26 USC § 430 - Minimum funding standards for single-employer defined benefit pension plans
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(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—
(b)
Target normal cost
For purposes of this section:
(1)
In general
Except as provided in subsection (i)(2) with respect to plans in at-risk status, the term “target normal cost” means, for any plan year, the excess of—
(2)
Special rule for increase in compensation
For purposes of this subsection, if any benefit attributable to services performed in a preceding plan year is increased by reason of any increase in compensation during the current plan year, the increase in such benefit shall be treated as having accrued during the current plan year.
(c)
Shortfall amortization charge
(1)
In general
For purposes of this section, the shortfall amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization installments for such plan year with respect to any shortfall amortization base which has not been fully amortized under this subsection.
(2)
Shortfall amortization installment
For purposes of paragraph (1)—
(A)
Determination
The shortfall amortization installments are the amounts necessary to amortize the shortfall amortization base of the plan for any plan year in level annual installments over the 7-plan-year period beginning with such plan year.
(B)
Shortfall installment
The shortfall amortization installment for any plan year in the 7-plan-year period under subparagraph (A) with respect to any shortfall amortization base is the annual installment determined under subparagraph (A) for that year for that base.
(C)
Segment rates
In determining any shortfall amortization installment under this paragraph, the plan sponsor shall use the segment rates determined under subparagraph (C) of subsection (h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2).
(D)
Special election for eligible plan years
(i)
In general
If a plan sponsor elects to apply this subparagraph with respect to the shortfall amortization base of a plan for any eligible plan year (in this subparagraph and paragraph (7) referred to as an “election year”), then, notwithstanding subparagraphs (A) and (B)—
(I)
the shortfall amortization installments with respect to such base shall be determined under clause (ii) or (iii), whichever is specified in the election, and
(II)
the shortfall amortization installment for any plan year in the 9-plan-year period described in clause (ii) or the 15-plan-year period described in clause (iii), respectively, with respect to such shortfall amortization base is the annual installment determined under the applicable clause for that year for that base.
(ii)
2 plus 7 amortization schedule
The shortfall amortization installments determined under this clause are—
(I)
in the case of the first 2 plan years in the 9-plan-year period beginning with the election year, interest on the shortfall amortization base of the plan for the election year (determined using the effective interest rate for the plan for the election year), and
(II)
in the case of the last 7 plan years in such 9-plan-year period, the amounts necessary to amortize the remaining balance of the shortfall amortization base of the plan for the election year in level annual installments over such last 7 plan years (using the segment rates under subparagraph (C) for the election year).
(iii)
15-year amortization
The shortfall amortization installments determined under this subparagraph are the amounts necessary to amortize the shortfall amortization base of the plan for the election year in level annual installments over the 15-plan-year period beginning with the election year (using the segment rates under subparagraph (C) for the election year).
(iv)
Election
(I)
In general
The plan sponsor of a plan may elect to have this subparagraph apply to not more than 2 eligible plan years with respect to the plan, except that in the case of a plan described in section 106 of the Pension Protection Act of 2006, the plan sponsor may only elect to have this subparagraph apply to a plan year beginning in 2011.
(II)
Amortization schedule
Such election shall specify whether the amortization schedule under clause (ii) or (iii) shall apply to an election year, except that if a plan sponsor elects to have this subparagraph apply to 2 eligible plan years, the plan sponsor must elect the same schedule for both years.
(III)
Other rules
Such election shall be made at such time, and in such form and manner, as shall be prescribed by the Secretary, and may be revoked only with the consent of the Secretary. The Secretary shall, before granting a revocation request, provide the Pension Benefit Guaranty Corporation an opportunity to comment on the conditions applicable to the treatment of any portion of the election year shortfall amortization base that remains unamortized as of the revocation date.
(v)
Eligible plan year
For purposes of this subparagraph, the term “eligible plan year” means any plan year beginning in 2008, 2009, 2010, or 2011, except that a plan year shall only be treated as an eligible plan year if the due date under subsection (j)(1) for the payment of the minimum required contribution for such plan year occurs on or after the date of the enactment of this subparagraph.
(3)
Shortfall amortization base
For purposes of this section, the shortfall amortization base of a plan for a plan year is—
(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—
(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 clause (iii), 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 purposes of paragraph (3)(A) and subparagraph (A).
(ii)
Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be determined in accordance with the following table:
In the case of a plan year
The applicable
beginning in calendar year:
percentage is
2008
92
2009
94
2010
96.
(6)
Early deemed amortization upon attainment of funding target
In any case in which the funding shortfall of a plan for a plan year is zero, for purposes of determining the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced to zero.
(7)
Increases in alternate required installments in cases of excess compensation or extraordinary dividends or stock redemptions
(A)
In general
If there is an installment acceleration amount with respect to a plan for any plan year in the restriction period with respect to an election year under paragraph (2)(D), then the shortfall amortization installment otherwise determined and payable under such paragraph for such plan year shall, subject to the limitation under subparagraph (B), be increased by such amount.
(B)
Total installments limited to shortfall base
Subject to rules prescribed by the Secretary, if a shortfall amortization installment with respect to any shortfall amortization base for an election year is required to be increased for any plan year under subparagraph (A)—
(i)
such increase shall not result in the amount of such installment exceeding the present value of such installment and all succeeding installments with respect to such base (determined without regard to such increase but after application of clause (ii)), and
(ii)
subsequent shortfall amortization installments with respect to such base shall, in reverse order of the otherwise required installments, be reduced to the extent necessary to limit the present value of such subsequent shortfall amortization installments (after application of this paragraph) to the present value of the remaining unamortized shortfall amortization base.
