§412. Minimum funding standards
(a) General rule
Except as provided in subsection (h), this section applies to a plan if, for any plan year beginning on or after the effective date of this section for such plan-
(1) such plan included a trust which qualified (or was determined by the Secretary to have qualified) under section 401(a), or
(2) such plan satisfied (or was determined by the Secretary to have satisfied) the requirements of section 403(a).
A plan to which this section applies shall have satisfied the minimum funding standard for such plan for a plan year if as of the end of such plan year, the plan does not have an accumulated funding deficiency. For purposes of this section and section 4971, the term "accumulated funding deficiency" means for any plan the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which this section 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. In any plan year in which a multiemployer plan is in reorganization, the accumulated funding deficiency of the plan shall be determined under section 418B.
(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 this section applies, over a period of 40 plan years,
(ii) in the case of a plan which comes into existence after January 1, 1974, 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 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 30 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 (15 plan years in the case of a multiemployer plan), 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 (30 plan years in the case of a multiemployer plan),
(C) the amount necessary to amortize each waived funding deficiency (within the meaning of subsection (d)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 5 plan years (15 plan years in the case of a multiemployer plan), and
(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).
For additional requirements in the case of plans other than multiemployer plans, see subsection (l).
(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 30 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 (15 plan years in the case of a multiemployer plan), 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 (30 plan years in the case of a multiemployer plan),
(C) the amount of the waived funding deficiency (within the meaning of subsection (d)(3) 1 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 standards, 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
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) Required change of interest rate
For purposes of determining a plan's current liability and for purposes of determining a plan's required contribution under section 412(l) for any plan year-
(i) In general
If any rate of interest used under the plan 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 10 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 subclause (I).
(iii) Assumptions
Notwithstanding subsection (c)(3)(A)(i), 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.
(6) Certain amortization charges and credits
In the case of a plan which, immediately before the date of the enactment of the Multiemployer Pension Plan Amendments Act of 1980, was a multiemployer plan (within the meaning of section 414(f) as in effect immediately before such date)-
(A) any amount described in paragraph (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this subsection which arose in a plan year beginning before such date shall be amortized in equal annual installments (until fully amortized) over 40 plan years, beginning with the plan year in which the amount arose;
(B) any amount described in paragraph (2)(B)(iv) or (3)(B)(ii) of this subsection which arose in a plan year beginning before such date shall be amortized in equal annual installments (until fully amortized) over 20 plan years, beginning with the plan year in which the amount arose;
(C) any change in past service liability which arises during the period of 3 plan years beginning on or after such date, and results from a plan amendment adopted before such date, shall be amortized in equal annual installments (until fully amortized) over 40 plan years, beginning with the plan year in which the change arises; and
(D) any change in past service liability which arises during the period of 2 plan years beginning on or after such date, and results from the changing of a group of participants from one benefit level to another benefit level under a schedule of plan benefits which-
(i) was adopted before such date, and
(ii) was effective for any plan participant before the beginning of the first plan year beginning on or after such date,
shall be amortized in equal annual installments (until fully amortized) over 40 plan years, beginning with the plan year in which the change arises.
(7) Special rules for multiemployer plans
For purposes of this section-
(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 418B(a) 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) For purposes of the full funding limitation under subsection (c)(7), 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)).
(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) 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. In the case of a plan other than a multiemployer plan, this subparagraph shall not apply, but the Secretary may by regulations provide that the value of any dedicated bond portfolio of such plan shall be determined by using the interest rate under subsection (b)(5).
(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) in the case of-
(i) a plan other than a multiemployer plan, each of which is reasonable (taking into account the experience of the plan and reasonable expectations) or which, in the aggregate, result in a total contribution equivalent to that which would be determined if each such assumption and method were reasonable, or
(ii) a multiemployer plan, which, in the aggregate, are reasonable (taking into account the experiences 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) Change in funding method or in plan year requires approval
(A) In general
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.
(B) 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 (l)(7)(C)) 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 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 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 unfunded current liability 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 (g)) 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
(A) In general
For purposes of paragraph (6), the term "full-funding limitation" means the excess (if any) of-
(i) the lesser of (I) 150 percent of current liability (including the expected increase in current liability due to benefits accruing during the plan year), or (II) 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) Current liability
For purposes of subparagraph (D) and subclause (I) of subparagraph (A)(i), the term "current liability" has the meaning given such term by subsection (l)(7) (without regard to subparagraphs (C) and (D) thereof) and using the rate of interest used under subsection (b)(5)(B).
(C) Special rule for paragraph (6)(B)
For purposes of paragraph (6)(B), subparagraph (A)(i) shall be applied without regard to subclause (I) thereof.
(D) Regulatory authority
The Secretary may by regulations provide-
(i) for adjustments to the percentage contained in subparagraph (A)(i) to take into account the respective ages or lengths of service of the participants,
(ii) alternative methods based on factors other than current liability for the determination of the amount taken into account under subparagraph (A)(i), and
(iii) for the treatment under this section of contributions which would be required to be made under the plan but for the provisions of subparagraph (A)(i)(I).
