant's service with any employer which has, prior to the date of enactment of the Multiemployer Pension Reform Act of 2014—
(aa) withdrawn from the plan in a complete withdrawal under section 4203 of the Employee Retirement Income Security Act of 1974 and has paid the full amount of the employer's withdrawal liability under section 4201(b)(1) of such Act or an agreement with the plan, and
(bb) pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries of the plan under a separate, single-employer plan sponsored by the employer, in an amount equal to any amount of benefits for such participants and beneficiaries reduced as a result of the financial status of the plan.
(E) Benefit improvements
(i) In general
The plan sponsor may, in its sole discretion, provide benefit improvements while any suspension of benefits under the plan remains in effect, except that the plan sponsor may not increase the liabilities of the plan by reason of any benefit improvement for any participant or beneficiary not in pay status by the first day of the plan year for which the benefit improvement takes effect, unless—
(I) such action is accompanied by equitable benefit improvements in accordance with clause (ii) for all participants and beneficiaries whose benefit commencement dates were before the first day of the plan year for which the benefit improvement for such participant or beneficiary not in pay status took effect; and
(II) the plan actuary certifies that after taking into account such benefits improvements the plan is projected to avoid insolvency indefinitely under section 418E.
(ii) Equitable distribution of benefit improvements
(I) Limitation
The projected value of the total liabilities for benefit improvements for participants and beneficiaries not in pay status by the date of the first day of the plan year in which the benefit improvements are proposed to take effect, as determined as of such date, may not exceed the projected value of the liabilities arising from benefit improvements for participants and beneficiaries with benefit commencement dates prior to the first day of such plan year, as so determined.
(II) Equitable distribution of benefits
The plan sponsor shall equitably distribute any increase in total liabilities for benefit improvements in clause (i) to some or all of the participants and beneficiaries whose benefit commencement date is before the date of the first day of the plan year in which the benefit improvements are proposed to take effect, taking into account the relevant factors described in subparagraph (D)(vi) and the extent to which the benefits of the participants and beneficiaries were suspended.
(iii) Special rule for resumptions of benefits only for participants in pay status
The plan sponsor may increase liabilities of the plan through a resumption of benefits for participants and beneficiaries in pay status only if the plan sponsor equitably distributes the value of resumed benefits to some or all of the participants and beneficiaries in pay status, taking into account the relevant factors described in subparagraph (D)(vi).
(iv) Special rule for certain benefit increases
This subparagraph shall not apply to a resumption of suspended benefits or plan amendment which increases liabilities with respect to participants and beneficiaries not in pay status by the first day of the plan year in which the benefit improvements took effect which—
(I) the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, or
(II) is required as a condition of qualification under part I of subchapter D of
(v) Additional limitations
Except for resumptions of suspended benefits described in clause (iii), the limitations on benefit improvements while a suspension of benefits is in effect under this paragraph shall be in addition to any other applicable limitations on increases in benefits imposed on a plan.
(vi) Definition of benefit improvement
For purposes of this subparagraph, the term "benefit improvement" means, with respect to a plan, a resumption of suspended benefits, an increase in benefits, an increase in the rate at which benefits accrue, or an increase in the rate at which benefits become nonforfeitable under the plan.
(F) Notice requirements
(i) In general
No suspension of benefits may be made pursuant to this paragraph unless notice of such proposed suspension has been given by the plan sponsor concurrently with an application for approval of such suspension submitted under subparagraph (G) to the Secretary of the Treasury to—
(I) such plan participants and beneficiaries who may be contacted by reasonable efforts,
(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.
(ii) Content of notice
The notice under clause (i) shall contain—
(I) sufficient information to enable participants and beneficiaries to understand the effect of any suspensions of benefits, including an individualized estimate (on an annual or monthly basis) of such effect on each participant or beneficiary,
(II) a description of the factors considered by the plan sponsor in designing the benefit suspensions,
(III) a statement that the application for approval of any suspension of benefits shall be available on the website of the Department of the Treasury and that comments on such application will be accepted,
(IV) information as to the rights and remedies of plan participants and beneficiaries,
(V) if applicable, a statement describing the appointment of a retiree representative, the date of appointment of such representative, identifying information about the retiree representative (including whether the representative is a plan trustee), and how to contact such representative, and
(VI) information on how to contact the Department of the Treasury for further information and assistance where appropriate.
(iii) Form and manner
Any notice under clause (i)—
(I) shall be provided in a form and manner prescribed in guidance by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, notwithstanding any other provision of law,
(II) shall be written in a manner so as to be understood by the average plan participant, and
(III) may be provided in written, electronic, or other appropriate form to the extent such form is reasonably accessible to persons to whom the notice is required to be provided.
(iv) Other notice requirement
Any notice provided under clause (i) shall fulfill the requirement for notice of a significant reduction in benefits described in section 4980F.
(v) Model notice
The Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall in the guidance prescribed under clause (iii)(I) establish a model notice that a plan sponsor may use to meet the requirements of this subparagraph.
(G) Approval process by the secretary of the treasury in consultation with the pension benefit guaranty corporation and the secretary of labor.—
(i) In general
The plan sponsor of a plan in critical and declining status for a plan year that seeks to suspend benefits must submit an application to the Secretary of the Treasury for approval of the suspensions of benefits. If the plan sponsor submits an application for approval of the suspensions, the Secretary of the Treasury shall approve, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, the application upon finding that the plan is eligible for the suspensions and has satisfied the criteria of subparagraphs (C), (D), (E), and (F).
(ii) Solicitation of comments
Not later than 30 days after receipt of the application under clause (i), the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall publish a notice in the Federal Register soliciting comments from contributing employers, employee organizations, and participants and beneficiaries of the plan for which an application was made and other interested parties. The application for approval of the suspension of benefits shall be published on the website of the Department of the Treasury.
(iii) Required action; deemed approval
The Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall approve or deny any application for suspensions of benefits under this paragraph within 225 days after the submission of such application. An application for suspension of benefits shall be deemed approved unless, within such 225 days, the Secretary of the Treasury notifies the plan sponsor that it has failed to satisfy one or more of the criteria described in this paragraph. If the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, rejects a plan sponsor's application, the Secretary of the Treasury shall provide notice to the plan sponsor detailing the specific reasons for the rejection, including reference to the specific requirement not satisfied. Approval or denial by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, of an application shall be treated as final agency action for purposes of
(iv) Agency review
In evaluating whether the plan sponsor has met the criteria specified in clause (ii) of subparagraph (C), the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall review the plan sponsor's consideration of factors under such clause.
(v) Standard for accepting plan sponsor determinations
In evaluating the plan sponsor's application, the Secretary of the Treasury shall accept the plan sponsor's determinations unless it concludes, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, that the plan sponsor's determinations were clearly erroneous.
(H) Participant ratification process
(i) In general
No suspension of benefits may take effect pursuant to this paragraph prior to a vote of the participants of the plan with respect to the suspension.
(ii) Administration of vote
Not later than 30 days after approval of the suspension by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, under subparagraph (G), the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall administer a vote of participants and beneficiaries of the plan. Except as provided in clause (v), the suspension shall go into effect following the vote unless a majority of all participants and beneficiaries of the plan vote to reject the suspension. The plan sponsor may submit a new suspension application to the Secretary of the Treasury for approval in any case in which a suspension is prohibited from taking effect pursuant to a vote under this subparagraph.
