26 U.S.C. § 431 — Minimum funding standards for multiemployer plans
submitted 20 years ago by Pub. L. 109-280 to r/title-26-INTERNAL-REVENUE-CODE · 4,717 words · no verdicts yet
This law sets rules for how multiemployer pension plans track and pay off funding shortfalls. Plans track this with a "funding standard account" charged for costs and credited for contributions. The law also lets struggling plans get extra time, up to several decades, to pay off big shortfalls.
This section explains how multiemployer pension plans must track and pay off funding shortfalls.
(a) In general. This section explains how to calculate a "funding standard account" for multiemployer pension plans, used under section 412 of this title. For any plan year, the "accumulated funding deficiency*" is the amount, as of the end of that year, by which all the total charges ever made to the plan's funding standard account (going back to the first year this section applied to the plan) are more than all the total credits ever made to that account.
(b) Funding standard account.
(1) Account required. Every multiemployer plan covered by this part must set up and keep a funding standard account. Only the rules in this section can add charges or credits to that account.
(2) Charges to account. For each plan year, the account is charged with the sum of: (A) the plan's normal cost for the year; (B) amounts needed to pay off, in equal yearly installments over set periods, several kinds of unfunded liability — the plan's unfunded past-service liability as of its first year under this section, paid off over 15 years if the plan began on or after January 1, 2008; any increase in unfunded past-service liability caused by a plan amendment, each year's increase paid off separately over 15 years; any net experience loss for the year, paid off over 15 years; and any loss from a change in actuarial assumptions, paid off over 15 years; (C) the amount needed to pay off, over 15 years, any funding deficiency that was waived under section 412(c)(3) in an earlier year; (D) the amount needed to pay off, over 5 years, any amount that was credited under the older section 412(b)(3)(D), as that section read before the Pension Protection Act of 2006; and (E) the amount needed to pay off, over 20 years, contributions that would otherwise have been required under the older section 412(c)(7)(A)(i)(I), as it read before that same 2006 law.
(3) Credits to account. For each plan year, the account is credited with the sum of: (A) the amount the employer is considered to have contributed for the year; (B) amounts needed to pay off, over 15 years each, any net decrease in unfunded past-service liability from a plan amendment, any net experience gain, and any gain from a change in actuarial assumptions; (C) the amount of any funding deficiency that was waived under section 412(c)(3) for that year; and (D) in certain cases where the plan used the older alternative minimum funding standard the year before, the amount by which a debit balance under the regular account exceeds a debit balance under that alternative account.
(4) Special rule for amounts first amortized before 2008. If an amount started being paid off before 2008 under the old section 412(b) rules, instead of using the new 15-year rules in paragraphs (2)(B) and (3)(B) above, it keeps being paid off the old way, under the law as it existed then.
(5) Combining and offsetting amounts. Under Treasury regulations, several amounts that must be amortized under paragraph (2) or (3) may be combined into one amount, paid off over a blended period based on how much time was left on each piece. These amounts may also be offset against each other, with the leftover paid off over the longer of the two remaining periods.
(6) Interest. The funding standard account, and the individual items in it, are charged or credited with interest, at whatever rate the plan uses to figure its costs, under rules the Secretary of the Treasury* sets.
(7) Special rules relating to charges and credits. (A) If a multiemployer plan gets a payment from an employer for that employer's withdrawal liability under ERISA, the payment counts as a contribution by the employer. The Secretary* may add rules to stop withdrawal-liability payments from improperly counting as regular advance funding. (B) If a plan was in "reorganization" the year before but is not in reorganization this year, any balance left in the account from that earlier year is wiped out with an offsetting charge or credit, but the wiped-out amount must still be paid off (or credited back) over the next 30 years — except for any part that was already an accumulated funding deficiency under ERISA section 4243(a) when the plan left reorganization. (C) Any amount a plan pays during the year to the Pension Benefit Guaranty Corporation*, or to a related tax-exempt fund*, reduces how much the employer is considered to have contributed that year. (D) If an employer makes an interim payment while its withdrawal liability is still being decided, and the plan later refunds that payment, the refunded amount is charged to the account under Treasury rules. (E) If a plan had elected, before the 2006 Pension Protection Act, to defer part of a net experience loss to a later year, that deferred amount is charged in the year it was deferred to. (F) Any financial assistance a plan gets from the Pension Benefit Guaranty Corporation, and any repayment of that assistance, is accounted for as the Secretary decides. (G) If a plan amendment increases unfunded past-service liability by raising short-term benefits — ones paid for no more than 14 years instead of for life — that increase is paid off over that shorter number of years instead of the usual 15.