(E) 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) Current liability; assets
For purposes of clause (i)-
(I) the term "current liability" has the meaning given such term by subsection (l)(7) (without regard to subparagraph (D) thereof), and
(II) assets shall not be reduced by any credit balance in the funding standard account.
(8) Certain retroactive plan amendments
For purposes of this section, any amendment applying to a plan year which-
(A) is adopted after the close of such plan year but no later than 2 and one-half months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year),
(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and
(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances,
shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary of Labor notifying him of such amendment and the Secretary of Labor has approved such amendment, or within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary of Labor unless he determines that such amendment is necessary because of a substantial business hardship (as determined under subsection (d)(2)) and that a waiver under subsection (d)(1) is unavailable or inadequate.
(9) Annual valuation
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.
(10) Time when certain contributions deemed made
For purposes of this section-
(A) Defined benefit plans other than multiemployer plans
In the case of a defined benefit plan other than a multiemployer plan, any contributions for a plan year made by an employer during the period-
(i) beginning on the day after the last day of such plan year, and
(ii) 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.
(B) Other plans
In the case of a plan not described in subparagraph (A), 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.
(11) Liability for contributions
(A) In general
Except as provided in subparagraph (B), the amount of any contribution required by this section and any required installments under subsection (m) shall be paid by the employer responsible for contributing to or under the plan the amount described in subsection (b)(3)(A).
(B) Joint and several liability where employer member of controlled group
(i) In general
In the case of a plan other than a multiemployer plan, if the employer referred to in subparagraph (A) is a member of a controlled group, each member of such group shall be jointly and severally liable for payment of such contribution or required installment.
(ii) Controlled group
For purposes of clause (i), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
(12) Anticipation of benefit increases effective in the future
In determining projected benefits, the funding method of a collectively bargained plan described in section 413(a) (other than a multiemployer plan) shall anticipate benefit increases scheduled to take effect during the term of the collective bargaining agreement applicable to the plan.
(d) Variance from minimum funding standard
(1) Waiver in case of business hardship
If an employer or in the case of a multiemployer plan, 10 percent or more of the number of employers contributing to or under the plan, are unable to satisfy the minimum funding standard for a plan year without temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan) and if application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary may waive the requirements of subsection (a) for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under subsection (b)(2)(C). The Secretary shall not waive the minimum funding standard with respect to a plan for more than 3 of any 15 (5 of any 15 in the case of a multiemployer plan) consecutive plan years. The interest rate used for purposes of computing the amortization charge described in subsection (b)(2)(C) for any plan year shall be-
(A) in the case of a plan other than a multiemployer plan, 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 used under the plan in determining costs (including adjustments under subsection (b)(5)(B)), and
(B) in the case of a multiemployer plan, the rate determined under section 6621(b).
(2) Determination of business hardship
For purposes of this section, the factors taken into account in determining temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan) shall include (but shall not be limited to) whether or not-
(A) the employer is operating at an economic loss,
(B) there is substantial unemployment or underemployment in the trade or business and in the industry concerned,
(C) the sales and profits of the industry concerned are depressed or declining, and
(D) it is reasonable to expect that the plan will be continued only if the waiver is granted.
(3) Waived funding deficiency
For purposes of this section, the term "waived funding deficiency" means the portion of the minimum funding standard (determined without regard to subsection (b)(3)(C)) for a plan year waived by the Secretary and not satisfied by employer contributions.
(4) Application must be submitted before date 2½ months after close of year
In the case of a plan other than a multiemployer plan, no waiver may be granted under this subsection with respect to any plan for any plan year unless an application therefor is submitted to the Secretary not later than the 15th day of the 3rd month beginning after the close of such plan year.
(5) Special rule if employer is member of controlled group
(A) In general
In the case of a plan other than a multiemployer plan, if an employer is a member of a controlled group, the temporary substantial business hardship requirements of paragraph (1) shall be treated as met only if such requirements are met-
(i) with respect to such employer, and
(ii) with respect to the controlled group of which such employer is a member (determined by treating all members of such group as a single employer).
The Secretary may provide that an analysis of a trade or business or industry of a member need not be conducted if the Secretary determines such analysis is not necessary because the taking into account of such member would not significantly affect the determination under this subsection.
(B) Controlled group
For purposes of subparagraph (A), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
(e) 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 of Labor for a period of time (not in excess of 10 years) if he determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and would provide adequate protection for participants under the plan and their beneficiaries and if he determines that the failure to permit such extension would-
(1) result in-
(A) a substantial risk to the voluntary continuation of the plan, or
(B) a substantial curtailment of pension benefit levels or employee compensation, and
(2) be adverse to the interests of plan participants in the aggregate.
In the case of a plan other than a multiemployer plan, the interest rate applicable for any plan year under any arrangement entered into by the Secretary in connection with an extension granted under this subsection shall be the greater of (A) 150 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. In the case of a multiemployer plan, such rate shall be the rate determined under section 6621(b).