(iii) Ballots
The plan sponsor shall provide a ballot for the vote (subject to approval by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor) that includes the following:
(I) A statement from the plan sponsor in support of the suspension.
(II) A statement in opposition to the suspension compiled from comments received pursuant to subparagraph (G)(ii).
(III) A statement that the suspension has been approved by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor.
(IV) A statement that the plan sponsor has determined that the plan will become insolvent unless the suspension takes effect.
(V) A statement that insolvency of the plan could result in benefits lower than benefits paid under the suspension.
(VI) A statement that insolvency of the Pension Benefit Guaranty Corporation would result in benefits lower than benefits paid in the case of plan insolvency.
(iv) Communication by plan sponsor
It is the sense of Congress that, depending on the size and resources of the plan and geographic distribution of the plan's participants, the plan sponsor should take such steps as may be necessary to inform participants about proposed benefit suspensions through in-person meetings, telephone or internet-based communications, mailed information, or by other means.
(v) Systemically important plans
(I) In general
Not later than 14 days after a vote under this subparagraph rejecting a suspension, the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall determine whether the plan is a systemically important plan. If the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, determines that the plan is a systemically important plan, not later than the end of the 90-day period beginning on the date the results of the vote are certified, the Secretary of the Treasury shall, notwithstanding such adverse vote—
(aa) permit the implementation of the suspension proposed by the plan sponsor; or
(bb) permit the implementation of a modification by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, of such suspension (so long as the plan is projected to avoid insolvency within the meaning of section 4245 of the Employee Retirement Income Security Act of 1974 under such modification).
(II) Recommendations
Not later than 30 days after a determination by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, that the plan is systemically important, the Participant and Plan Sponsor Advocate selected under section 4004 of the Employee Retirement Income Security Act of 1974 may submit recommendations to the Secretary of the Treasury with respect to the suspension or any revisions to the suspension.
(III) Systemically important plan defined
(aa) In general
For purposes of this subparagraph, a systemically important plan is a plan with respect to which the Pension Benefit Guaranty Corporation projects the present value of projected financial assistance payments exceeds $1,000,000,000 if suspensions are not implemented.
(bb) Indexing
For calendar years beginning after 2015, there shall be substituted for the dollar amount specified in item (aa) an amount equal to the product of such dollar amount and a fraction, the numerator of which is the contribution and benefit base (determined under section 230 of the Social Security Act) for the preceding calendar year and the denominator of which is such contribution and benefit base for calendar year 2014. If the amount otherwise determined under this item is not a multiple of $1,000,000, such amount shall be rounded to the next lowest multiple of $1,000,000.
(vi) Final authorization to suspend
In any case in which a suspension goes into effect following a vote pursuant to clause (ii) (or following a determination under clause (v) that the plan is a systemically important plan), the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall issue a final authorization to suspend with respect to the suspension not later than 7 days after such vote (or, in the case of a suspension that goes into effect under clause (v), at a time sufficient to allow the implementation of the suspension prior to the end of the 90-day period described in clause (v)(I)).
(I) Judicial review
(i) Denial of application
An action by the plan sponsor challenging the denial of an application for suspension of benefits by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, may only be brought following such denial.
(ii) Approval of suspension of benefits
(I) Timing of action
An action challenging a suspension of benefits under this paragraph may only be brought following a final authorization to suspend by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, under subparagraph (H)(vi).
(II) Standards of review
(aa) In general
A court shall review an action challenging a suspension of benefits under this paragraph in accordance with
(bb) Temporary injunction
A court reviewing an action challenging a suspension of benefits under this paragraph may not grant a temporary injunction with respect to such suspension unless the court finds a clear and convincing likelihood that the plaintiff will prevail on the merits of the case.
(iii) Restricted cause of action
A participant or beneficiary affected by a benefit suspension under this paragraph shall not have a cause of action under this title.
(iv) Limitation on action to suspend benefits
No action challenging a suspension of benefits following the final authorization to suspend or the denial of an application for suspension of benefits pursuant to this paragraph may be brought after one year after the earliest date on which the plaintiff acquired or should have acquired actual knowledge of the existence of such cause of action.
(J) Special rule for emergence from critical status
A plan certified to be in critical and declining status pursuant to projections made under subsection (b)(3) for which a suspension of benefits has been made by the plan sponsor pursuant to this paragraph shall not emerge from critical status under paragraph (4)(B), until such time as—
(i) the plan is no longer certified to be in critical or endangered status under paragraphs (1) and (2) of subsection (b), and
(ii) the plan is projected to avoid insolvency under section 418E.
(f) Rules for operation of plan during adoption and rehabilitation period
(1) Compliance with rehabilitation plan
(A) In general
A plan may not be amended after the date of the adoption of a rehabilitation plan under subsection (e) so as to be inconsistent with the rehabilitation plan.
(B) Special rules for benefit increases
A plan may not be amended after the date of the adoption of a rehabilitation plan under subsection (e) so as to increase benefits, including future benefit accruals, unless the plan actuary certifies that such increase is paid for out of additional contributions not contemplated by the rehabilitation plan, and, after taking into account the benefit increase, the multiemployer plan still is reasonably expected to emerge from critical status by the end of the rehabilitation period on the schedule contemplated in the rehabilitation plan.
(2) Restriction on lump sums and similar benefits
(A) In general
Effective on the date the notice of certification of the plan's critical status for the initial critical year under subsection (b)(3)(D) is sent, and notwithstanding section 411(d)(6), the plan shall not pay—
(i) any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section 411(a)(9)), to a participant or beneficiary whose annuity starting date (as defined in section 417(f)(2)) occurs after the date such notice is sent,
(ii) any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and
(iii) any other payment specified by the Secretary by regulations.
(B) Exception
Subparagraph (A) shall not apply to a benefit which under section 411(a)(11) may be immediately distributed without the consent of the participant or to any makeup payment in the case of a retroactive annuity starting date or any similar payment of benefits owed with respect to a prior period.
(3) Special rules for plan adoption period
During the period beginning on the date of the certification under subsection (b)(3)(A) for the initial critical year and ending on the date of the adoption of a rehabilitation plan—
(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides for—
(i) a reduction in the level of contributions for any participants,
(ii) a suspension of contributions with respect to any period of service, or
(iii) any new direct or indirect exclusion of younger or newly hired employees from plan participation, and
(B) no amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan may be adopted unless the amendment is required as a condition of qualification under part I of subchapter D of
(g) Adjustments disregarded in withdrawal liability determination
(1) Benefit reduction
Any benefit reductions under subsection (e)(8) or (f), or benefit reductions or suspensions while in critical and declining status under subsection (e)(9), unless the withdrawal occurs more than ten years after the effective date of a benefit suspension by a plan in critical and declining status, shall be disregarded in determining a plan's unfunded vested benefits for purposes of determining an employer's withdrawal liability under section 4201 of the Employee Retirement Income Security Act of 1974.
(2) Surcharges
Any surcharges under subsection (e)(7) shall be disregarded in determining the allocation of unfunded vested benefits to an employer under section 4211 of the Employee Retirement Income Security Act of 1974 and in determining the highest contribution rate under section 4219(c) of such Act, except for purposes of determining the unfunded vested benefits attributable to an employer under section 4211(c)(4) of such Act or a comparable method approved under section 4211(c)(5) of such Act.