(C)
Installment acceleration amount
For purposes of this paragraph—
(i)
In general
The term “installment acceleration amount” means, with respect to any plan year in a restriction period with respect to an election year, the sum of—
(ii)
Annual limitation
The installment acceleration amount for any plan year shall not exceed the excess (if any) of—
(I)
the sum of the shortfall amortization installments for the plan year and all preceding plan years in the amortization period elected under paragraph (2)(D) with respect to the shortfall amortization base with respect to an election year, determined without regard to paragraph (2)(D) and this paragraph, over
(iii)
Carryover of excess installment acceleration amounts
(I)
In general
If the installment acceleration amount for any plan year (determined without regard to clause (ii)) exceeds the limitation under clause (ii), then, subject to subclause (II), such excess shall be treated as an installment acceleration amount with respect to the succeeding plan year.
(II)
Cap to apply
If any amount treated as an installment acceleration amount under subclause (I) or this subclause with respect any succeeding plan year, when added to other installment acceleration amounts (determined without regard to clause (ii)) with respect to the plan year, exceeds the limitation under clause (ii), the portion of such amount representing such excess shall be treated as an installment acceleration amount with respect to the next succeeding plan year.
(III)
Limitation on years to which amounts carried for
No amount shall be carried under subclause (I) or (II) to a plan year which begins after the first plan year following the last plan year in the restriction period (or after the second plan year following such last plan year in the case of an election year with respect to which 15-year amortization was elected under paragraph (2)(D)).
(IV)
Ordering rules
For purposes of applying subclause (II), installment acceleration amounts for the plan year (determined without regard to any carryover under this clause) shall be applied first against the limitation under clause (ii) and then carryovers to such plan year shall be applied against such limitation on a first-in, first-out basis.
(D)
Excess employee compensation
For purposes of this paragraph—
(i)
In general
The term “excess employee compensation” means, with respect to any employee for any plan year, the excess (if any) of—
(ii)
Amounts set aside for nonqualified deferred compensation
If during any calendar year assets are set aside or reserved (directly or indirectly) in a trust (or other arrangement as determined by the Secretary), or transferred to such a trust or other arrangement, by a plan sponsor for purposes of paying deferred compensation of an employee under a nonqualified deferred compensation plan (as defined in section
409A) of the plan sponsor, then, for purposes of clause (i), the amount of such assets shall be treated as remuneration of the employee includible in income for the calendar year unless such amount is otherwise includible in income for such year. An amount to which the preceding sentence applies shall not be taken into account under this paragraph for any subsequent calendar year.
(iii)
Only remuneration for certain post-2009 services counted
Remuneration shall be taken into account under clause (i) only to the extent attributable to services performed by the employee for the plan sponsor after February 28, 2010.
(iv)
Exception for certain equity payments
(I)
In general
There shall not be taken into account under clause (i)(I) any amount includible in income with respect to the granting after February 28, 2010, of service recipient stock (within the meaning of section
409A) that, upon such grant, is subject to a substantial risk of forfeiture (as defined under section
83
(c)(1)) for at least 5 years from the date of such grant.
(v)
Other exceptions
The following amounts includible in income shall not be taken into account under clause (i)(I):
(I)
Commissions
Any remuneration payable on a commission basis solely on account of income directly generated by the individual performance of the individual to whom such remuneration is payable.
(II)
Certain payments under existing contracts
Any remuneration consisting of nonqualified deferred compensation, restricted stock, stock options, or stock appreciation rights payable or granted under a written binding contract that was in effect on March 1, 2010, and which was not modified in any material respect before such remuneration is paid.
(vi)
Self-employed individual treated as employee
The term “employee” includes, with respect to a calendar year, a self-employed individual who is treated as an employee under section
401
(c) for the taxable year ending during such calendar year, and the term “compensation” shall include earned income of such individual with respect to such self-employment.
(vii)
Indexing of amount
In the case of any calendar year beginning after 2010, the dollar amount under clause (i)(II) shall be increased by an amount equal to—
(II)
the cost-of-living adjustment determined under section
1
(f)(3) for the calendar year, determined by substituting “calendar year 2009” for “calendar year 1992” in subparagraph (B) thereof.
If the amount of any increase under clause (i) is not a multiple of $1,000, such increase shall be rounded to the next lowest multiple of $1,000.
(E)
Extraordinary dividends and redemptions
(i)
In general
The amount determined under this subparagraph for any plan year is the excess (if any) of the sum of the dividends declared during the plan year by the plan sponsor plus the aggregate amount paid for the redemption of stock of the plan sponsor redeemed during the plan year over the greater of—
(ii)
Only certain post-2009 dividends and redemptions counted
For purposes of clause (i), there shall only be taken into account dividends declared, and redemptions occurring, after February 28, 2010.
(iii)
Exception for intra-group dividends
Dividends paid by one member of a controlled group (as defined in section
412
(d)(3)) to another member of such group shall not be taken into account under clause (i).
(iv)
Exception for certain redemptions
Redemptions that are made pursuant to a plan maintained with respect to employees, or that are made on account of the death, disability, or termination of employment of an employee or shareholder, shall not be taken into account under clause (i).
