§1085b. Security required upon adoption of plan amendment resulting in significant underfunding

(a) In general

If-

(1) a defined benefit plan (other than a multiemployer plan) to which the requirements of section 1082 of this title apply adopts an amendment an effect of which is to increase current liability under the plan for a plan year, and

(2) the funded current liability percentage of the plan for the plan year in which the amendment takes effect is less than 60 percent, including the amount of the unfunded current liability under the plan attributable to the plan amendment,

the contributing sponsor (or any member of the controlled group of the contributing sponsor) shall provide security to the plan.

(b) Form of security

The security required under subsection (a) of this section shall consist of-

(1) a bond issued by a corporate surety company that is an acceptable surety for purposes of section 1112 of this title,

(2) cash, or United States obligations which mature in 3 years or less, held in escrow by a bank or similar financial institution, or

(3) such other form of security as is satisfactory to the Secretary of the Treasury and the parties involved.

(c) Amount of security

The security shall be in an amount equal to the excess of-

(1) the lesser of-

(A) the amount of additional plan assets which would be necessary to increase the funded current liability percentage under the plan to 60 percent, including the amount of the unfunded current liability under the plan attributable to the plan amendment, or

(B) the amount of the increase in current liability under the plan attributable to the plan amendment and any other plan amendments adopted after December 22, 1987, and before such plan amendment, over

(2) $10,000,000.

(d) Release of security

The security shall be released (and any amounts thereunder shall be refunded together with any interest accrued thereon) at the end of the first plan year which ends after the provision of the security and for which the funded current liability percentage under the plan is not less than 60 percent. The Secretary of the Treasury may prescribe regulations for partial releases of the security by reason of increases in the funded current liability percentage.

(e) Notice

A contributing sponsor which is required to provide security under subsection (a) of this section shall notify the Pension Benefit Guaranty Corporation within 30 days after the amendment requiring such security takes effect. Such notice shall contain such information as the Corporation may require.

(f) Definitions

For purposes of this section, the terms "current liability", "funded current liability percentage", and "unfunded current liability" shall have the meanings given such terms by section 1082(d) of this title, except that in computing unfunded current liability there shall not be taken into account any unamortized portion of the unfunded old liability amount as of the close of the plan year.

(Pub. L. 93–406, title I, §307, as added Pub. L. 100–203, title IX, §9341(b)(2), Dec. 22, 1987, 101 Stat. 1330–370 ; amended Pub. L. 101–239, title VII, §7881(i)(1)(B)–(3)(A), (4)(B), Dec. 19, 1989, 103 Stat. 2442 .)

Prior Provisions

A prior section 307 of Pub. L. 93–406 was renumbered section 308 and is classified to section 1086 of this title.

Amendments

1989-Subsec. (a)(1). Pub. L. 101–239, §7881(i)(4)(B), inserted "to which the requirements of section 1082 of this title apply" after "multiemployer plan)".

Subsec. (c)(1)(B). Pub. L. 101–239, §7881(i)(1)(B), which directed amendment of subsec. (c)(1)(B) by inserting "and any other plan amendments adopted after December 22, 1987, and before such plan amendment" without specifying where such language was to be inserted, was executed by making the insertion after "to the plan amendment", as the probable intent of Congress.

Subsec. (d). Pub. L. 101–239, §7881(i)(2), inserted "of the Treasury" after "Secretary".

Subsecs. (e), (f). Pub. L. 101–239, §7881(i)(3)(A), added subsec. (e) and redesignated former subsec. (e) as (f).

Effective Date of 1989 Amendment

Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Pension Protection Act, Pub. L. 100–203, §§9302–9346, to which such amendment relates, see section 7882 of Pub. L. 101–239, set out as a note under section 401 of Title 26, Internal Revenue Code.

Effective Date

This section applicable to plan amendments adopted after Dec. 22, 1987, except that, in the case of a plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified before Dec. 22, 1987, this section not applicable to plan amendments adopted pursuant to collective bargaining agreements ratified before Dec. 22, 1987, see section 9341(c) of Pub. L. 100–203, set out as an Effective Date of 1987 Amendment note under section 401 of Title 26, Internal Revenue Code.

Section Referred to in Other Sections

This section is referred to in section 1371 of this title.