(3) Contribution increases required by funding improvement or rehabilitation plan
(A) In general
Any increase in the contribution rate (or other increase in contribution requirements unless due to increased levels of work, employment, or periods for which compensation is provided) that is required or made in order to enable the plan to meet the requirement of the funding improvement plan or rehabilitation plan shall be disregarded in determining the allocation of unfunded vested benefits to an employer under section 4211 of such Act and in determining the highest contribution rate under section 4219(c) of such Act, except for purposes of determining the unfunded vested benefits attributable to an employer under section 4211(c)(4) of such Act or a comparable method approved under section 4211(c)(5) of such Act.
(B) Special rules
For purposes of this paragraph, any increase in the contribution rate (or other increase in contribution requirements) shall be deemed to be required or made in order to enable the plan to meet the requirement of the funding improvement plan or rehabilitation plan except for increases in contribution requirements due to increased levels of work, employment, or periods for which compensation is provided or additional contributions are used to provide an increase in benefits, including an increase in future benefit accruals, permitted by subsection (d)(1)(B) or (f)(1)(B).
(4) Emergence from endangered or critical status
In the case of increases in the contribution rate (or other increases in contribution requirements unless due to increased levels of work, employment, or periods for which compensation is provided) disregarded pursuant to paragraph (3), this subsection shall cease to apply as of the expiration date of the collective bargaining agreement in effect when the plan emerges from endangered or critical status. Notwithstanding the preceding sentence, once the plan emerges from critical or endangered status, increases in the contribution rate disregarded pursuant to paragraph (3) shall continue to be disregarded in determining the highest contribution rate under section 4219(c) of such Act for plan years during which the plan was in endangered or critical status.
(5) Simplified calculations
The Pension Benefit Guaranty Corporation shall prescribe simplified methods for the application of this subsection in determining withdrawal liability and payment amounts under section 4219(c) of such Act.
(h) Expedited resolution of plan sponsor decisions
If, within 60 days of the due date for adoption of a funding improvement plan under subsection (c) or a rehabilitation plan under subsection (e), the plan sponsor of a plan in endangered status or a plan in critical status has not agreed on a funding improvement plan or rehabilitation plan, then any member of the board or group that constitutes the plan sponsor may require that the plan sponsor enter into an expedited dispute resolution procedure for the development and adoption of a funding improvement plan or rehabilitation plan.
(i) Nonbargained participation
(1) Both bargained and nonbargained employee-participants
In the case of an employer that contributes to a multiemployer plan with respect to both employees who are covered by one or more collective bargaining agreements and employees who are not so covered, if the plan is in endangered status or in critical status, benefits of and contributions for the nonbargained employees, including surcharges on those contributions, shall be determined as if those nonbargained employees were covered under the first to expire of the employer's collective bargaining agreements in effect when the plan entered endangered or critical status.
(2) Nonbargained employees only
In the case of an employer that contributes to a multiemployer plan only with respect to employees who are not covered by a collective bargaining agreement, this section shall be applied as if the employer were the bargaining party, and its participation agreement with the plan were a collective bargaining agreement with a term ending on the first day of the plan year beginning after the employer is provided the schedule or schedules described in subsections (c) and (e).
(j) Definitions; actuarial method
For purposes of this section—
(1) Bargaining party
The term "bargaining party" means—
(A)(i) except as provided in clause (ii), an employer who has an obligation to contribute under the plan; or
(ii) in the case of a plan described under section 404(c), or a continuation of such a plan, the association of employers that is the employer settlor of the plan; and
(B) an employee organization which, for purposes of collective bargaining, represents plan participants employed by an employer who has an obligation to contribute under the plan.
(2) Funded percentage
The term "funded percentage" means the percentage equal to a fraction—
(A) the numerator of which is the value of the plan's assets, as determined under section 431(c)(2), and
(B) the denominator of which is the accrued liability of the plan, determined using actuarial assumptions described in section 431(c)(3).
(3) Accumulated funding deficiency
The term "accumulated funding deficiency" has the meaning given such term in section 431(a).
(4) Active participant
The term "active participant" means, in connection with a multiemployer plan, a participant who is in covered service under the plan.
(5) Inactive participant
The term "inactive participant" means, in connection with a multiemployer plan, a participant, or the beneficiary or alternate payee of a participant, who—
(A) is not in covered service under the plan, and
(B) is in pay status under the plan or has a nonforfeitable right to benefits under the plan.
(6) Pay status
A person is in pay status under a multiemployer plan if—
(A) at any time during the current plan year, such person is a participant or beneficiary under the plan and is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan related to a retirement benefit), or
(B) to the extent provided in regulations of the Secretary, such person is entitled to such a benefit under the plan.
(7) Obligation to contribute
The term "obligation to contribute" has the meaning given such term under section 4212(a) of the Employee Retirement Income Security Act of 1974.
(8) Actuarial method
Notwithstanding any other provision of this section, the actuary's determinations with respect to a plan's normal cost, actuarial accrued liability, and improvements in a plan's funded percentage under this section shall be based upon the unit credit funding method (whether or not that method is used for the plan's actuarial valuation).
(9) Plan sponsor
For purposes of this section, section 431, and section 4971(g):
(A) In general
The term "plan sponsor" means, with respect to any multiemployer plan, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
(B) Special rule for section 404(c) plans
In the case of a plan described in section 404(c) (or a continuation of such plan), such term means the bargaining parties described in paragraph (1).
(10) Benefit commencement date
The term "benefit commencement date" means the annuity starting date (or in the case of a retroactive annuity starting date, the date on which benefit payments begin).
(k) Rules relating to eligible multiemployer plans
(1) Plans applying for special financial assistance
In the case of an eligible multiemployer plan which applies for special financial assistance under section 4262 of such Act— 1
(A) In general
Such application shall be submitted in accordance with the requirements of such section, including any guidance issued thereunder by the Pension Benefit Guaranty Corporation.
(B) Reinstatement of suspended benefits
In the case of a plan for which a suspension of benefits has been approved under subsection (e)(9), the application shall describe the manner in which suspended benefits will be reinstated in accordance with paragraph (2)(A) and guidance issued by the Secretary if the plan receives special financial assistance.
(C) Amount of financial assistance
(i) In general
In determining the amount of special financial assistance to be specified in its application, an eligible multiemployer plan shall—
(I) use the interest rate used by the plan in its most recently completed certification of plan status before January 1, 2021, provided that such interest rate does not exceed the interest rate limit, and
(II) for other assumptions, use the assumptions that the plan used in its most recently completed certification of plan status before January 1, 2021, unless such assumptions are unreasonable.
(ii) Interest rate limit
For purposes of clause (i), the interest rate limit is the rate specified in section 430(h)(2)(C)(iii) (disregarding modifications made under clause (iv) of such section) for the month in which the application for special financial assistance is filed by the eligible multiemployer plan or the 3 preceding months, with such specified rate increased by 200 basis points.
(iii) Changes in assumptions
If a plan determines that use of one or more prior assumptions is unreasonable, the plan may propose in its application to change such assumptions, provided that the plan discloses such changes in its application and describes why such assumptions are no longer reasonable. The plan may not propose a change to the interest rate otherwise required under this subsection for eligibility or financial assistance amount.
(D) Plans applying for priority consideration
In the case of a plan applying for special financial assistance under rules providing for temporary priority consideration, as provided in paragraph (4)(C), such plan's application shall be submitted to the Secretary in addition to the Pension Benefit Guaranty Corporation.