(v)
Exception for certain preferred stock
(I)
In general
Dividends and redemptions with respect to applicable preferred stock shall not be taken into account under clause (i) to the extent that dividends accrue with respect to such stock at a specified rate in all events and without regard to the plan sponsor’s income, and interest accrues on any unpaid dividends with respect to such stock.
(II)
Applicable preferred stock
For purposes of subclause (I), the term “applicable preferred stock” means preferred stock which was issued before March 1, 2010 (or which was issued after such date and is held by an employee benefit plan subject to the provisions of title I of
[1]
Employee Retirement Income Security Act of 1974).
(F)
Other definitions and rules
For purposes of this paragraph—
(i)
Plan sponsor
The term “plan sponsor” includes any member of the plan sponsor’s controlled group (as defined in section
412
(d)(3)).
(ii)
Restriction period
The term “restriction period” means, with respect to any election year—
(iii)
Elections for multiple plans
If a plan sponsor makes elections under paragraph (2)(D) with respect to 2 or more plans, the Secretary shall provide rules for the application of this paragraph to such plans, including rules for the ratable allocation of any installment acceleration amount among such plans on the basis of each plan’s relative reduction in the plan’s shortfall amortization installment for the first plan year in the amortization period described in subparagraph (A) (determined without regard to this paragraph).
(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.
(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)—
(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).
(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.
(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),
(3)
Election to apply balances against minimum required contribution
(A)
In general
Except as provided in subparagraphs (B) and (C), in the case of any plan year in which the plan sponsor elects to credit against the minimum required contribution for the current plan year all or a portion of the prefunding balance or the funding standard carryover balance for the current plan year (not in excess of such minimum required contribution), the minimum required contribution for the plan year shall be reduced as of the first day of the plan year by the amount so credited by the plan sponsor. For purposes of the preceding sentence, the minimum required contribution shall be determined after taking into account any waiver under section
412
(c).
(B)
Coordination with funding standard carryover balance
To the extent that any plan has a funding standard carryover balance greater than zero, no amount of the prefunding balance of such plan may be credited under this paragraph in reducing the minimum required contribution.
(C)
Limitation for underfunded plans
The preceding provisions of this paragraph shall not apply for any plan year if the ratio (expressed as a percentage) which—
(i)
the value of plan assets for the preceding plan year (as reduced under paragraph (4)(C)), bears to
(ii)
the funding target of the plan for the preceding plan year (determined without regard to subsection (i)(1)),
is less than 80 percent. In the case of plan years beginning in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary may prescribe.
(D)
Special rule for certain years of plans maintained by charities
(i)
In general
For purposes of applying subparagraph (C) for plan years beginning after August 31, 2009, and before September 1, 2011, the ratio determined under such subparagraph for the preceding plan year of a plan shall be the greater of—
(4)
Effect of balances on amounts treated as value of plan assets
In the case of any plan maintaining a prefunding balance or a funding standard carryover balance pursuant to this subsection, the amount treated as the value of plan assets shall be deemed to be such amount, reduced as provided in the following subparagraphs:
(A)
Applicability of shortfall amortization base
For purposes of subsection (c)(5), the value of plan assets is deemed to be such amount, reduced by the amount of the prefunding balance, but only if an election under paragraph (3) applying any portion of the prefunding balance in reducing the minimum required contribution is in effect for the plan year.
(B)
Determination of excess assets, funding shortfall, and funding target attainment percentage
(i)
In general
For purposes of subsections (a), (c)(4)(B), and (d)(2)(A), the value of plan assets is deemed to be such amount, reduced by the amount of the prefunding balance and the funding standard carryover balance.
(ii)
Special rule for certain binding agreements with PBGC
For purposes of subsection (c)(4)(B), the value of plan assets shall not be deemed to be reduced for a plan year by the amount of the specified balance if, with respect to such balance, there is in effect for a plan year a binding written agreement with the Pension Benefit Guaranty Corporation which provides that such balance is not available to reduce the minimum required contribution for the plan year. For purposes of the preceding sentence, the term “specified balance” means the prefunding balance or the funding standard carryover balance, as the case may be.
(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).
(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—
(ii)
Adjustments for interest
Any excess contributions under clause (i) shall be properly adjusted for interest accruing for the periods between the first day of the current plan year and the dates on which the excess contributions were made, determined by using the effective interest rate for the preceding plan year and by treating contributions as being first used to satisfy the minimum required contribution.
(iii)
Certain contributions necessary to avoid benefit limitations disregarded
The excess described in clause (i) with respect to any preceding plan year shall be reduced (but not below zero) by the amount of contributions an employer would be required to make under subsection (b), (c), or (e) ofsection
436 to avoid a benefit limitation which would otherwise be imposed under such paragraph for the preceding plan year. Any contribution which may be taken into account in satisfying the requirements of more than 1 of such paragraphs shall be taken into account only once for purposes of this clause.
(C)
Decreases
The prefunding balance of a plan shall be decreased (but not below zero) by—
(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—
(8)
Adjustments for investment experience
In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, the plan sponsor shall, in accordance with regulations prescribed by the Secretary, adjust such balance to reflect the rate of return on plan assets for the preceding plan year. Notwithstanding subsection (g)(3), such rate of return shall be determined on the basis of fair market value and shall properly take into account, in accordance with such regulations, all contributions, distributions, and other plan payments made during such period.