(8) Special relief rules. These rules gave struggling multiemployer plans temporary extra flexibility after the 2008 financial crisis, and again in 2020–2021, but only for a plan whose actuary certifies, under a "solvency test," that the plan has enough assets to pay its expected benefits over the relevant payoff period. (A) A qualifying plan could treat investment losses from either or both of the first two plan years after August 31, 2008, as their own separate item, paid off over 30 years starting the year the loss first showed up in the plan's asset value — as long as no separate extension was also given for that item, and any extension already granted did not stretch this 30-year period further. (B) A qualifying plan could also change how it values its assets: it could spread the gap between expected and actual investment returns over up to 10 years, and it could limit the smoothed asset value to no less than 80 percent and no more than 130 percent of the assets' real market value. The Secretary would not treat this changed valuation method as unreasonable just because of these changes, and the change counts as automatically approved. If a plan used both this rule and the investment-loss rule in (A), any resulting drop in unfunded liability is treated as its own separate item, paid off over 30 years. (C) The "solvency test" is met only if the plan's actuary certifies the plan is projected to have enough assets to pay its expected benefits and costs on time, factoring in these special relief changes. (D) If a plan uses this relief, it generally cannot increase benefits during the following two plan years, unless the actuary certifies that the increase is funded by new money not already committed to the plan, and that the plan's funded percentage and credit balances will stay at least as strong as they would have been without the increase — or unless the amendment is required to keep the plan legally qualified or to follow other law. (E) A plan using this relief must tell its participants and beneficiaries, and must inform the Pension Benefit Guaranty Corporation, in whatever form the Corporation's Director requires. (F) A separate version of this relief applied for 2020 and 2021: a plan that met the solvency test as of February 29, 2020, could apply these same rules using that date in place of August 31, 2008, and could also treat COVID-19-related losses — like lower contributions, lower employment, or unexpected early retirements — the same way as investment losses. This 2020–2021 relief did not apply to a plan that also received special financial assistance under ERISA section 4262, and for it, the Secretary of the Treasury generally must accept the plan sponsor's own loss calculations unless they are clearly wrong.
(c) Additional rules.
(1) Determinations to be made under funding method. Normal costs, accrued liability, past-service liabilities, and experience gains and losses are all figured out using whatever funding method the plan actually uses to calculate its costs.
(2) Valuation of assets. (A) The plan's assets are valued using any reasonable actuarial method that accounts for fair market value and that Treasury regulations allow. (B) For a bond or similar debt instrument that is not in default, the plan administrator may choose to value it on an amortized basis — moving smoothly from its purchase cost to its face value at maturity or earliest call date. This choice must be made the way Treasury regulations require, applies to all such bonds, and can only be undone with the Secretary's consent.
(3) Actuarial assumptions must be reasonable. All the costs, liabilities, interest rates, and other factors used under the plan must be based on actuarial assumptions and methods that are each individually reasonable, given the plan's actual experience and reasonable expectations, and that together represent the actuary's best estimate of what will really happen under the plan.
(4) Treatment of certain changes as experience gain or loss. If a change in Social Security benefits, other government retirement benefits, the legal definition of "wages," or the wage amounts counted under section 401(a)(5) causes the plan's accrued liability to go up or down, that change is treated as an experience loss or gain, not as something else.
(5) Full funding. If, without this rule, a plan would end the year with an accumulated funding deficiency bigger than the "full funding limitation" (defined next), then the account is credited with that excess amount, and all the amounts that would otherwise have to be amortized under paragraphs (b)(2)(B), (b)(2)(C), (b)(2)(D), and (b)(3)(B) are instead treated as if they were already fully paid off.