(f) Requirements relating to waivers and extensions
(1) Benefits may not be increased during waiver or extension period
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 shall be adopted if a waiver under subsection (d)(1) or an extension of time under subsection (e) is in effect with respect to the plan, or if a plan amendment described in subsection (c)(8) has been made at any time in the preceding 12 months (24 months for multiemployer plans). If a plan is amended in violation of the preceding sentence, any such waiver or extension of time shall not apply to any plan year ending on or after the date on which such amendment is adopted.
(2) Exception
Paragraph (1) shall not apply to any plan amendment which-
(A) the Secretary of Labor determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan.
(B) only repeals an amendment described in subsection (c)(8), or
(C) is required as a condition of qualification under this part.
(3) Security for waivers and extensions; consultations
(A) Security may be required
(i) In general
Except as provided in subparagraph (C), the Secretary may require an employer maintaining a defined benefit plan which is a single-employer plan (within the meaning of section 4001(a)(15) of the Employee Retirement Income Security Act of 1974) to provide security to such plan as a condition for granting or modifying a waiver under subsection (d) or an extension under subsection (e).
(ii) Special rules
Any security provided under clause (i) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor (within the meaning of section 4001(a)(13) of such Act), or a member of such sponsor's controlled group (within the meaning of section 4001(a)(14) of such Act).
(B) Consultation with the pension benefit guaranty corporation
Except as provided in subparagraph (C), the Secretary shall, before granting or modifying a waiver under subsection (d) or an extension under subsection (e) with respect to a plan described in subparagraph (A)(i)-
(i) provide the Pension Benefit Guaranty Corporation with-
(I) notice of the completed application for any waiver, extension, or modification, and
(II) an opportunity to comment on such application within 30 days after receipt of such notice, and
(ii) consider-
(I) any comments of the Corporation under clause (i)(II), and
(II) any views of any employee organization (within the meaning of section 3(4) of the Employee Retirement Income Security Act of 1974) representing participants in the plan which are submitted in writing to the Secretary in connection with such application.
Information provided to the corporation under this subparagraph shall be considered tax return information and subject to the safeguarding and reporting requirements of section 6103(p).
(C) Exception for certain waivers and extensions
(i) In general
The preceding provisions of this paragraph shall not apply to any plan with respect to which the sum of-
(I) the outstanding balance of the accumulated funding deficiencies (within the meaning of subsection (a) and section 302(a) of such Act) of the plan,
(II) the outstanding balance of the amount of waived funding deficiencies of the plan waived under subsection (d) or section 303 of such Act, and
(III) the outstanding balance of the amount of decreases in the minimum funding standard allowed under subsection (e) or section 304 of such Act,
is less than $1,000,000.
(ii) Accumulated funding deficiencies
For purposes of clause (i)(I), accumulated funding deficiencies shall include any increase in such amount which would result if all applications for waivers of the minimum funding standard under subsection (d) or section 303 of such Act and for extensions of the amortization period under subsection (e) or section 304 of such Act which are pending with respect to such plan were denied.
(4) Additional requirements
(A) Advance notice
The Secretary shall, before granting a waiver under subsection (d) or an extension under subsection (e), require each applicant to provide evidence satisfactory to the Secretary that the applicant has provided notice of the filing of the application for such waiver or extension to each employee organization representing employees covered by the affected plan, and each participant, beneficiary, and alternate payee (within the meaning of section 414(p)(8)). 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 subparagraph (A).
(g) Alternative minimum funding standard
(1) In general
A 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) Special rules
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.
(h) Exceptions
This section shall not apply to-
(1) any profit-sharing or stock bonus plan,
(2) any insurance contract plan described in subsection (i),
(3) any governmental plan (within the meaning of section 414(d)),
(4) any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made,
(5) any plan which has not, at any time after September 2, 1974, provided for employer contributions, or
(6) any plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan.
No plan described in paragraph (3), (4), or (6) shall be treated as a qualified plan for purposes of section 401(a) unless such plan meets the requirements of section 401(a)(7) as in effect on September 1, 1974.
(i) Certain insurance contract plans
A plan is described in this subsection if-
(1) the plan is funded exclusively by the purchase of individual insurance contracts.
(2) such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective),
(3) benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid,
(4) premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy,
(5) no rights under such contracts have been subject to a security interest at any time during the plan year, and
(6) no policy loans are outstanding at any time during the plan year.
A plan funded exclusively by the purchase of group insurance contracts which is determined under regulations prescribed by the Secretary to have the same characteristics as contracts described in the preceding sentence shall be treated as a plan described in this subsection.
(j) Certain terminated multiemployer plans
This section applies with respect to a terminated multiemployer plan to which section 4021 of the Employee Retirement Income Security Act of 1974 applies, until the last day of the plan year in which the plan terminates, within the meaning of section 4041A(a)(2) of that Act.
(k) 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 in such manner as determined by the Secretary.
(l) Additional funding requirements for plans which are not multiemployer plans
(1) In general
In the case of a defined benefit plan (other than a multiemployer plan) to which this subsection applies under paragraph (9) for any plan year, the amount charged to the funding standard account for such plan year shall be increased by the sum of-
(A) the excess (if any) of-
(i) the deficit reduction contribution determined under paragraph (2) for such plan year, over
(ii) the sum of the charges for such plan year under subsection (b)(2), reduced by the sum of the credits for such plan year under subparagraph (B) of subsection (b)(3), plus
(B) the unpredictable contingent event amount (if any) for such plan year.