(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—
(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—
(ii)
does not provide for averaging of such values over more than the period beginning on the last day of the 25th month preceding the month in which the valuation date occurs and ending on the valuation date (or a similar period in the case of a valuation date which is not the 1st day of a month), and
(iii)
does not result in a determination of the value of plan assets which, at any time, is lower than 90 percent or greater than 110 percent of the fair market value of such assets at such time.
Any such averaging shall be adjusted for contributions, distributions, and expected earnings (as determined by the plan’s actuary on the basis of an assumed earnings rate specified by the actuary but not in excess of the third segment rate applicable under subsection (h)(2)(C)(iii)), as specified by the Secretary.
(4)
Accounting for contribution receipts
For purposes of determining the value of assets under paragraph (3)—
(A)
Prior year contributions
If—
(i)
an employer makes any contribution to the plan after the valuation date for the plan year in which the contribution is made, and
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.
(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—
(2)
Interest rates
(A)
Effective interest rate
For purposes of this section, the term “effective interest rate” means, with respect to any plan for any plan year, the single rate of interest which, if used to determine the present value of the plan’s accrued or earned benefits referred to in subsection (d)(1), would result in an amount equal to the funding target of the plan for such plan year.
(B)
Interest rates for determining funding target
For purposes of determining the funding target and target normal cost of a plan for any plan year, the interest rate used in determining the present value of the benefits of the plan shall be—
(i)
in the case of benefits reasonably determined to be payable during the 5-year period beginning on the first day of the plan year, the first 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 (C) 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.
(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—
(iii)
Requirements
A mortality table meets the requirements of this clause if—
(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—
(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.
(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—
(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—
(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.
(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—
(3)
Minimum amount
In no event shall—
(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—
(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”:
In the case of plan years beginning in 2008, the funding target attainment percentage for the preceding plan year under subparagraph (A) may be determined using such methods of estimation as the Secretary may provide.
(C)
Special rule for employees offered early retirement in 2006
(i)
In general
For purposes of subparagraph (A)(ii), the additional actuarial assumptions described in paragraph (1)(B) shall not be taken into account with respect to any employee if—
(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),
(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—
(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 81/2 months after the close of the plan year.
(2)
Interest
Any payment required under paragraph (1) for a plan year that is made on a date other than the valuation date for such plan year shall be adjusted for interest accruing for the period between the valuation date and the payment date, at the effective rate of interest for the plan for such plan year.
(3)
Accelerated quarterly contribution schedule for underfunded plans
(A)
Failure to timely make required installment
In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining the plan shall make the required installments under this paragraph and if the employer fails to pay the full amount of a required installment for the plan year, then the amount of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise used under paragraph (2) plus 5 percentage points. In the case of plan years beginning in 2008, the funding shortfall for the preceding plan year may be determined using such methods of estimation as the Secretary may provide.
(B)
Amount of underpayment, period of underpayment
For purposes of subparagraph (A)—
(D)
Amount of required installment
For purposes of this paragraph—
(i)
In general
The amount of any required installment shall be 25 percent of the required annual payment.
(ii)
Required annual payment
For purposes of clause (i), the term “required annual payment” means the lesser of—
(I)
90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this section, or
(II)
100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section
412
(c)) to the plan for the preceding plan year.
Subclause (II) shall not apply if the preceding plan year referred to in such clause was not a year of 12 months.
(E)
Fiscal years, short years, and years with alternate valuation date
(i)
Fiscal years
In applying this paragraph to a plan year beginning on any date other than January 1, there shall be substituted for the months specified in this paragraph, the months which correspond thereto.
(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—
(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—
(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—
(k)
Imposition of lien where failure to make required contributions
(1)
In general
In the case of a plan to which this subsection applies (as provided under paragraph (2)), if—
(A)
any person fails to make a contribution payment required by section
412 and this section before the due date for such payment, and
(B)
the unpaid balance of such payment (including interest), when added to the aggregate unpaid balance of all preceding such payments for which payment was not made before the due date (including interest), exceeds $1,000,000,
then there shall be a lien in favor of the plan in the amount determined under paragraph (3) upon all property and rights to property, whether real or personal, belonging to such person and any other person who is a member of the same controlled group of which such person is a member.
(2)
Plans to which subsection applies
This subsection shall apply to a defined benefit plan (other than a multiemployer plan) covered under section 4021 of the Employee Retirement Income Security Act of 1974 for any plan year for which the funding target attainment percentage (as defined in subsection (d)(2)) of such plan is less than 100 percent.
(3)
Amount of lien
For purposes of paragraph (1), the amount of the lien shall be equal to the aggregate unpaid balance of contribution payments required under this section and section
412 for which payment has not been made before the due date.
(4)
Notice of failure; lien
(A)
Notice of failure
A person committing a failure described in paragraph (1) shall notify the Pension Benefit Guaranty Corporation of such failure within 10 days of the due date for the required contribution payment.
(B)
Period of lien
The lien imposed by paragraph (1) shall arise on the due date for the required contribution payment and shall continue until the last day of the first plan year in which the plan ceases to be described in paragraph (1)(B). Such lien shall continue to run without regard to whether such plan continues to be described in paragraph (2) during the period referred to in the preceding sentence.
(C)
Certain rules to apply
Any amount with respect to which a lien is imposed under paragraph (1) shall be treated as taxes due and owing the United States and rules similar to the rules of subsections (c), (d), and (e) ofsection
4068 of the Employee Retirement Income Security Act of 1974 shall apply with respect to a lien imposed by subsection (a) and the amount with respect to such lien.