(2) Plans receiving special financial assistance
In the case of an eligible multiemployer plan receiving special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974—
(A) Reinstatement of suspended benefits
The plan shall—
(i) reinstate any benefits that were suspended under subsection (e)(9) or section 4245(a) of the Employee Retirement Income Security Act of 1974, effective as of the first month in which the effective date for the special financial assistance occurs, for participants and beneficiaries as of such month, and
(ii) provide payments equal to the amount of benefits previously suspended to any participants or beneficiaries in pay status as of the effective date of the special financial assistance, payable, as determined by the plan—
(I) as a lump sum within 3 months of such effective date; or
(II) in equal monthly installments over a period of 5 years, commencing within 3 months of such effective date, with no adjustment for interest.
(B) Restrictions on the use of special financial assistance
Special financial assistance received by the plan may be used to make benefit payments and pay plan expenses. Such assistance shall be segregated from other plan assets, and shall be invested by the plan in investment-grade bonds or other investments as permitted by regulations or other guidance issued by the Pension Benefit Guaranty Corporation.
(C) Conditions on plans receiving special financial assistance
(i) In general
The Pension Benefit Guaranty Corporation, in consultation with the Secretary, may impose, by regulation or other guidance, reasonable conditions on an eligible multiemployer plan receiving special financial assistance relating to increases in future accrual rates and any retroactive benefit improvements, allocation of plan assets, reductions in employer contribution rates, diversion of contributions and allocation of expenses to other benefit plans, and withdrawal liability.
(ii) Limitation
The Pension Benefit Guaranty Corporation shall not impose conditions on an eligible multiemployer plan as a condition of, or following receipt of, special financial assistance relating to—
(I) any prospective reduction in plan benefits (including benefits that may be adjusted pursuant to subsection (e)(8)),
(II) plan governance, including selection of, removal of, and terms of contracts with, trustees, actuaries, investment managers, and other service providers, or
(III) any funding rules relating to the plan.
(D) Assistance disregarded for certain purposes
(i) Funding standards
Special financial assistance received by the plan shall not be taken into account for determining contributions required under section 431.
(ii) Insolvent plans
If the plan becomes insolvent within the meaning of section 418E after receiving special financial assistance, the plan shall be subject to all rules applicable to insolvent plans.
(E) Ineligibility for suspension of benefits
The plan shall not be eligible to apply for a new suspension of benefits under subsection (e)(9)(G).
(3) Eligible multiemployer plan
(A) In general
For purposes of this section, a multiemployer plan is an eligible multiemployer plan if—
(i) the plan is in critical and declining status in any plan year beginning in 2020 through 2022,
(ii) a suspension of benefits has been approved with respect to the plan under subsection (e)(9) as of the date of the enactment of this subsection;
(iii) in any plan year beginning in 2020 through 2022, the plan is certified by the plan actuary to be in critical status, has a modified funded percentage of less than 40 percent, and has a ratio of active to inactive participants which is less than 2 to 3, or
(iv) the plan became insolvent within the meaning of section 418E after December 16, 2014, and has remained so insolvent and has not been terminated as of the date of enactment of this subsection.
(B) Modified funded percentage
For purposes of subparagraph (A)(iii), the term "modified funded percentage" means the percentage equal to a fraction the numerator of which is current value of plan assets (as defined in section 3(26) of the Employee Retirement Income Security Act of 1974) and the denominator of which is current liabilities (as defined in section 431(c)(6)(D)).
(4) Coordination with pension benefit guaranty corporation
In prescribing the application process for eligible multiemployer plans to receive special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974 and reviewing applications of such plans, the Pension Benefit Guaranty Corporation shall coordinate with the Secretary in the following manner:
(A) In the case of a plan which has suspended benefits under subsection (e)(9)—
(i) in determining whether to approve the application, such corporation shall consult with the Secretary regarding the plan's proposed method of reinstating benefits, as described in the plan's application and in accordance with guidance issued by the Secretary, and
(ii) such corporation shall consult with the Secretary regarding the amount of special financial assistance needed based on the projected funded status of the plan as of the last day of the plan year ending in 2051, whether the plan proposes to repay benefits over 5 years or as a lump sum, as required by paragraph (2)(A)(ii), and any other relevant factors, as determined by such corporation in consultation with the Secretary, to ensure the amount of assistance is sufficient to meet such requirement and is sufficient to pay benefits as required in section 4262(j)(1) of such Act.
(B) In the case of any plan which proposes in its application to change the assumptions used, as provided in paragraph (1)(C)(iii), such corporation shall consult with the Secretary regarding such proposed change in assumptions.
(C) If such corporation specifies in regulations or guidance that temporary priority consideration is available for plans which are insolvent within the meaning of section 418E or likely to become so insolvent or for plans which have suspended benefits under subsection (e)(9), or that availability is otherwise based on the funded status of the plan under this section, as permitted by section 4262(d) of such Act, such corporation shall consult with the Secretary regarding any granting of priority consideration to such plans.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under
Editorial Notes
References in Text
The Employee Retirement Income Security Act of 1974, referred to in text, is
The enactment of the Pension Protection Act of 2006, referred to in subsec. (e)(4)(B)(i)(II), means the enactment of
The date of enactment of the Multiemployer Pension Reform Act of 2014, referred to in subsec. (e)(9)(D)(vii)(III), is the date of enactment of div. O of
Section 230 of the Social Security Act, referred to in subsec. (e)(9)(H)(v)(III)(bb), is classified to
The date of enactment of this subsection, referred to in subsec. (k)(3)(A)(ii), (iv), is the date of enactment of
Amendments
2021—Subsec. (a)(4).
Subsec. (b)(7).
Subsec. (k).
2018—Subsec. (b)(3)(A)(i).
Subsec. (b)(3)(B)(iv), (v).
Subsec. (b)(3)(D)(iv).
Subsec. (e)(8)(C)(iii).
Subsec. (f)(3).
Subsec. (g)(1).
2014—Subsec. (a)(3).
Subsec. (b)(1).
Subsec. (b)(3)(A)(i).
Subsec. (b)(3)(B)(i).
Subsec. (b)(3)(B)(iv).
Subsec. (b)(3)(D)(i).
Subsec. (b)(3)(D)(iii).
Subsec. (b)(3)(D)(iv).
Subsec. (b)(3)(D)(v).
Subsec. (b)(4).
Subsec. (b)(5).
Subsec. (b)(6).
Subsec. (c)(3)(A)(i)(I).
Subsec. (c)(3)(A)(ii).
Subsec. (c)(7).
Subsec. (d).
Subsec. (e)(3)(C).
Subsec. (e)(4)(B).
Subsec. (e)(9).
Subsec. (f)(3).
Subsec. (f)(4).
Subsec. (g).
Subsec. (g)(1).
Subsecs. (h) to (j).
2008—Subsec. (b)(3)(C).
Subsec. (b)(3)(D)(iii).
Subsec. (c)(3)(A)(ii).
Subsec. (c)(7)(A)(ii).
Subsec. (c)(7)(B).
"(i) on which the Secretary of Labor certifies that the parties are at an impasse, or
"(ii) which is 180 days after the date on which the collective bargaining agreement described in subparagraph (A) expires."
Subsec. (e)(3)(C)(i)(II).
Subsec. (e)(3)(C)(ii).