Such increase shall not exceed the amount which, after taking into account charges (other than the additional charge under this subsection) and credits under subsection (b), 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.
(2) Deficit reduction contribution
For purposes of paragraph (1), the deficit reduction contribution determined under this paragraph for any plan year is the sum of-
(A) the unfunded old liability amount,
(B) the unfunded new liability amount,
(C) the expected increase in current liability due to benefits accruing during the plan year, and
(D) the aggregate of the unfunded mortality increase amounts.
(3) Unfunded old liability amount
For purposes of this subsection-
(A) In general
The unfunded old liability amount with respect to any plan for any plan year is the amount necessary to amortize the unfunded old liability under the plan in equal annual installments over a period of 18 plan years (beginning with the 1st plan year beginning after December 31, 1988).
(B) Unfunded old liability
The term "unfunded old liability" means the unfunded current liability of the plan as of the beginning of the 1st plan year beginning after December 31, 1987 (determined without regard to any plan amendment increasing liabilities adopted after October 16, 1987).
(C) Special rules for benefit increases under existing collective bargaining agreements
(i) In general
In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and the employer ratified before October 29, 1987, the unfunded old liability amount with respect to such plan for any plan year shall be increased by the amount necessary to amortize the unfunded existing benefit increase liability in equal annual installments over a period of 18 plan years beginning with-
(I) the plan year in which the benefit increase with respect to such liability occurs, or
(II) if the taxpayer elects, the 1st plan year beginning after December 31, 1988.
(ii) Unfunded existing benefit increase liabilities
For purposes of clause (i), the unfunded existing benefit increase liability means, with respect to any benefit increase under the agreements described in clause (i) which takes effect during or after the 1st plan year beginning after December 31, 1987, the unfunded current liability determined-
(I) by taking into account only liabilities attributable to such benefit increase, and
(II) by reducing (but not below zero) the amount determined under paragraph (8)(A)(ii) by the current liability determined without regard to such benefit increase.
(iii) Extensions, modifications, etc. not taken into account
For purposes of this subparagraph, any extension, amendment, or other modification of an agreement after October 28, 1987, shall not be taken into account.
(D) Special rule for required changes in actuarial assumptions
(i) In general
The unfunded old liability amount with respect to any plan for any plan year shall be increased by the amount necessary to amortize the amount of additional unfunded old liability under the plan in equal annual installments over a period of 12 plan years (beginning with the first plan year beginning after December 31, 1994).
(ii) Additional unfunded old liability
For purposes of clause (i), the term "additional unfunded old liability" means the amount (if any) by which-
(I) the current liability of the plan as of the beginning of the first plan year beginning after December 31, 1994, valued using the assumptions required by paragraph (7)(C) as in effect for plan years beginning after December 31, 1994, exceeds
(II) the current liability of the plan as of the beginning of such first plan year, valued using the same assumptions used under subclause (I) (other than the assumptions required by paragraph (7)(C)), using the prior interest rate, and using such mortality assumptions as were used to determine current liability for the first plan year beginning after December 31, 1992.
(iii) Prior interest rate
For purposes of clause (ii), the term "prior interest rate" means the rate of interest that is the same percentage of the weighted average under subsection (b)(5)(B)(ii)(I) for the first plan year beginning after December 31, 1994, as the rate of interest used by the plan to determine current liability for the first plan year beginning after December 31, 1992, is of the weighted average under subsection (b)(5)(B)(ii)(I) for such first plan year beginning after December 31, 1992.
(E) Optional rule for additional unfunded old liability
(i) In general
If an employer makes an election under clause (ii), the additional unfunded old liability for purposes of subparagraph (D) shall be the amount (if any) by which-
(I) the unfunded current liability of the plan as of the beginning of the first plan year beginning after December 31, 1994, valued using the assumptions required by paragraph (7)(C) as in effect for plan years beginning after December 31, 1994, exceeds
(II) the unamortized portion of the unfunded old liability under the plan as of the beginning of the first plan year beginning after December 31, 1994.
(ii) Election
(I) An employer may irrevocably elect to apply the provisions of this subparagraph as of the beginning of the first plan year beginning after December 31, 1994.
(II) If an election is made under this clause, the increase under paragraph (1) for any plan year beginning after December 31, 1994, and before January 1, 2002, to which this subsection applies (without regard to this subclause) shall not be less than the increase that would be required under paragraph (1) if the provisions of this title as in effect for the last plan year beginning before January 1, 1995, had remained in effect.
(4) Unfunded new liability amount
For purposes of this subsection-
(A) In general
The unfunded new liability amount with respect to any plan for any plan year is the applicable percentage of the unfunded new liability.
(B) Unfunded new liability
The term "unfunded new liability" means the unfunded current liability of the plan for the plan year determined without regard to-
(i) the unamortized portion of the unfunded old liability, the unamortized portion of the additional unfunded old liability, the unamortized portion of each unfunded mortality increase, and the unamortized portion of the unfunded existing benefit increase liability, and
(ii) the liability with respect to any unpredictable contingent event benefits (without regard to whether the event has occurred).