(5)
Enforcement
Any lien created under paragraph (1) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Pension Benefit Guaranty Corporation, by the contributing sponsor (or any member of the controlled group of the contributing sponsor).
(6)
Definitions
For purposes of this subsection—
(A)
Contribution payment
The term “contribution payment” means, in connection with a plan, a contribution payment required to be made to the plan, including any required installment under paragraphs (3) and (4) of subsection (j).
(B)
Due date; required installment
The terms “due date” and “required installment” have the meanings given such terms by subsection (j).
(C)
Controlled group
The term “controlled group” means any group treated as a single employer under subsections (b), (c), (m), and (o) ofsection
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.
[1] So in original. Probably should be followed by “the”.
Source
(Added Pub. L. 109–280, title I, § 112(a),Aug. 17, 2006, 120 Stat. 826; amended Pub. L. 110–458, title I, §§ 101(b)(2),
121
(b), title II, § 202(b),Dec. 23, 2008, 122 Stat. 5095, 5113, 5118; Pub. L. 111–192, title II, §§ 201(b),
204(b),June 25, 2010, 124 Stat. 1290, 1301.)
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.
References in Text
Section 106 of the Pension Protection Act of 2006, referred to in subsec. (c)(2)(D)(iv)(I), is section 106 ofPub. L. 109–280, which is set out as a note under section
401 of this title.
The date of the enactment of this subparagraph, referred to in subsec. (c)(2)(D)(v), is the date of enactment of Pub. L. 111–192, which was approved June 25, 2010.
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (c)(7)(E)(i)(I), (v)(II), (h)(5)(B)(i), (ii), and (k)(2), (4)(C), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829. Title I of the Act is classified generally to subchapter I (§ 1001 et seq.) of chapter
18 of Title
29, Labor. Title IV of the Act is classified principally to subchapter III (§ 1301 et seq.) of chapter
18 of Title
29. Sections 4001, 4006, 4021, 4043, and 4068 of the Act are classified to sections
1301,
1306,
1321,
1343, and
1368, respectively, of Title
29. For complete classification of this Act to the Code, see Short Title note set out under section
1001 of Title
29 and Tables.
The Social Security Act, referred to in subsec. (h)(3)(D)(ii), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended. Title II of the Act is classified generally to subchapter II (§ 401 et seq.) of chapter
7 of Title
42, The Public Health and Welfare. For complete classification of this Act to the Code, see section
1305 of Title
42 and Tables.
Amendments
2010—Subsec. (c)(1). Pub. L. 111–192, § 201(b)(3)(A), substituted “any shortfall amortization base which has not been fully amortized under this subsection” for “the shortfall amortization bases for such plan year and each of the 6 preceding plan years”.
Subsec. (c)(2)(D). Pub. L. 111–192, § 201(b)(1), added subpar. (D).
Subsec. (c)(7). Pub. L. 111–192, § 201(b)(2), added par. (7).
Subsec. (f)(3)(D). Pub. L. 111–192, § 204(b), added subpar. (D).
Subsec. (j)(3)(F). Pub. L. 111–192, § 201(b)(3)(B), added subpar. (F).
2008—Subsec. (b). Pub. L. 110–458, § 101(b)(2)(A), amended subsec. (b) generally. Prior to amendment, text read as follows: “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.”
Subsec. (c)(5)(B)(i). Pub. L. 110–458, § 202(b)(2), added cl. (i) and struck out former cl. (i). Prior to amendment, text read as follows: “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).”
Subsec. (c)(5)(B)(iii). Pub. L. 110–458, § 202(b)(1), redesignated cl. (iv) as (iii) and struck out former cl. (iii). Prior to amendment, text read as follows: “Clause (i) shall not apply with respect to any plan year beginning after 2008 unless the shortfall amortization base for each of the preceding years beginning after 2007 was zero (determined after application of this subparagraph).”
Pub. L. 110–458, § 101(b)(2)(B), inserted “beginning” before “after 2008”.
Subsec. (c)(5)(B)(iv). Pub. L. 110–458, § 202(b)(1), redesignated cl. (iv) as (iii).
Subsec. (c)(5)(B)(iv)(II). Pub. L. 110–458, § 101(b)(2)(C), inserted “for such year” after “beginning in 2007)”.
Subsec. (f)(3)(A). Pub. L. 110–458, § 101(b)(2)(D)(i), struck out “as of the first day of the plan year” after “credited by the plan sponsor”.
Subsec. (f)(4)(A). Pub. L. 110–458, § 101(b)(2)(D)(ii), substituted “paragraph (3)” for “paragraph (2)”.
Subsec. (f)(6)(B)(iii). Pub. L. 110–458, § 101(b)(2)(D)(iii), substituted “subsection (b), (c), or (e) ofsection
436” for “paragraph (1), (2), or (4) of section
206(g)”.
Subsec. (f)(6)(C). Pub. L. 110–458, § 101(b)(2)(D)(iv), struck out “the sum of” after “by” in introductory provisions.
Subsec. (f)(8). Pub. L. 110–458, § 101(b)(2)(D)(v), struck out “of the Treasury” after “by the Secretary”.
Subsec. (g)(3)(B). Pub. L. 110–458, § 121(b), amended concluding provisions generally. Prior to amendment, concluding provisions read as follows: “Any such averaging shall be adjusted for contributions and distributions (as provided by the Secretary).”