"(I) on which the Secretary of Labor certifies that the parties are at an impasse, or
"(II) which is 180 days after the date on which the collective bargaining agreement described in clause (i) expires."
Subsec. (e)(4)(A)(ii).
Subsec. (e)(4)(B).
Subsec. (e)(6).
Subsec. (e)(8)(A)(i).
Subsec. (e)(8)(C)(i)(II).
Subsec. (e)(8)(C)(iii).
Subsec. (e)(8)(C)(iii)(I).
Subsec. (e)(9)(B).
Subsec. (f)(2)(A)(i).
Subsec. (g).
Subsec. (i)(3).
Subsec. (i)(9).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Effective Date of 2008 Amendment
Amendment by
Effective Date
Section applicable with respect to plan years beginning after 2007, with special rules for certain notices and certain restored benefits, see section 212(e) of
Temporary Delay of Designation of Multiemployer Plans as in Endangered, Critical, or Critical and Declining Status
"(a)
"(1) the status of the plan for its first plan year beginning during the period beginning on March 1, 2020, and ending on February 28, 2021, or the next succeeding plan year (as designated by the plan sponsor in such election), shall be the same as the status of such plan under such sections for the plan year preceding such designated plan year, and
"(2) in the case of a plan which was in endangered or critical status for the plan year preceding the designated plan year described in paragraph (1), the plan shall not be required to update its plan or schedules under section 305(c)(6) of such Act and section 432(c)(6) of such Code, or section 305(e)(3)(B) of such Act and section 432(e)(3)(B) of such Code, whichever is applicable, until the plan year following the designated plan year described in paragraph (1).
"(b)
"(1) an election was made under subsection (a) with respect to a multiemployer plan, and
"(2) such plan has, without regard to such election, been certified by the plan actuary under section 305(b)(3) of the Employee Retirement Income Security Act of 1974 [
"(c)
"(1)
"(A) shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate may prescribe and, once made, may be revoked only with the consent of the Secretary, and
"(B) if made—
"(i) before the date the annual certification is submitted to the Secretary or the Secretary's delegate under section 305(b)(3) of such Act [
"(ii) after such date, shall be submitted to the Secretary or the Secretary's delegate not later than 30 days after the date of the election.
"(2)
"(A)
"(i) the plan sponsor of a multiemployer plan shall not be required to provide notice under such sections, and
"(ii) the plan sponsor shall provide to the participants and beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, and the Secretary of Labor a notice of the election under subsection (a) and such other information as the Secretary of the Treasury (in consultation with the Secretary of Labor) may require—
"(I) if the election is made before the date the annual certification is submitted to the Secretary or the Secretary's delegate under section 305(b)(3) of such Act and section 432(b)(3) of such Code, not later than 30 days after the date of the certification, and
"(II) if the election is made after such date, not later than 30 days after the date of the election.
"(B)
Temporary Extension of the Funding Improvement and Rehabilitation Periods for Multiemployer Pension Plans in Critical and Endangered Status for 2020 or 2021
"(a)
"(b)
"(1)
"(2)
"(c)
Guidance
Temporary Delay of Designation of Multiemployer Plans as in Endangered or Critical Status
"(a)
"(1) the status of the plan for its first plan year beginning during the period beginning on October 1, 2008, and ending on September 30, 2009, shall be the same as the status of such plan under such sections for the plan year preceding such plan year, and
"(2) in the case of a plan which was in endangered or critical status for the preceding plan year described in paragraph (1), the plan shall not be required to update its plan or schedules under section 305(c)(6) of such Act and section 432(c)(6) of such Code, or section 305(e)(3)(B) of such Act and section 432(e)(3)(B) of such Code, whichever is applicable, until the plan year following the first plan year described in paragraph (1).
If section 305 of the Employee Retirement Income Security Act of 1974 and section 432 of the Internal Revenue Code of 1986 did not apply to the preceding plan year described in paragraph (1), the plan actuary shall make a certification of the status of the plan under section 305(b)(3) of such Act and section 432(b)(3) of such Code for the preceding plan year in the same manner as if such sections had applied to such preceding plan year.
"(b)
"(1) an election was made under subsection (a) with respect to a multiemployer plan, and
"(2) such plan has, without regard to such election, been certified by the plan actuary under section 305(b)(3) of such Act [
then such plan shall be treated as a plan in critical status for such plan year for purposes of applying section 4971(g)(1)(A) of such Code, section 302(b)(3) of such Act [
"(c)
"(1)
"(A) be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate may prescribe and, once made, may be revoked only with the consent of the Secretary, and
"(B) if the election is made—
"(i) before the date the annual certification is submitted to the Secretary or the Secretary's delegate under section 305(b)(3) of such Act [
"(ii) after such date, be submitted to the Secretary or the Secretary's delegate not later than 30 days after the date of the election.
"(2)
"(A)
"(i) the plan sponsor of a multiemployer plan shall not be required to provide notice under such sections, and
"(ii) the plan sponsor shall provide to the participants and beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, and the Secretary of Labor a notice of the election and such other information as the Secretary of the Treasury (in consultation with the Secretary of Labor) may require—
"(I) if the election is made before the date the annual certification is submitted to the Secretary or the Secretary's delegate under section 305(b)(3) of such Act and section 432(b)(3) of such Code, not later than 30 days after the date of the certification, and
"(II) if the election is made after such date, not later than 30 days after the date of the election.
"(B)
Temporary Extension of the Funding Improvement and Rehabilitation Periods for Multiemployer Pension Plans in Critical and Endangered Status for 2008 or 2009
"(a)
"(1) except as provided in paragraph (2), the plan's funding improvement period or rehabilitation period, whichever is applicable, shall be 13 years rather than 10 years, and
"(2) in the case of a plan in seriously endangered status, the plan's funding improvement period shall be 18 years rather than 15 years.
"(b)
"(1)
"(2)
"(c)
Special Rule for Certain Benefits Funded Under an Agreement Approved by the Pension Benefit Guaranty Corporation
For applicability of this section to a multiemployer plan that is a party to an agreement that was approved by the Pension Benefit Guaranty Corporation prior to June 30, 2005, and that increases benefits and provides for certain withdrawal liability rules, see section 206 of
§433. Minimum funding standards for CSEC plans
(a) General rule
For purposes of section 412, the term "accumulated funding deficiency" for a CSEC plan means the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which section 412 applies) over the total credits to such account for such years or, if less, the excess of the total charges to the alternative minimum funding standard account for such plan years over the total credits to such account for such years.
(b) Funding standard account
(1) Account required
Each plan to which this section applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section.
(2) Charges to account
For a plan year, the funding standard account shall be charged with the sum of—
(A) the normal cost of the plan for the plan year,
(B) the amounts necessary to amortize in equal annual installments (until fully amortized)—
(i) in the case of a plan in existence on January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which section 412 applies, over a period of 40 plan years,
(ii) in the case of a plan which comes into existence after January 1, 1974, but before the first day of the first plan year beginning after December 31, 2013, the unfunded past service liability under the plan on the first day of the first plan year to which section 412 applies, over a period of 30 plan years,
(iii) separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
(iv) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 5 plan years, and
(v) separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 10 plan years,
(C) the amount necessary to amortize each waived funding deficiency (within the meaning of section 412(c)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 5 plan years,
(D) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under paragraph (3)(D), and
(E) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 20 years the contributions which would be required to be made under the plan but for the provisions of section 412(c)(7)(A)(i)(I) (as in effect on the day before the enactment of the Pension Protection Act of 2006).