(C) Applicable percentage
The term "applicable percentage" means, with respect to any plan year, 30 percent, reduced by the product of-
(i) .40 multiplied by
(ii) the number of percentage points (if any) by which the funded current liability percentage exceeds 60 percent.
(5) Unpredictable contingent event amount
(A) In general
The unpredictable contingent event amount with respect to a plan for any plan year is an amount equal to the greatest of-
(i) the applicable percentage of the product of-
(I) 100 percent, reduced (but not below zero) by the funded current liability percentage for the plan year, multiplied by
(II) the amount of unpredictable contingent event benefits paid during the plan year, including (except as provided by the Secretary) any payment for the purchase of an annuity contract for a participant or beneficiary with respect to such benefits,
(ii) the amount which would be determined for the plan year if the unpredictable contingent event benefit liabilities were amortized in equal annual installments over 7 plan years (beginning with the plan year in which such event occurs), or
(iii) the additional amount that would be determined under paragraph (4)(A) if the unpredictable contingent event benefit liabilities were included in unfunded new liability notwithstanding paragraph (4)(B)(ii).
(B) Applicable percentage
(C) Paragraph not to apply to existing benefits
This paragraph shall not apply to unpredictable contingent event benefits (and liabilities attributable thereto) for which the event occurred before the first plan year beginning after December 31, 1988.
(D) Special rule for first year of amortization
Unless the employer elects otherwise, the amount determined under subparagraph (A) for the plan year in which the event occurs shall be equal to 150 percent of the amount determined under subparagraph (A)(i). The amount under subparagraph (A)(ii) for subsequent plan years in the amortization period shall be adjusted in the manner provided by the Secretary to reflect the application of this subparagraph.
(E) Limitation
The present value of the amounts described in subparagraph (A) with respect to any one event shall not exceed the unpredictable contingent event benefit liabilities attributable to that event.
(6) Special rules for small plans
(A) Plans with 100 or fewer participants
This subsection shall not apply to any plan for any plan year if on each day during the preceding plan year such plan had no more than 100 participants.
(B) Plans with more than 100 but not more than 150 participants
In the case of a plan to which subparagraph (A) does not apply and which on each day during the preceding plan year had no more than 150 participants, the amount of the increase under paragraph (1) for such plan year shall be equal to the product of-
(i) such increase determined without regard to this subparagraph, multiplied by
(ii) 2 percent for the highest number of participants in excess of 100 on any such day.
(C) Aggregation of plans
For purposes of this paragraph, all defined benefit plans maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only employees of such employer or member shall be taken into account.
(7) Current liability
For purposes of this subsection-
(A) In general
The term "current liability" means all liabilities to employees and their beneficiaries under the plan.
(B) Treatment of unpredictable contingent event benefits
(i) In general
For purposes of subparagraph (A), any unpredictable contingent event benefit shall not be taken into account until the event on which the benefit is contingent occurs.
(ii) 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).
(C) Interest rate and mortality assumptions used
Effective for plan years beginning after December 31, 1994-
(i) Interest rate
(I) In general
The rate of interest used to determine current liability under this subsection shall be the rate of interest used under subsection (b)(5), except that the highest rate in the permissible range under subparagraph (B)(ii) thereof shall not exceed the specified percentage under subclause (II) of the weighted average referred to in such subparagraph.
(II) Specified percentage
For purposes of subclause (I), the specified percentage shall be determined as follows:
(ii) 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 subsection shall be the table prescribed by the Secretary which is based on the prevailing commissioners' standard table (described in section 807(d)(5)(A)) 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.
(III) 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.
(iii) Separate mortality tables for the disabled
Notwithstanding clause (ii)-
(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 clause (ii)) 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.
(III) Plan years beginning in 1995
In the case of any plan year beginning in 1995, a plan may use its own mortality assumptions for individuals who are entitled to benefits under the plan on account of disability.
(D) Certain service disregarded
(i) In general
In the case of a participant to whom this subparagraph 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.
(ii) Applicable percentage
For purposes of this subparagraph, the applicable percentage shall be determined as follows:
(iii) Participants to whom subparagraph 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.
(iv) 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.
(8) Other definitions
For purposes of this subsection-
(A) Unfunded current liability
The term "unfunded current liability" means, with respect to any plan year, the excess (if any) of-
(i) the current liability under the plan, over
(ii) value of the plan's assets determined under subsection (c)(2).
(B) Funded current liability percentage
The term "funded current liability percentage" means, with respect to any plan year, the percentage which-
(i) the amount determined under subparagraph (A)(ii), is of
(ii) the current liability under the plan.
(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.
(D) Adjustments to prevent omissions and duplications
The Secretary shall provide such adjustments in the unfunded old liability amount, the unfunded new liability amount, the unpredictable contingent event amount, the current payment amount, and any other charges or credits under this section as are necessary to avoid duplication or omission of any factors in the determination of such amounts, charges, or credits.