Subsec. (h)(2)(B). Pub. L. 110–458, § 101(b)(2)(E)(i), (ii), in introductory provisions, inserted “and target normal cost” after “funding target” and substituted “benefits” for “liabilities”.
Subsec. (h)(2)(F). Pub. L. 110–458, § 101(b)(2)(E)(iii), (iv), substituted “section
417
(e)(3)(D)(i) for such month)” for “section
417
(e)(3)(D)(i)) for such month” and “subparagraph (C)” for “subparagraph (B)”.
Subsec. (i)(2)(A). Pub. L. 110–458, § 101(b)(2)(F)(i)(I), added subpar. (A) and struck out former subpar. (A) which read as follows: “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”.
Subsec. (i)(2)(B). Pub. L. 110–458, § 101(b)(2)(F)(i)(II), substituted “the amount determined under subsection (b)(1)(A)(i) with respect to the plan for the plan year” for “the target normal cost (determined without regard to this paragraph) of the plan for the plan year”.
Subsec. (i)(4)(B). Pub. L. 110–458, § 101(b)(2)(F)(ii), substituted “subparagraph (A)” for “subparagraph (A)(ii)” in concluding provisions.
Subsec. (j)(3)(A). Pub. L. 110–458, § 101(b)(2)(G)(i), inserted at end “In the case of plan years beginning in 2008, the funding shortfall for the preceding plan year may be determined using such methods of estimation as the Secretary may provide.”
Subsec. (j)(3)(D)(ii)(II). Pub. L. 110–458, § 101(b)(2)(G)(ii), substituted “section
412
(c)” for “section
302
(c)”.
Subsec. (j)(3)(E). Pub. L. 110–458, § 101(b)(2)(G)(iii), (iv), substituted “, short years, and years with alternate valuation date” for “and short years” in heading and added cl. (iii).
Subsec. (k)(1). Pub. L. 110–458, § 101(b)(2)(H)(i), inserted “(as provided under paragraph (2))” after “applies” in introductory provisions.
Subsec. (k)(6)(B). Pub. L. 110–458, § 101(b)(2)(H)(ii), struck out “, 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” before period at end.
Effective Date of 2010 Amendment
Pub. L. 111–192, title II, § 201(c),June 25, 2010, 124 Stat. 1296, provided that: “The amendments made by this section [amending this section and section
1083 of Title
29, Labor] shall apply to plan years beginning after December 31, 2007.”
Pub. L. 111–192, title II, § 204(c),June 25, 2010, 124 Stat. 1302, provided that:
“(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and section
1083 of Title
29, Labor] shall apply to plan years beginning after August 31, 2009.
“(2) Special rule.—In the case of a plan for which the valuation date is not the first day of the plan year, the amendments made by this section shall apply to plan years beginning after December 31, 2008.”
Effective Date of 2008 Amendment
Pub. L. 110–458, title I, § 101(b)(3),Dec. 23, 2008, 122 Stat. 5096, provided that:
“(A) In general.—Except as provided in subparagraph (B), the amendments made by paragraphs (1)(A) [amending section
1083 of Title
29, Labor], (1)(F)(i) [amending section
1083 of Title
29], (2)(A) [amending this section], and (2)(F)(i) [amending this section] shall apply to plan years beginning after December 31, 2008.”
“(B) Election for earlier application.—The amendments made by such paragraphs shall apply to a plan for the first plan year beginning after December 31, 2007, if the plan sponsor makes the election under this subparagraph. An election under this subparagraph shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary’s delegate may prescribe, and, once made, may be revoked only with the consent of the Secretary.”
Amendment by section
101
(b)(2)(B)–(E), (F)(ii)–(H) of Pub. L. 110–458effective as if included in the provisions of Pub. L. 109–280to which the amendment relates, except as otherwise provided, see section 112 ofPub. L. 110–458, set out as a note under section
72 of this title.
Pub. L. 110–458, title I, § 121(c),Dec. 23, 2008, 122 Stat. 5114, provided that: “The amendments made by this section [amending this section and section
1083 of Title
29, Labor] shall take effect as if included in the provisions of the 2006 Act [Pub. L. 109–280] to which the amendments relate.”
Pub. L. 110–458, title II, § 202(c),Dec. 23, 2008, 122 Stat. 5118, provided that: “The amendments made by subsections (a) and (b) [amending this section and section
1083 of Title
29, Labor] shall apply as if included in the enactment of sections
102 and
112, respectively, of the Pension Protection Act of 2006 [Pub. L. 109–280].”
Effective Date
Pub. L. 109–280, title I, § 112(b),Aug. 17, 2006, 120 Stat. 846, provided that: “The amendments made by this section [enacting this section] shall apply with respect to plan years beginning after December 31, 2007.”
Applicability of Subtitles A and B of Title I of Pub. L. 109–280
For special rules on applicability of subtitles A (§§ 101–108) and B (§§ 111–116) of title I of Pub. L. 109–280to certain eligible cooperative plans, PBGC settlement plans, and eligible government contractor plans, see sections 104, 105, and 106 ofPub. L. 109–280, set out as notes under section
401 of this title.