(3) Credits to account
For a plan year, the funding standard account shall be credited with the sum of—
(A) the amount considered contributed by the employer to or under the plan for the plan year,
(B) the amount necessary to amortize in equal annual installments (until fully amortized)—
(i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
(ii) separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 5 plan years, and
(iii) separately, with respect to each plan year, the net gain (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 10 plan years,
(C) the amount of the waived funding deficiency (within the meaning of section 412(c)(3)) for the plan year, and
(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard, the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account.
(4) Combining and offsetting amounts to be amortized
Under regulations prescribed by the Secretary, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—
(A) may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and
(B) may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater.
(5) Interest
(A) In general
Except as provided in subparagraph (B), the funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs.
(B) Exception
The interest rate used for purposes of computing the amortization charge described in subsection (b)(2)(C) or for purposes of any arrangement under subsection (d) for any plan year shall be the greater of—
(i) 150 percent of the Federal mid-term rate (as in effect under section 1274 for the 1st month of such plan year), or
(ii) the rate of interest determined under subparagraph (A).
(6) Amortization schedules in effect
Amortization schedules for amounts described in paragraphs (2) and (3) that are in effect as of the last day of the last plan year beginning before January 1, 2014, by reason of section 104 of the Pension Protection Act of 2006 shall remain in effect pursuant to their terms and this section, except that such amounts shall not be amortized again under this section.
(c) Special rules
(1) Determinations to be made under funding method
For purposes of this section, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan.
(2) Valuation of assets
(A) In general
For purposes of this section, the value of the plan's assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary.
(B) Dedicated bond portfolio
The Secretary may by regulations provide that the value of any dedicated bond portfolio of a plan shall be determined by using the interest rate under section 412(b)(5) (as in effect on the day before the enactment of the Pension Protection Act of 2006).
(3) Actuarial assumptions must be reasonable
For purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods—
(A) each of which is reasonable (taking into account the experience of the plan and reasonable expectations), and
(B) which, in combination, offer the actuary's best estimate of anticipated experience under the plan.
(4) Treatment of certain changes as experience gain or loss
For purposes of this section, if—
(A) a change in benefits under the Social Security Act or in other retirement benefits created under Federal or State law, or
(B) a change in the definition of the term "wages" under section 3121 or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5),
results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain.
(5) Funding method and plan year
(A) Funding methods available
All funding methods available to CSEC plans under section 412 (as in effect on the day before the enactment of the Pension Protection Act of 2006) shall continue to be available under this section.
(B) Changes
If the funding method for a plan is changed, the new funding method shall become the funding method used to determine costs and liabilities under the plan only if the change is approved by the Secretary. If the plan year for a plan is changed, the new plan year shall become the plan year for the plan only if the change is approved by the Secretary.
(C) Approval required for certain changes in assumptions by certain single-employer plans subject to additional funding requirement
(i) In general
No actuarial assumption (other than the assumptions described in subsection (h)(3)) used to determine the current liability for a plan to which this subparagraph applies may be changed without the approval of the Secretary.
(ii) Plans to which subparagraph applies
This subparagraph shall apply to a plan only if—
(I) the plan is a CSEC plan,
(II) the aggregate unfunded vested benefits as of the close of the preceding plan year (as determined under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974) of such plan and all other plans maintained by the contributing sponsors (as defined in section 4001(a)(13) of such Act) and members of such sponsors' controlled groups (as defined in section 4001(a)(14) of such Act) which are covered by title IV of such Act (disregarding plans with no unfunded vested benefits) exceed $50,000,000, and
(III) the change in assumptions (determined after taking into account any changes in interest rate and mortality table) results in a decrease in the funding shortfall of the plan for the current plan year that exceeds $50,000,000, or that exceeds $5,000,000 and that is 5 percent or more of the current liability of the plan before such change.
(6) Full funding
If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency (determined without regard to the alternative minimum funding standard account permitted under subsection (e)) in excess of the full funding limitation—
(A) the funding standard account shall be credited with the amount of such excess, and
(B) all amounts described in paragraphs (2)(B), (C), and (D) and (3)(B) of subsection (b) which are required to be amortized shall be considered fully amortized for purposes of such paragraphs.
(7) Full-funding limitation
For purposes of paragraph (6), the term "full-funding limitation" means the excess (if any) of—
(A) the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over
(B) the lesser of—
(i) the fair market value of the plan's assets, or
(ii) the value of such assets determined under paragraph (2).
(C)
(i)
(I) 90 percent of the current liability (determined without regard to paragraph (4) of subsection (h)) of the plan (including the expected increase in such current liability due to benefits accruing during the plan year), over
(II) the value of the plan's assets determined under paragraph (2).
(ii)
(8) Annual valuation
(A) In general
For purposes of this section, a determination of experience gains and losses and a valuation of the plan's liability shall be made not less frequently than once every year, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.
(B) Valuation date
(i) Current year
Except as provided in clause (ii), the valuation referred to in subparagraph (A) shall be made as of a date within the plan year to which the valuation refers or within one month prior to the beginning of such year.
(ii) Use of prior year valuation
The valuation referred to in subparagraph (A) may be made as of a date within the plan year prior to the year to which the valuation refers if, as of such date, the value of the assets of the plan are not less than 100 percent of the plan's current liability.
(iii) Adjustments
Information under clause (ii) shall, in accordance with regulations, be actuarially adjusted to reflect significant differences in participants.
(iv) Limitation
A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan's current liability.
(9) Time when certain contributions deemed made
For purposes of this section, any contributions for a plan year made by an employer during the period—
(A) beginning on the day after the last day of such plan year, and
(B) ending on the day which is 8½ months after the close of the plan year,
shall be deemed to have been made on such last day.
(10) Anticipation of benefit increases effective in the future
In determining projected benefits, the funding method of a collectively bargained CSEC plan described in section 413(a) shall anticipate benefit increases scheduled to take effect during the term of the collective bargaining agreement applicable to the plan.
(d) Extension of amortization periods
The period of years required to amortize any unfunded liability (described in any clause of subsection (b)(2)(B)) of any plan may be extended by the Secretary for a period of time (not in excess of 10 years) if the Secretary determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and provide adequate protection for participants under the plan and their beneficiaries, and if the Secretary determines that the failure to permit such extension would result in—
(1) a substantial risk to the voluntary continuation of the plan, or
(2) a substantial curtailment of pension benefit levels or employee compensation.
(e) Alternative minimum funding standard
(1) In general
A CSEC plan which uses a funding method that requires contributions in all years not less than those required under the entry age normal funding method may maintain an alternative minimum funding standard account for any plan year. Such account shall be credited and charged solely as provided in this subsection.
(2) Charges and credits to account
For a plan year the alternative minimum funding standard account shall be—
(A) charged with the sum of—
(i) the lesser of normal cost under the funding method used under the plan or normal cost determined under the unit credit method,
(ii) the excess, if any, of the present value of accrued benefits under the plan over the fair market value of the assets, and
(iii) an amount equal to the excess (if any) of credits to the alternative minimum standard account for all prior plan years over charges to such account for all such years, and
(B) credited with the amount considered contributed by the employer to or under the plan for the plan year.
