§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, 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 present value of all benefits which are expected to accrue or to be earned under the plan during the plan year. 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 the shortfall amortization bases for such plan year and each of the 6 preceding plan years.
(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).
(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
(A) In general
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.
(B) Transition rule
(i) In general
Except as provided in clauses (iii) and (iv), in the case of plan years beginning after 2007 and before 2011, only the applicable percentage of the funding target shall be taken into account under paragraph (3)(A) in determining the funding shortfall for the plan year for purposes of subparagraph (A).
(ii) Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be determined in accordance with the following table:
(iii) Limitation
Clause (i) shall not apply with respect to any plan year after 2008 unless the shortfall amortization base for each of the preceding years beginning after 2007 was zero (determined after application of this subparagraph).
(iv) Transition relief not available for new or deficit reduction plans
Clause (i) shall not apply to a plan-
(I) which was not in effect for a plan year beginning in 2007, or
(II) which was in effect for a plan year beginning in 2007 and which was subject to section 412(l) (as in effect for plan years beginning in 2007), determined after the application of paragraphs (6) and (9) thereof.
(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.
(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 as of the first day of the plan year. 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.
(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 (2) 1 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 paragraph (1), (2), or (4) of section 206(g) 2 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 the sum of-
(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 of the Treasury, 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 and distributions (as provided 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 of a plan for any plan year, the interest rate used in determining the present value of the liabilities of the plan shall be-
(i) in the case of benefits reasonably determined to be payable during the 5-year period beginning on the first day of 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).
(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)(i)) for such month and each of the rates determined under subparagraph (B) 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.
(G) Transition rule
(i) In general
Notwithstanding the preceding provisions of this paragraph, for plan years beginning in 2008 or 2009, the first, second, or third segment rate for a plan with respect to any month shall be equal to the sum of-
(I) the product of such rate for such month determined without regard to this subparagraph, multiplied by the applicable percentage, and
(II) the product of the rate determined under the rules of section 412(b)(5)(B)(ii)(II) (as in effect for plan years beginning in 2007), multiplied by a percentage equal to 100 percent minus the applicable percentage.
(ii) Applicable percentage
For purposes of clause (i), the applicable percentage is 331/3 percent for plan years beginning in 2008 and 662/3 percent for plan years beginning in 2009.
(iii) New plans ineligible
Clause (i) shall not apply to any plan if the first plan year of the plan begins after December 31, 2007.
(iv) Election
The plan sponsor may elect not to have this subparagraph apply. Such election, once made, may be revoked only with the consent of the Secretary.
(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 present value of all benefits which are expected to accrue or be earned under the plan during the plan year, determined using the additional actuarial assumptions described in paragraph (1)(B), 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 target normal cost (determined without regard to this paragraph) of 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)(ii) 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:
(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.
(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 302(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 and short years
(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.
(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, 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), 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 section 430.
(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.
(Added
References in Text
The Social Security Act, referred to in subsec. (h)(3)(D)(ii), is act Aug. 14, 1935, ch. 531,
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (h)(5)(B)(i), (ii) and (k)(2), (4)(C), is
Effective Date
Applicability of Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of subtitles A (§§101–107) 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 [29 U.S.C. 1083(j)(3)], the plan shall be treated as not having a funding shortfall for any plan year.
"(2) For purposes of-
"(A) determining unfunded vested benefits under section 4006(a)(3)(E)(iii) of such Act [29 U.S.C. 1306(a)(3)(E)(iii)], and
"(B) determining any present value or making any computation under section 412 of such Code or section 302 of such Act [29 U.S.C. 1082],
the mortality table shall be the mortality table used by the plan.
"(3) Section 430(c)(5)(B) of such Code and section 303(c)(5)(B) of such Act [29 U.S.C. 1083(c)(5)(B)] (relating to phase-in of funding target for exemption from new shortfall amortization base) shall each be applied by substituting '2012' for '2011' therein and by substituting for the table therein the following:
| "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 [29 U.S.C. 1083] and section 430 of the Internal Revenue Code of 1986 applied to its first taxable year beginning in 2008 by amortizing the shortfall amortization base for such taxable year over a period of 10 plan years (rather than 7 plan years) beginning with such plan year and by using, in determining the funding target for each of the 10 plan years during such period, an interest rate of 8.25 percent (rather than the segment rates calculated on the basis of the corporate bond yield curve).
"(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 [29 U.S.C. 1082] and sections 412 and 4971 of the Internal Revenue Code of 1986 if contributions to the plan for the plan year are not less than the minimum required contribution determined under subsection (e) for the plan for the plan year, and
"(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 [29 U.S.C. 1083] and 430 of such Code shall, for purposes of sections 302 and 303 of such Act and sections 412, 430, and 4971 of such Code, be equal to the minimum required contribution determined under subsection (e) for the plan for the plan year.
"(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 [29 U.S.C. 1054(b)(1)(G)], of each participant are frozen at the amount of such benefit or supplement immediately before such first day, and
"(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 airline 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 equal to their fair market value.
"(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)
[
[
1 So in original. Probably should be "paragraph (3)".
2 So in original. This title does not contain a section 206.