(6) Full-funding limitation. (A) This is generally the plan's total accrued liability, including normal cost — calculated using the entry age normal method if the plan's own funding method can't calculate it directly — minus the smaller of the assets' fair market value or their value under paragraph (2) above. (B) But this limitation can never be less than 90 percent of the plan's "current liability" (including benefits expected to accrue that year) minus the plan's asset value under paragraph (2); for this floor calculation, assets are not reduced by any credit balance in the funding standard account. (C) Unless the plan says otherwise, "accrued liability" here does not include benefits that would not be guaranteed if the plan terminated. (D) "Current liability" means all the liabilities owed to employees and their beneficiaries under the plan. A benefit that depends on an event other than age, service, pay, death, or disability — and that is not reasonably predictable — is not counted until that event actually happens. The interest rate used to figure current liability is set under part (E) below. The mortality tables used are the tables the Secretary prescribes, based on a commissioners' standard table for years before newer government tables apply, and updated periodically — at least every five years — to reflect real pension-plan experience, with separate tables for people who are disabled, split between those disabled before 1995 and those disabled in or after 1995, with the post-1994 group limited to people who qualify as disabled under Social Security's rules. (E) The interest rate used under the plan to figure current liability must fall within a "permissible range." That range normally runs from 10 percent below to 5 percent above the weighted average interest rate on 30-year Treasury securities over the prior four years. If the Secretary finds that the lowest rate in that range is unreasonably high, the Secretary may allow a lower rate, but never below 80 percent of that four-year average. This interest rate is set without regard to the plan's own experience, but it must stay consistent with the rates insurance companies would use to price the same liabilities.
(7) Annual valuation. (A) The plan's gains, losses, and liabilities must generally be valued at least once a year; the Secretary can require more frequent valuations in particular cases. (B) Normally, this valuation must be dated within the plan year it covers, or within one month before that year starts. But a plan may instead use a valuation from the prior year if, as of that earlier date, plan assets were at least 100 percent of current liability; that older data must then be actuarially adjusted for any real differences in the group of participants. A plan may not switch to using this prior-year approach unless, at that earlier valuation date, its assets were at least 125 percent of current liability.
(8) Time when certain contributions deemed made. Contributions an employer makes after the end of a plan year, but within two and a half months after that year ends, are treated as if made on the last day of that plan year. The Secretary may extend this two-and-a-half-month window by up to six months under regulations.
(d) Extension of amortization periods for multiemployer plans.
(1) Automatic extension upon application by certain plans. (A) If a multiemployer plan's sponsor applies to the Secretary for more time to pay off an unfunded liability described in subsection (b)(2)(B) or (b)(4), and includes the actuary's certification described below, the Secretary must grant an extension of up to 5 years, on top of any extension granted under paragraph (2). (B) The actuary must certify, based on reasonable assumptions, that: without the extension the plan would have an accumulated funding deficiency within the current year or the next 9 years; the plan sponsor has adopted a plan to improve funding; the plan is projected to have enough assets to pay benefits and costs on time even with the longer payoff period; and the required notice described in paragraph (3) has been given.
(2) Alternative extension. (A) A plan sponsor may also apply for an extension of up to 10 years, minus any years already granted under paragraph (1), for the same kinds of unfunded liability, on top of any paragraph (1) extension, if the Secretary makes the finding in (B). (B) The Secretary may grant this extension if it would further the purposes of the Pension Protection Act of 2006 and adequately protect participants and beneficiaries, and if refusing it would create a substantial risk that the plan could not keep going voluntarily, or would substantially cut pension benefits or worker pay, in a way that would hurt participants overall. (C) The Secretary must act on this kind of application within 180 days. If the Secretary turns it down, the Secretary must tell the plan the specific reasons, referencing the standards above.
(3) Advance notice. (A) Before granting any extension under this subsection, the Secretary must first get proof that the applicant notified every "affected party" under ERISA about the extension request, including a description of how well-funded the plan is for guaranteed benefits and for all benefit liabilities. (B) The Secretary must consider any relevant information that an affected party submits after getting that notice.
For purposes of section 412, the accumulated funding deficiency* of a multiemployer plan for any plan year is the amount, determined as of the end of the plan year, equal to the excess (if any) of the total charges to the funding standard account of the plan for all plan years (beginning with the first plan year for which this part applies to the plan) over the total credits to such account for such years.
Each multiemployer plan to which this part applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section.
For a plan year, the funding standard account shall be charged with the sum of—
the normal cost of the plan for the plan year,
the amounts necessary to amortize in equal annual installments (until fully amortized)—
in the case of a plan which comes into existence on or after January 1, 2008, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 15 plan years,
separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years, and
separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 15 plan years,
the amount necessary to amortize each waived funding deficiency (within the meaning of section 412(c)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years,
the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under section 412(b)(3)(D) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006), and
the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 20 years the contributions which would be required to be made under the plan but for the provisions of section 412(c)(7)(A)(i)(I) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006).