(E) Deduction for credit balances
For purposes of this subsection, the amount determined under subparagraph (A)(ii) shall be reduced by any credit balance in the funding standard account. The Secretary may provide for such reduction for purposes of any other provision which references this subsection.
(9) Applicability of subsection
(A) In general
Except as provided in paragraph (6)(A), this subsection shall apply to a plan for any plan year if its funded current liability percentage for such year is less than 90 percent.
(B) Exception for certain plans at least 80 percent funded
Subparagraph (A) shall not apply to a plan for a plan year if-
(i) the funded current liability percentage for the plan year is at least 80 percent, and
(ii) such percentage for each of the 2 immediately preceding plan years (or each of the 2d and 3d immediately preceding plan years) is at least 90 percent.
(C) Funded current liability percentage
For purposes of subparagraphs (A) and (B), the term "funded current liability percentage" has the meaning given such term by paragraph (8)(B), except that such percentage shall be determined for any plan year-
(i) without regard to paragraph (8)(E), and
(ii) by using the rate of interest which is the highest rate allowable for the plan year under paragraph (7)(C).
(D) Transition rules
For purposes of this paragraph:
(i) Funded percentage for years before 1995
The funded current liability percentage for any plan year beginning before January 1, 1995, shall be treated as not less than 90 percent only if for such plan year the plan met one of the following requirements (as in effect for such year):
(I) The full-funding limitation under subsection (c)(7) for the plan was zero.
(II) The plan had no additional funding requirement under this subsection (or would have had no such requirement if its funded current liability percentage had been determined under subparagraph (C)).
(III) The plan's additional funding requirement under this subsection did not exceed the lesser of 0.5 percent of current liability or $5,000,000.
(ii) Special rule for 1995 and 1996
For purposes of determining whether subparagraph (B) applies to any plan year beginning in 1995 or 1996, a plan shall be treated as meeting the requirements of subparagraph (B)(ii) if the plan met the requirements of clause (i) of this subparagraph for any two of the plan years beginning in 1992, 1993, and 1994 (whether or not consecutive).
(10) Unfunded mortality increase amount
(A) In general
The unfunded mortality increase amount with respect to each unfunded mortality increase is the amount necessary to amortize such increase in equal annual installments over a period of 10 plan years (beginning with the first plan year for which a plan uses any new mortality table issued under paragraph (7)(C)(ii)(II) or (III)).
(B) Unfunded mortality increase
For purposes of subparagraph (A), the term "unfunded mortality increase" means an amount equal to the excess of-
(i) the current liability of the plan for the first plan year for which a plan uses any new mortality table issued under paragraph (7)(C)(ii)(II) or (III), over
(ii) the current liability of the plan for such plan year which would have been determined if the mortality table in effect for the preceding plan year had been used.
(11) Phase-in of increases in funding required by Retirement Protection Act of 1994
(A) In general
For any applicable plan year, at the election of the employer, the increase under paragraph (1) shall not exceed the greater of-
(i) the increase that would be required under paragraph (1) if the provisions of this title as in effect for plan years beginning before January 1, 1995, had remained in effect, or
(ii) the amount which, after taking into account charges (other than the additional charge under this subsection) and credits under subsection (b), 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) for the applicable plan year to a percentage equal to the sum of the initial funded current liability percentage of the plan plus the applicable number of percentage points for such applicable plan year.
(B) Applicable number of percentage points
(i) Initial funded current liability percentage of 75 percent or less
Except as provided in clause (ii), for plans with an initial funded current liability percentage of 75 percent or less, the applicable number of percentage points for the applicable plan year is:
(ii) Other cases
In the case of a plan to which this clause applies, the applicable number of percentage points for any such applicable plan year is the sum of-
(I) 2 percentage points;
(II) the applicable number of percentage points (if any) under this clause for the preceding applicable plan year;
(III) the product of .10 multiplied by the excess (if any) of (a) 85 percentage points over (b) the sum of the initial funded current liability percentage and the number determined under subclause (II);
(IV) for applicable plan years beginning in 2000, 1 percentage point; and
(V) for applicable plan years beginning in 2001, 2 percentage points.
(iii) Plans to which clause (ii) applies
(I) In general
Clause (ii) shall apply to a plan for an applicable plan year if the initial funded current liability percentage of such plan is more than 75 percent.
(II) Plans initially under clause (i)
In the case of a plan which (but for this subclause) has an initial funded current liability percentage of 75 percent or less, clause (ii) (and not clause (i)) shall apply to such plan with respect to applicable plan years beginning after the first applicable plan year for which the sum of the initial funded current liability percentage and the applicable number of percentage points (determined under clause (i)) exceeds 75 percent. For purposes of applying clause (ii) to such a plan, the initial funded current liability percentage of such plan shall be treated as being the sum referred to in the preceding sentence.
(C) Definitions
For purposes of this paragraph:
(i) The term "applicable plan year" means a plan year beginning after December 31, 1994, and before January 1, 2002.
(ii) The term "initial funded current liability percentage" means the funded current liability percentage as of the first day of the first plan year beginning after December 31, 1994.