(3) Interest
The alternative minimum funding standard account (and items therein) shall be charged or credited with interest in the manner provided under subsection (b)(5) with respect to the funding standard account.
(f) Quarterly contributions required
(1) In general
If a CSEC plan which has a funded current liability percentage for the preceding plan year of less than 100 percent fails to pay the full amount of a required installment for the plan year, then the rate of interest charged to the funding standard account under subsection (b)(5) with respect to the amount of the underpayment for the period of the underpayment shall be equal to the greater of—
(A) 175 percent of the Federal mid-term rate (as in effect under section 1274 for the 1st month of such plan year), or
(B) the rate of interest used under the plan in determining costs.
(2) Amount of underpayment, period of underpayment
For purposes of paragraph (1)—
(A) Amount
The amount of the underpayment shall be the excess of—
(i) the required installment, over
(ii) the amount (if any) of the installment contributed to or under the plan on or before the due date for the installment.
(B) Period of underpayment
The period for which interest is charged under this subsection with regard to any portion of the underpayment shall run from the due date for the installment to the date on which such portion is contributed to or under the plan (determined without regard to subsection (c)(9)).
(C) Order of crediting contributions
For purposes of subparagraph (A)(ii), contributions shall be credited against unpaid required installments in the order in which such installments are required to be paid.
(3) Number of required installments; due dates
For purposes of this subsection—
(A) Payable in 4 installments
There shall be 4 required installments for each plan year.
(B) Time for payment of installments
| In the case of the following required installments: | The due date is: | |
|---|---|---|
| 1st | April 15 | |
| 2nd | July 15 | |
| 3rd | October 15 | |
| 4th | January 15 of the following year. |
(4) Amount of required installment
For purposes of this subsection—
(A) In general
The amount of any required installment shall be 25 percent of the required annual payment.
(B) Required annual payment
For purposes of subparagraph (A), the term "required annual payment" means the lesser of—
(i) 90 percent of the amount required to be contributed to or under the plan by the employer for the plan year under section 412 (without regard to any waiver under subsection (c) thereof), or
(ii) 100 percent of the amount so required for the preceding plan year.
Clause (ii) shall not apply if the preceding plan year was not a year of 12 months.
(5) Liquidity requirement
(A) In general
A plan to which this paragraph applies shall be treated as failing to pay the full amount of any required installment to the extent that the value of the liquid assets paid in such installment is less than the liquidity shortfall (whether or not such liquidity shortfall exceeds the amount of such installment required to be paid but for this paragraph).
(B) Plans to which paragraph applies
This paragraph shall apply to a CSEC plan other than a plan described in section 412(l)(6)(A) (as in effect on the day before the enactment of the Pension Protection Act of 2006) which—
(i) is required to pay installments under this subsection for a plan year, and
(ii) has a liquidity shortfall for any quarter during such plan year.
(C) Period of underpayment
For purposes of paragraph (1), any portion of an installment that is treated as not paid under subparagraph (A) shall continue to be treated as unpaid until the close of the quarter in which the due date for such installment occurs.
(D) Limitation on increase
If the amount of any required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the amount which, when added to prior installments for the plan year, is necessary to increase the funded current liability percentage (taking into account the expected increase in current liability due to benefits accruing during the plan year) to 100 percent.
(E) Definitions
For purposes of this paragraph—
(i) Liquidity shortfall
The term "liquidity shortfall" means, with respect to any required installment, an amount equal to the excess (as of the last day of the quarter for which such installment is made) of the base amount with respect to such quarter over the value (as of such last day) of the plan's liquid assets.
(ii) Base amount
(I) In general
The term "base amount" means, with respect to any quarter, an amount equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending on the last day of such quarter.
(II) Special rule
If the amount determined under subclause (I) exceeds an amount equal to 2 times the sum of the adjusted disbursements from the plan for the 36 months ending on the last day of the quarter and an enrolled actuary certifies to the satisfaction of the Secretary that such excess is the result of nonrecurring circumstances, the base amount with respect to such quarter shall be determined without regard to amounts related to those nonrecurring circumstances.
(iii) Disbursements from the plan
The term "disbursements from the plan" means all disbursements from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses.
(iv) Adjusted disbursements
The term "adjusted disbursements" means disbursements from the plan reduced by the product of—
(I) the plan's funded current liability percentage for the plan year, and
(II) the sum of the purchases of annuities, payments of single sums, and such other disbursements as the Secretary shall provide in regulations.
(v) Liquid assets
The term "liquid assets" means cash, marketable securities and such other assets as specified by the Secretary in regulations.
(vi) Quarter
The term "quarter" means, with respect to any required installment, the 3-month period preceding the month in which the due date for such installment occurs.
(F) Regulations
The Secretary may prescribe such regulations as are necessary to carry out this paragraph.
(6) Fiscal years and short years
(A) Fiscal years
In applying this subsection to a plan year beginning on any date other than January 1, there shall be substituted for the months specified in this subsection, the months which correspond thereto.
(B) Short plan year
This subsection shall be applied to plan years of less than 12 months in accordance with regulations prescribed by the Secretary.
(g) Imposition of lien where failure to make required contributions
(1) In general
In the case of a plan to which this section applies, if—
(A) any person fails to make a required installment under subsection (f) or any other payment required under this section before the due date for such installment or other payment, and
(B) the unpaid balance of such installment or other payment (including interest), when added to the aggregate unpaid balance of all preceding such installments or other payments for which payment was not made before the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount determined under paragraph (3) upon all property and rights to property, whether real or personal, belonging to such person and any other person who is a member of the same controlled group of which such person is a member.
(2) Plans to which subsection applies
This subsection shall apply to a CSEC plan for any plan year for which the funded current liability percentage of such plan is less than 100 percent. This subsection shall not apply to any plan to which section 4021 of the Employee Retirement Income Security Act of 1974 does not apply (as such section is in effect on the date of the enactment of the Retirement Protection Act of 1994).
(3) Amount of lien
For purposes of paragraph (1), the amount of the lien shall be equal to the aggregate unpaid balance of required installments and other payments required under this section (including interest)—
(A) for plan years beginning after 1987, and
(B) for which payment has not been made before the due date.
(4) Notice of failure; lien
(A) Notice of failure
A person committing a failure described in paragraph (1) shall notify the Pension Benefit Guaranty Corporation of such failure within 10 days of the due date for the required installment or other payment.
(B) Period of lien
The lien imposed by paragraph (1) shall arise on the due date for the required installment or other payment and shall continue until the last day of the first plan year in which the plan ceases to be described in paragraph (1)(B). Such lien shall continue to run without regard to whether such plan continues to be described in paragraph (2) during the period referred to in the preceding sentence.
(C) Certain rules to apply
Any amount with respect to which a lien is imposed under paragraph (1) shall be treated as taxes due and owing the United States and rules similar to the rules of subsections (c), (d), and (e) of section 4068 of the Employee Retirement Income Security Act of 1974 shall apply with respect to a lien imposed by subsection (a) and the amount with respect to such lien.
(5) Enforcement
Any lien created under paragraph (1) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Pension Benefit Guaranty Corporation, by any contributing employer (or any member of the controlled group of the contributing employer).
(6) Definitions
For purposes of this subsection—
(A) Due date; required installment
The terms "due date" and "required installment" have the meanings given such terms by subsection (f), except that in the case of a payment other than a required installment, the due date shall be the date such payment is required to be made under this section.
(B) Controlled group
The term "controlled group" means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414.