Modification of Transition Rule to Pension Funding Requirements
Pub. L. 109–280, title I, § 115(a)–(c), Aug. 17, 2006, 120 Stat. 855, 856, provided that:
“(a) In General.—In the case of a plan that—
“(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) Modified Rules.—The rules described in this subsection are as follows:
“(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) Definitions.—Any term used in this section which is also used in section 430 of such Code or section 303 of such Act [29 U.S.C. 1083] shall have the meaning provided such term in such section. If the same term has a different meaning in such Code and such Act [29 U.S.C. 1001 et seq.], such term shall, for purposes of this section, have the meaning provided by such Code when applied with respect to such Code and the meaning provided by such Act when applied with respect to such Act.”
Special Funding Rules for Certain Plans Maintained by Commercial Airlines
Pub. L. 109–280, title IV, § 402,Aug. 17, 2006, 120 Stat. 922, as amended by Pub. L. 110–28, title VI, §§ 6614(a),
6615(a),May 25, 2007, 121 Stat. 181; Pub. L. 110–458, title I, §§ 104(b),
126
(a),Dec. 23, 2008, 122 Stat. 5104, 5116, provided that:
“(a) In General.—The plan sponsor of an eligible plan may elect to either—
“(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) Alternative Funding Schedule.—
“(1) In general.—If an election is made under subsection (a)(1) to have this subsection apply to an eligible plan and the requirements of paragraphs (2) and (3) are met with respect to the plan—
“(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) Accrual restrictions.—
“(A) In general.—The requirements of this paragraph are met if, effective as of the first day of the first applicable plan year and at all times thereafter while an election under this section is in effect, the plan provides that—
“(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) Increases in section
415 limits.—If a plan provides that an accrued benefit of a participant which has been subject to any limitation under section 415 of such Code will be increased if such limitation is increased, the plan shall not be treated as meeting the requirements of this section unless, effective as of the first day of the first applicable plan year (or, if later, the date of the enactment of this Act [Aug. 17, 2006]) and at all times thereafter while an election under this section is in effect, the plan provides that any such increase shall not take effect. A plan shall not fail to meet the requirements of section 411(d)(6) of such Code and section 204(g) of such Act solely because the plan is amended to meet the requirements of this subparagraph.
“(3) Restriction on applicable benefit increases.—
“(A) In general.—The requirements of this paragraph are met if no applicable benefit increase takes effect at any time during the period beginning on July 26, 2005, and ending on the day before the first day of the first applicable plan year.
“(B) Applicable benefit increase.—For purposes of this paragraph, the term ‘applicable benefit increase’ means, with respect to any plan year, any increase in liabilities of the plan by plan amendment (or otherwise provided in regulations provided by the Secretary) which, but for this paragraph, would occur during the plan year by reason of—
“(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) Exception for imputed disability service.—Paragraphs (2) and (3) shall not apply to any accrual or increase with respect to imputed service provided to a participant during any period of the participant’s disability occurring on or after the effective date of the plan amendment providing the restrictions under paragraph (2) (or on or after July 26, 2005, in the case of the restrictions under paragraph (3)) if the participant—
“(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) Definitions.—For purposes of this section—
“(1) Eligible plan.—The term ‘eligible plan’ means a defined benefit plan (other than a multiemployer plan) to which sections 302 of such Act [29 U.S.C. 1082] and 412 of such Code applies which is sponsored by an employer—
“(A) which is a commercial passenger airline, or
“(B) the principal business of which is providing catering services to a commercial passenger airline.
“(2) Applicable plan year.—The term ‘applicable plan year’ means each plan year to which the election under subsection (a)(1) applies under subsection (d)(1)(A).
“(d) Elections and Related Terms.—
“(1) Years for which election made.—
“(A) Alternative funding schedule.—If an election under subsection (a)(1) was made with respect to an eligible plan, the plan sponsor may select either a plan year beginning in 2006 or a plan year beginning in 2007 as the first plan year to which such election applies. The election shall apply to such plan year and all subsequent years. The election shall be made—
“(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 year amortization.—An election under subsection (a)(2) shall be made not later than December 31, 2007.
“(C) Election of new plan year for alternative funding schedule.—In the case of an election under subsection (a)(1), the plan sponsor may specify a new plan year in such election and the plan year of the plan may be changed to such new plan year without the approval of the Secretary of the Treasury.
“(2) Manner of election.—A plan sponsor shall make any election under subsection (a) in such manner as the Secretary of the Treasury may prescribe. Such election, once made, may be revoked only with the consent of such Secretary.
“(e) Minimum Required Contribution.—In the case of an eligible plan with respect to which an election is made under subsection (a)(1)—
“(1) In general.—In the case of any applicable plan year during the amortization period, the minimum required contribution shall be the amount necessary to amortize the unfunded liability of the plan, determined as of the first day of the plan year, in equal annual installments (until fully amortized) over the remainder of the amortization period. Such amount shall be separately determined for each applicable plan year.
“(2) Years after amortization period.—In the case of any plan year beginning after the end of the amortization period, section 302(a)(2)(A) of such Act [29 U.S.C. 1082
(a)(2)(A)] and section 412(a)(2)(A) of such Code shall apply to such plan, but the prefunding balance and funding standard carryover balance as of the first day of the first of such years under section 303(f) of such Act [29 U.S.C. 1083
(f)] and section 430(f) of such Code shall be zero.
“(3) Definitions.—For purposes of this section—
“(A) Unfunded liability.—The term ‘unfunded liability’ means the unfunded accrued liability under the plan, determined under the unit credit funding method.
“(B) Amortization period.—The term ‘amortization period’ means the 17-plan year period beginning with the first applicable plan year.