For a plan year, the funding standard account shall be credited with the sum of—
the amount considered contributed by the employer to or under the plan for the plan year,
the amount necessary to amortize in equal annual installments (until fully amortized)—
separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 15 plan years,
separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 15 plan years, and
separately, with respect to each plan year, the net gain (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 15 plan years,
the amount of the waived funding deficiency (within the meaning of section 412(c)(3)) for the plan year, and
in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard under section 412(g) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006), the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account.
In the case of any amount amortized under section 412(b) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006) over any period beginning with a plan year beginning before 2008 in lieu of the amortization described in paragraphs (2)(B) and (3)(B), such amount shall continue to be amortized under such section as so in effect.
Under regulations prescribed by the Secretary*, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—
may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and
may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater.
The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary of the Treasury*) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs.
For purposes of this part—
Any amount received by a multiemployer plan in payment of all or part of an employer’s withdrawal liability under part 1 of subtitle E of title IV of the Employee* Retirement Income Security Act of 1974 shall be considered an amount contributed by the employer to or under the plan. The Secretary may prescribe by regulation additional charges and credits to a multiemployer plan’s funding standard account to the extent necessary to prevent withdrawal liability payments from being unduly reflected as advance funding for plan liabilities.
If a multiemployer plan is not in reorganization in the plan year but was in reorganization in the immediately preceding plan year, any balance in the funding standard account at the close of such immediately preceding plan year—
shall be eliminated by an offsetting credit or charge (as the case may be), but
shall be taken into account in subsequent plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years.
The preceding sentence shall not apply to the extent of any accumulated funding deficiency under section 4243(a) of such Act as of the end of the last plan year that the plan was in reorganization.
Any amount paid by a plan during a plan year to the Pension Benefit Guaranty Corporation* pursuant to section 4222 of such Act or to a fund exempt under section 501(c)(22) pursuant to section 4223 of such Act shall reduce the amount of contributions considered received by the plan for the plan year.
Any amount paid by an employer pending a final determination of the employer’s withdrawal liability under part 1 of subtitle E of title IV of such Act and subsequently refunded to the employer by the plan shall be charged to the funding standard account in accordance with regulations prescribed by the Secretary.
If an election is in effect under section 412(b)(7)(F) (as in effect on the day before the date of the enactment of the Pension Protection Act of 2006) for any plan year, the funding standard account shall be charged in the plan year to which the portion of the net experience loss deferred by such election was deferred with the amount so deferred (and paragraph (2)(B)(iii) shall not apply to the amount so charged).
Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount, shall be taken into account under this section and section 412 in such manner as is determined by the Secretary.
To the extent that any plan amendment increases the unfunded past service liability under the plan by reason of an increase in benefits which are not payable as a life annuity but are payable under the terms of the plan for a period that does not exceed 14 years from the effective date of the amendment, paragraph (2)(B)(ii) shall be applied separately with respect to such increase in unfunded past service liability by substituting the number of years of the period during which such benefits are payable for “15”.
Notwithstanding any other provision of this subsection—
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met may treat the portion of any experience loss or gain attributable to net investment losses incurred in either or both of the first two plan years ending after August 31, 2008, as an item separate from other experience losses, to be amortized in equal annual installments (until fully amortized) over the period—
beginning with the plan year in which such portion is first recognized in the actuarial value of assets, and
ending with the last plan year in the 30-plan year period beginning with the plan year in which such net investment loss was incurred.
If this subparagraph applies for any plan year—
no extension of the amortization period under clause (i) shall be allowed under subsection (d), and
if an extension was granted under subsection (d) for any plan year before the election to have this subparagraph apply to the plan year, such extension shall not result in such amortization period exceeding 30 years.
For purposes of this subparagraph—
Net investment losses shall be determined in the manner prescribed by the Secretary on the basis of the difference between actual and expected returns (including any difference attributable to any criminally fraudulent investment arrangement).
The determination as to whether an arrangement is a criminally fraudulent investment arrangement shall be made under rules substantially similar to the rules prescribed by the Secretary for purposes of section 165.
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met may change its asset valuation method in a manner which—
spreads the difference between expected and actual returns for either or both of the first 2 plan years ending after August 31, 2008, over a period of not more than 10 years,
provides that for either or both of the first 2 plan years beginning after August 31, 2008, the value of plan assets at any time shall not be less than 80 percent or greater than 130 percent of the fair market value of such assets at such time, or
makes both changes described in subclauses (I) and (II) to such method.