(m) Quarterly contributions required
(1) In general
If a defined benefit plan (other than a multiemployer plan) which has a funded current liability percentage (as defined in subsection (l)(8)) 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 (including adjustments under subsection (b)(5)(B)).
(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)(10)).
(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 the applicable percentage 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.
(C) Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be determined in accordance with the following table:
(D) Special rules for unpredictable contingent event benefits
In the case of a plan to which subsection (1) 2 applies for any calendar year and which has any unpredictable contingent event benefit liabilities-
(i) Liabilities not taken into account
Such liabilities shall not be taken into account in computing the required annual payment under subparagraph (B).
(ii) Increase in installments
Each required installment shall be increased by the greatest of-
(I) the unfunded percentage of the amount of benefits described in subsection (l)(5)(A)(i) paid during the 3-month period preceding the month in which the due date for such installment occurs,
(II) 25 percent of the amount determined under subsection (l)(5)(A)(ii) for the plan year, or
(III) 25 percent of the amount determined under subsection (l)(5)(A)(iii) for the plan year.
(iii) Unfunded percentage
For purposes of clause (ii)(I), the term "unfunded percentage" means the percentage determined under subsection (l)(5)(A)(i)(I) for the plan year.
(iv) Limitation on increase
In no event shall the increases under clause (ii) exceed the amount necessary to increase the funded current liability percentage (within the meaning of subsection (l)(8)(B)) for the plan year to 100 percent.
(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 defined benefit plan (other than a multiemployer plan or a plan described in subsection (l)(6)(A)) 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 clause (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 (as defined in subsection (l)(8)) 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.
(n) 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 (m) 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 defined benefit plan (other than a multiemployer plan) for any plan year for which the funded current liability percentage (within the meaning of subsection (l)(8)(B)) 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 the contributing sponsor (or any member of the controlled group of the contributing sponsor).
(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 (m), 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.
(Added
References in Text
The date of the enactment of the Multiemployer Pension Plan Amendments Act of 1980, referred to in subsec. (b)(6), means the date of the enactment of
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(7)(A), (C), (D), (c)(5)(B)(ii), (e), (f)(3), (4)(A), (j), and (n)(2), (4)(C), is
The Social Security Act, referred to in subsecs. (c)(4)(A) and (l)(7)(C)(iii)(II), is act Aug. 14, 1935, ch. 531,
The Retirement Protection Act of 1994, referred to in subsec. (l)(11), is subtitle F (§§750–781) of title VII of
The date of the enactment of the Retirement Protection Act of 1994, referred to in subsec. (n)(2), is the date of enactment of subtitle F (§§750–781) of title VII of
Amendments
1994-Subsec. (c)(5).
Subsec. (c)(7)(A)(i)(I).
Subsec. (c)(7)(B).
Subsec. (c)(7)(E).
Subsec. (c)(12).
Subsec. (l)(1).
Subsec. (l)(1)(A)(ii).
Subsec. (l)(2)(C).
Subsec. (l)(2)(D).
Subsec. (l)(3)(D), (E).
Subsec. (l)(4)(B)(i).
Subsec. (l)(4)(C).
Subsec. (l)(5)(A).
Subsec. (l)(5)(A)(iii).
Subsec. (l)(5)(E).
Subsec. (l)(7)(C).
Subsec. (l)(9).
Subsec. (l)(10).
Subsec. (l)(11).
Subsec. (m)(1).
Subsec. (m)(4)(D)(ii).
Subsec. (m)(4)(D)(ii)(III).
Subsec. (m)(5), (6).
Subsec. (n)(2).
Subsec. (n)(3).
"(A) the amount by which the unpaid balances described in paragraph (1)(B) (including interest) exceed $1,000,000, or
"(B) the aggregate unpaid balance of required installments and other payments required under this section (including interest)-
"(i) for plan years beginning after 1987, and
"(ii) for which payment has not been made before the due date."
Subsec. (n)(4)(B).
1989-Subsec. (b)(5)(B)(iii).
Subsec. (c)(9).
Subsec. (c)(10)(A).
Subsec. (c)(10)(B).
Subsec. (d)(1)(A)(ii).
Subsec. (f)(4)(A).
Subsec. (l)(3)(C)(ii)(II).
Subsec. (l)(4)(B)(i).
Subsec. (l)(5)(C).
Subsec. (l)(7)(D)(iii)(III).
Subsec. (l)(7)(D)(iv).
Subsec. (l)(8)(A)(ii).
Subsec. (l)(8)(E).
Subsec. (m)(1).
Subsec. (m)(1)(B).
Subsec. (m)(4)(D).
"(i) such liabilities shall not be taken into account in computing the required annual payment under subparagraph (B), and
"(ii) each required installment shall be increased by the greater of-
"(I) the amount of benefits described in subsection (l)(5)(A)(i) paid during the 3-month period preceding the month in which the due date for such installment occurs, or
"(II) 25 percent of the amount determined under subsection (l)(5)(A)(ii) for the plan year."
1988-Subsec. (l)(3)(C)(i), (iii).
1987-Subsec. (b)(2).
Subsec. (b)(2)(B)(iv).