“(4) Other rules.—In determining the minimum required contribution and amortization amount under this subsection—
“(A) the provisions of section 302(c)(3) of such Act and section 412(c)(3) of such Code, as in effect before the date of enactment of this section [Aug. 17, 2006], shall apply,
“(B) a rate of interest of 8.85 percent shall be used for all calculations requiring an interest rate, and
“(C) the value of plan assets shall be determined under sections 303(g)(3) of such Act [29 U.S.C. 1083
(g)(3)] and 430(g)(3) of such Code.
“(5) Special rule for certain plan spinoffs.—For purposes of subsection (b), if, with respect to any eligible plan to which this subsection applies—
“(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) Special Rules for Certain Balances and Waivers.—In the case of an eligible plan with respect to which an election is made under subsection (a)(1)—
“(1) Funding standard account and credit balances.—Any charge or credit in the funding standard account under section 302 of such Act [29 U.S.C. 1082] or section 412 of such Code, and any prefunding balance or funding standard carryover balance under section 303 of such Act [29 U.S.C. 1083] or section 430 of such Code, as of the day before the first day of the first applicable plan year, shall be reduced to zero.
“(2) Waived funding deficiencies.—Any waived funding deficiency under sections 302 and 303 of such Act or section 412 of such Code, as in effect before the date of enactment of this section [Aug. 17, 2006], shall be deemed satisfied as of the first day of the first applicable plan year and the amount of such waived funding deficiency shall be taken into account in determining the plan’s unfunded liability under subsection (e)(3)(A). In the case of a plan amendment adopted to satisfy the requirements of subsection (b)(2), the plan shall not be deemed to violate section 304(b) of such Act [29 U.S.C. 1084
(b)] or section 412(f) of such Code, as so in effect, by reason of such amendment or any increase in benefits provided to such plan’s participants under a separate plan that is a defined contribution plan or a multiemployer plan.
“(g) Other Rules for Plans Making Election Under This Section.—
“(1) Successor plans to certain plans.—If—
“(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) Special rules for terminations.—
“(B) Termination premium.—In applying section 4006(a)(7)(A) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1306
(a)(7)(A)] to an eligible plan during any period in which an election under subsection (a)(1) is in effect—
“(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 [Pub. L. 109–171, 29 U.S.C. 1306 note] (relating to special rule for plans terminated in bankruptcy).
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) Limitation on deductions under certain plans.—Section 404(a)(7)(C)(iv) of the Internal Revenue Code of 1986, as added by this Act, shall not apply with respect to any taxable year of a plan sponsor of an eligible plan if any applicable plan year with respect to such plan ends with or within such taxable year.
“(4) Notice.—In the case of a plan amendment adopted in order to comply with this section, any notice required under section 204(h) of such Act [29 U.S.C. 1054
(h)] or section 4980F(e) of such Code shall be provided within 15 days of the effective date of such plan amendment. This subsection shall not apply to any plan unless such plan is maintained pursuant to one or more collective bargaining agreements between employee representatives and 1 or more employers.
“(h) Exclusion of Certain Employees From Minimum Coverage Requirements.—
“(1) In general.—[Amended section
410 of this title.]
“(2) Effective date.—The amendment made by this subsection [amending section
410 of this title] shall apply to years beginning before, on, or after the date of the enactment of this Act [Aug. 17, 2006].
“(i) Extension of Special Rule for Additional Funding Requirements.—In the case of an employer which is a commercial passenger airline, section 302(d)(12) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082
(d)(12)] and section 412(l)(12) of the Internal Revenue Code of 1986, as in effect before the date of the enactment of this Act [Aug. 17, 2006], shall each be applied—
“(1) by substituting ‘January 1, 2008’ for ‘December 28, 2005’ in subparagraph (D)(i) thereof, and
“(2) without regard to subparagraph (D)(ii).
“(j) Effective Date.—Except as otherwise provided in this section, the provisions of and amendments made by this section [amending section
410 of this title and section
1322 of Title
29, Labor] shall apply to plan years ending after the date of the enactment of this Act [Aug. 17, 2006].”
[Pub. L. 110–458, title I, § 126(b),Dec. 23, 2008, 122 Stat. 5116, provided that: “The amendment made by this section [amending section 402(e)(4)(C) ofPub. L. 109–280, set out above] shall apply to plan years beginning after December 31, 2007.”]
[Pub. L. 110–28, title VI, § 6614(b),May 25, 2007, 121 Stat. 181, provided that: “The amendment made by subsection (a) [amending section 402(i)(1) ofPub. L. 109–280, set out above] shall take effect as if included in section 402 of the Pension Protection Act of 2006 [Pub. L. 109–280].”]
[Pub. L. 110–28, title VI, § 6615(b),May 25, 2007, 121 Stat. 181, provided that: “The amendment made by this section [amending section 402(a)(2) ofPub. L. 109–280, set out above] shall take effect as if included in the provisions of the Pension Protection Act of 2006 [Pub. L. 109–280] to which such amendment relates.”]
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Wednesday, December 26, 2012
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
| 26 USC | Description of Change | Session Year | Public Law | Statutes at Large |
|---|---|---|---|---|
| § 430 | 2012 | 112-141 [Sec.] 40211(a)(2)(B) | 126 Stat. 847 | |
| § 430 | 2012 | 112-141 [Sec.] 40211(a)(1) | 126 Stat. 846 |
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