If this subparagraph applies for any plan year—
the Secretary shall not treat the asset valuation method of the plan as unreasonable solely because of the changes in such method described in clause (i), and
such changes shall be deemed approved by the Secretary under section 302(d)(1) of the Employee Retirement Income Security Act of 1974 and section 412(d)(1).
If this subparagraph and subparagraph (A) both apply for any plan year, the plan shall treat any reduction in unfunded accrued liability resulting from the application of this subparagraph as a separate experience amortization base, to be amortized in equal annual installments (until fully amortized) over a period of 30 plan years rather than the period such liability would otherwise be amortized over.
The solvency test under this paragraph is met only if the plan actuary certifies that the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period, taking into account the changes in the funding standard account under this paragraph.
If subparagraph (A) or (B) apply to a multiemployer plan for any plan year, then, in addition to any other applicable restrictions on benefit increases, a plan amendment increasing benefits may not go into effect during either of the 2 plan years immediately following such plan year unless—
the plan actuary certifies that—
any such increase is paid for out of additional contributions not allocated to the plan immediately before the application of this paragraph to the plan, and
the plan’s funded percentage and projected credit balances for such 2 plan years are reasonably expected to be at least as high as such percentage and balances would have been if the benefit increase had not been adopted, or
the amendment is required as a condition of qualification under part I of subchapter D or to comply with other applicable law.
A plan sponsor of a plan to which this paragraph applies shall—
give notice of such application to participants and beneficiaries of the plan, and
inform the Pension Benefit Guaranty Corporation of such application in such form and manner as the Director of the Pension Benefit Guaranty Corporation may prescribe.
A multiemployer plan with respect to which the solvency test under subparagraph (C) is met as of February 29, 2020, may elect to apply this paragraph (without regard to whether such plan previously elected the application of this paragraph)—
by substituting “February 29, 2020” for “August 31, 2008” each place it appears in subparagraphs (A)(i), (B)(i)(I), and (B)(i)(II),
by inserting “and other losses related to the virus SARS–CoV–2 or coronavirus disease 2019 (COVID–19) (including experience losses related to reductions in contributions, reductions in employment, and deviations from anticipated retirement rates, as determined by the plan sponsor)” after “net investment losses” in subparagraph (A)(i), and
by substituting “this subparagraph or subparagraph (A)” for “this subparagraph and subparagraph (A) both” in subparagraph (B)(iii).
The preceding sentence shall not apply to a plan to which special financial assistance is granted under section 4262 of the Employee Retirement Income Security Act of 1974. For purposes of the application of this subparagraph, the Secretary shall rely on the plan sponsor’s calculations of plan losses unless such calculations are clearly erroneous.
For purposes of this part, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan.
For purposes of this part, the value of the plan’s assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary.
The value of a bond or other evidence of indebtedness which is not in default as to principal or interest may, at the election of the plan administrator, be determined on an amortized basis running from initial cost at purchase to par value at maturity or earliest call date. Any election under this subparagraph shall be made at such time and in such manner as the Secretary shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary.
For purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods—
each of which is reasonable (taking into account the experience of the plan and reasonable expectations), and
which, in combination, offer the actuary’s best estimate of anticipated experience under the plan.
For purposes of this section, if—
a change in benefits under the Social Security Act or in other retirement benefits created under Federal or State law, or
a change in the definition of the term “wages” under section 3121, or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5),
results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain.
If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency in excess of the full funding limitation—
the funding standard account shall be credited with the amount of such excess, and
all amounts described in subparagraphs (B), (C), and (D) of subsection (b)(2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall be considered fully amortized for purposes of such subparagraphs.
For purposes of paragraph (5), the term “full-funding limitation” means the excess (if any) of—
the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over
the lesser of—
the fair market value of the plan’s assets, or
the value of such assets determined under paragraph (2).
In no event shall the full-funding limitation determined under subparagraph (A) be less than the excess (if any) of—
90 percent of the current liability of the plan (including the expected increase in current liability due to benefits accruing during the plan year), over
the value of the plan’s assets determined under paragraph (2).
For purposes of clause (i), assets shall not be reduced by any credit balance in the funding standard account.
For purposes of this paragraph, unless otherwise provided by the plan, the accrued liability under a multiemployer plan shall not include benefits which are not nonforfeitable under the plan after the termination of the plan (taking into consideration section 411(d)(3)).