(h) Current liability
For purposes of this section—
(1) In general
The term "current liability" means all liabilities to employees and their beneficiaries under the plan.
(2) Treatment of unpredictable contingent event benefits
(A) In general
For purposes of paragraph (1), any unpredictable contingent event benefit shall not be taken into account until the event on which the benefit is contingent occurs.
(B) Unpredictable contingent event benefit
The term "unpredictable contingent event benefit" means any benefit contingent on an event other than—
(i) age, service, compensation, death, or disability, or
(ii) an event which is reasonably and reliably predictable (as determined by the Secretary).
(3) Interest rate and mortality assumptions used
(A) Interest rate
The rate of interest used to determine current liability under this section shall be the third segment rate determined under section 430(h)(2)(C).
(B) Mortality tables
(i) Secretarial authority
The Secretary may by regulation prescribe mortality tables to be used in determining current liability under this subsection. Such tables shall be based upon the actual experience of pension plans and projected trends in such experience. In prescribing such tables, the Secretary shall take into account results of available independent studies of mortality of individuals covered by pension plans.
(ii) Periodic review
The Secretary shall periodically (at least every 5 years) review any tables in effect under this subsection and shall, to the extent the Secretary determines necessary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experience.
(C) Separate mortality tables for the disabled
Notwithstanding subparagraph (B)—
(i) In general
In the case of plan years beginning after December 31, 1995, the Secretary shall establish mortality tables which may be used (in lieu of the tables under subparagraph (B)) to determine current liability under this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals whose disabilities occur in plan years beginning on or after such date.
(ii) Special rule for disabilities occurring after 1994
In the case of disabilities occurring in plan years beginning after December 31, 1994, the tables under clause (i) shall apply only with respect to individuals described in such subclause who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder.
(4) Certain service disregarded
(A) In general
In the case of a participant to whom this paragraph applies, only the applicable percentage of the years of service before such individual became a participant shall be taken into account in computing the current liability of the plan.
(B) Applicable percentage
For purposes of this subparagraph, the applicable percentage shall be determined as follows:
| If the years of participation are: | The applicable percentage is: | |
|---|---|---|
| 1 | 20 | |
| 2 | 40 | |
| 3 | 60 | |
| 4 | 80 | |
| 5 or more | 100. |
(C) Participants to whom paragraph applies
This subparagraph shall apply to any participant who, at the time of becoming a participant—
(i) has not accrued any other benefit under any defined benefit plan (whether or not terminated) maintained by the employer or a member of the same controlled group of which the employer is a member,
(ii) who first becomes a participant under the plan in a plan year beginning after December 31, 1987, and
(iii) has years of service greater than the minimum years of service necessary for eligibility to participate in the plan.
(D) Election
An employer may elect not to have this subparagraph apply. Such an election, once made, may be revoked only with the consent of the Secretary.
(i) Funded current liability percentage
For purposes of this section, the term "funded current liability percentage" means, with respect to any plan year, the percentage which—
(1) the value of the plan's assets determined under subsection (c)(2), is of
(2) the current liability under the plan.
(j) Funding restoration status
Notwithstanding any other provisions of this section—
(1) Normal cost payment
(A) In general
In the case of a CSEC plan that is in funding restoration status for a plan year, for purposes of section 412, the term "accumulated funding deficiency" means, for such plan year, the greater of—
(i) the amount described in subsection (a), or
(ii) the excess of the normal cost of the plan for the plan year over the amount actually contributed to or under the plan for the plan year.
(B) Normal cost
In the case of a CSEC plan that uses a spread gain funding method, for purposes of this subsection, the term "normal cost" means normal cost as determined under the entry age normal funding method.
(2) Plan amendments
In the case of a CSEC plan that is in funding restoration status for a plan year, no amendment to such plan may take effect during such plan year if such amendment has the effect of increasing liabilities of the plan by means of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable. This paragraph shall not apply to any plan amendment that is required to comply with any applicable law. This paragraph shall cease to apply with respect to any plan year, effective as of the first day of the plan year (or if later, the effective date of the amendment) upon payment by the plan sponsor of a contribution to the plan (in addition to any contribution required under this section without regard to this paragraph) in an amount equal to the increase in the funding liability of the plan attributable to the plan amendment.
(3) Funding restoration plan
The sponsor of a CSEC plan shall establish a written funding restoration plan within 180 days of the receipt by the plan sponsor of a certification from the plan actuary that the plan is in funding restoration status for a plan year. Such funding restoration plan shall consist of actions that are calculated, based on reasonably anticipated experience and reasonable actuarial assumptions, to increase the plan's funded percentage to 100 percent over a period that is not longer than the greater of 7 years or the shortest amount of time practicable. Such funding restoration plan shall take into account contributions required under this section (without regard to this paragraph). If a plan remains in funding restoration status for 2 or more years, such funding restoration plan shall be updated each year after the 1st such year within 180 days of receipt by the plan sponsor of a certification from the plan actuary that the plan remains in funding restoration status for the plan year.
(4) Annual certification by plan actuary
Not later than the 90th day of each plan year of a CSEC plan, the plan actuary shall certify to the plan sponsor whether or not the plan is in funding restoration status for the plan year, based on the plan's funded percentage as of the beginning of the plan year. For this purpose, the actuary may conclusively rely on an estimate of—
(A) the plan's funding liability, based on the funding liability of the plan for the preceding plan year and on reasonable actuarial estimates, assumptions, and methods, and
(B) the amount of any contributions reasonably anticipated to be made for the preceding plan year.
Contributions described in subparagraph (B) shall be taken into account in determining the plan's funded percentage as of the beginning of the plan year.
(5) Definitions
For purposes of this subsection—
(A) Funding restoration status
A CSEC plan shall be treated as in funding restoration status for a plan year if the plan's funded percentage as of the beginning of such plan year is less than 80 percent.
(B) Funded percentage
The term "funded percentage" means the ratio (expressed as a percentage) which—
(i) the value of plan assets (as determined under subsection (c)(2)), bears to
(ii) the plan's funding liability.
(C) Funding liability
The term "funding liability" for a plan year means the present value of all benefits accrued or earned under the plan as of the beginning of the plan year, based on the assumptions used by the plan pursuant to this section, including the interest rate described in subsection (b)(5)(A) (without regard to subsection (b)(5)(B)).
(D) Spread gain funding method
The term "spread gain funding method" has the meaning given such term under rules and forms issued by the Secretary.
(E) Plan sponsor
The term "plan sponsor" means, with respect to a CSEC plan, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
(Added
Editorial Notes
References in Text
Section 412 (as in effect on the day before the enactment of the Pension Protection Act of 2006), referred to in subsecs. (b)(2)(E), (c)(2)(B), (5)(A), and (f)(5)(B), means
Section 104 of the Pension Protection Act of 2006, referred to in subsec. (b)(6), is section 104 of
The Social Security Act, referred to in subsecs. (c)(4)(A) and (h)(3)(C)(ii), is act Aug. 14, 1935, ch. 531,
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (c)(5)(C)(ii)(II), (d), and (g)(2), (4)(C), is
The date of the enactment of the Retirement Protection Act of 1994, referred to in subsec. (g)(2), is the date of enactment of subtitle F of title VII of
Amendments
2018—
Subsec. (c)(5)(C)(ii)(II).
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to years beginning after Dec. 31, 2013, see section 3 of