Subsec. (b)(2)(B)(v).
Subsec. (b)(2)(C), (3)(B)(ii).
Subsec. (b)(3)(B)(iii).
Subsec. (b)(5).
Subsec. (c)(2)(B).
Subsec. (c)(3).
Subsec. (c)(7).
"(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 the fair market value of the plan's assets or the value of such assets determined under paragraph (2)."
Subsec. (c)(10).
Subsec. (c)(11).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (e).
Subsec. (f)(3)(C)(i).
Subsec. (f)(4)(A).
Subsec. (l).
Subsec. (m).
Subsec. (n).
1986-Subsec. (d)(1).
Subsec. (e).
Subsec. (f).
1984-Subsec. (a)(2).
1980-Subsec. (a).
Subsec. (b).
Subsecs. (j), (k).
1976-Subsecs. (a) to (d).
Subsec. (h).
Subsec. (i).
Effective Date of 1994 Amendment
Amendment by section 751(a)(1)–(9)(A), (10) of
Section 752(b) of
"(1)
"(2)
"(A) such change would have required the approval of the Secretary of the Treasury had such amendment applied to such change, and
"(B) such change is not so approved."
Section 753(b) of
Section 754(b) of
Section 768(c) of
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
Section 9301(c)(1), (2) of
"(1)
"(2)
Section 9303(e) of
"(1)
"(2)
"(3)
"(A)
"(i) the required percentage of the current liability under such plan, plus
"(ii) the amount determined under subparagraph (C)(i) for such plan year.
"(B)
"(i) the sum of-
"(I) the funded current liability percentage as of the beginning of the 1st plan year beginning after December 31, 1988 (determined without regard to any plan amendment adopted after June 30, 1987), plus
"(II) 1 percentage point for the plan year for which the determination under this paragraph is being made and for each prior plan year beginning after December 31, 1988, over
"(ii) the funded current liability percentage as of the beginning of the plan year for which such determination is being made.
"(C)
"(i)
"(ii)
"(I) the unpredictable contingent event benefit liability, or
"(II) any amount contributed to the plan which is attributable to clause (i) (and any income allocable to such amount).
"(D)
"(i) such plan is maintained by a steel company, and
"(ii) substantially all of the employees covered by such plan are employees of such company.
"(E)
"(i)
"(ii)
"(F)
Section 9304(a)(3) of
Section 9304(b)(3) of
Section 9304(e)(3) of
Section 9305(d) of
Section 9306(f) of
"(1)
"(A) any application submitted after December 17, 1987, and
"(B) any waiver granted pursuant to such an application.
"(2)
"(A)
"(B)
"(3)
"(4)
Amendment by section 9307(a)(1), (b)(1), (e)(1) of
Effective Date of 1986 Amendment
Amendment by section 11015(a)(2) of
Amendment by sections 11015(b)(2) and 11016(c)(4) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(a)(63) of
Effective Date
Section applicable, except as otherwise provided in section 1017(c) through (i) of
Regulations
Section 769 of
"(a)
"(1) a plan which is, on the date of enactment of this Act [Dec. 8, 1994], subject to a restoration payment schedule order issued by the Pension Benefit Guaranty Corporation that meets the requirements of section 1.412(c)(1)–3 of the Treasury Regulations, or
"(2) a plan established by an affected air carrier (as defined under section 4001(a)(14)(C)(ii)(I) of such Act [29 U.S.C. 1301(a)(14)(C)(ii)(I)]) and assumed by a new plan sponsor pursuant to the terms of a written agreement with the Pension Benefit Guaranty Corporation dated January 5, 1993, and approved by the United States Bankruptcy Court for the District of Delaware on December 30, 1992.
"(b)
Section 9303(c) of
Alternative Amortization Method for Certain Multiemployer Plans
Section 1013(d) of
"(1)
"(A) on January 1, 1974, the contributions under the plan were based on a percentage of pay,
"(B) the actuarial assumptions with respect to pay are reasonably related to past and projected experience, and
"(C) the rates of interest under the plan are determined on the basis of reasonable actuarial assumptions,
the plan may elect (in such manner and at such time as may be provided under regulations prescribed by the Secretary of the Treasury or his delegate) to fund the unfunded past service liability under the plan existing as of the date 12 months following the first date on which such section 412 first applies to the plan by charging the funding standard account with an equal annual percentage of the aggregate pay of all participants in the plan in lieu of the level dollar charges to such account required under clauses (i), (ii), and (iii) of section 412(b)(2)(B) of such Code and section 302(b)(2)(B)(i), (ii), and (iii) of this Act [section 1082(b)(2)(B)(i), (ii), and (iii) of Title 29, Labor].
"(2)
Section Referred to in Other Sections
This section is referred to in sections 401, 404, 404A, 411, 413, 414, 415, 418, 418B, 418D, 420, 4971, 4972, 6059, 6110, 6692 of this title; title 29 sections 1082, 1083, 1085a, 1202, 1301, 1303, 1306, 1310, 1322a, 1341, 1342, 1343, 1362, 1393, 1421, 1423, 1425.
1 So in original. Probably should be followed by a closing parenthesis.