For purposes of this paragraph—
The term “current liability” means all liabilities to employees and their beneficiaries under the plan.
For purposes of clause (i), any benefit contingent on an event other than—
age, service, compensation, death, or disability, or
an event which is reasonably and reliably predictable (as determined by the Secretary),
shall not be taken into account until the event on which the benefit is contingent occurs.
The rate of interest used to determine current liability under this paragraph shall be the rate of interest determined under subparagraph (E).
In the case of plan years beginning before the first plan year to which the first tables prescribed under subclause (II) apply, the mortality table used in determining current liability under this paragraph shall be the table prescribed by the Secretary which is based on the prevailing commissioners’ standard table (described in section 807(d)(5)(A)) 1 used to determine reserves for group annuity contracts issued on January 1, 1993.
The Secretary may by regulation prescribe for plan years beginning after December 31, 1999, mortality tables to be used in determining current liability under this subsection. Such tables shall be based upon the actual experience of pension plans and projected trends in such experience. In prescribing such tables, the Secretary shall take into account results of available independent studies of mortality of individuals covered by pension plans.
Notwithstanding clause (iv)—
The Secretary shall establish mortality tables which may be used (in lieu of the tables under clause (iv)) to determine current liability under this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals whose disabilities occur in plan years beginning on or after such date.
In the case of disabilities occurring in plan years beginning after December 31, 1994, the tables under subclause (I) shall apply only with respect to individuals described in such subclause who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder.
The Secretary shall periodically (at least every 5 years) review any tables in effect under this subparagraph and shall, to the extent such Secretary determines necessary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experience.
For purposes of determining a plan’s current liability for purposes of this paragraph—
If any rate of interest used under the plan under subsection (b)(6) to determine cost is not within the permissible range, the plan shall establish a new rate of interest within the permissible range.
For purposes of this subparagraph—
Except as provided in subclause (II), the term “permissible range” means a rate of interest which is not more than 5 percent above, and not more than 10 percent below, the weighted average of the rates of interest on 30-year Treasury securities during the 4-year period ending on the last day before the beginning of the plan year.
If the Secretary finds that the lowest rate of interest permissible under subclause (I) is unreasonably high, the Secretary may prescribe a lower rate of interest, except that such rate may not be less than 80 percent of the average rate determined under such subclause.
Notwithstanding paragraph (3)(A), the interest rate used under the plan shall be—
determined without taking into account the experience of the plan and reasonable expectations, but
consistent with the assumptions which reflect the purchase rates which would be used by insurance companies to satisfy the liabilities under the plan.
For purposes of this section, a determination of experience gains and losses and a valuation of the plan’s liability shall be made not less frequently than once every year, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.
Except as provided in clause (ii), the valuation referred to in subparagraph (A) shall be made as of a date within the plan year to which the valuation refers or within one month prior to the beginning of such year.
The valuation referred to in subparagraph (A) may be made as of a date within the plan year prior to the year to which the valuation refers if, as of such date, the value of the assets of the plan are not less than 100 percent of the plan’s current liability (as defined in paragraph (6)(D) without regard to clause (iv) thereof).
Information under clause (ii) shall, in accordance with regulations, be actuarially adjusted to reflect significant differences in participants.
A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valuation date within the prior plan year, the value of the assets of the plan are not less than 125 percent of the plan’s current liability (as defined in paragraph (6)(D) without regard to clause (iv) thereof).
For purposes of this section, any contributions for a plan year made by an employer after the last day of such plan year, but not later than two and one-half months after such day, shall be deemed to have been made on such last day. For purposes of this subparagraph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary.
If the plan sponsor of a multiemployer plan—
submits to the Secretary an application for an extension of the period of years required to amortize any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), and
includes with the application a certification by the plan’s actuary described in subparagraph (B),
the Secretary shall extend the amortization period for the period of time (not in excess of 5 years) specified in the application. Such extension shall be in addition to any extension under paragraph (2).
A certification with respect to a multiemployer plan is described in this subparagraph if the plan’s actuary certifies that, based on reasonable assumptions—
absent the extension under subparagraph (A), the plan would have an accumulated funding deficiency in the current plan year or any of the 9 succeeding plan years,
the plan sponsor has adopted a plan to improve the plan’s funding status,
the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended, and
the notice required under paragraph (3)(A) has been provided.
If the plan sponsor of a multiemployer plan submits to the Secretary an application for an extension of the period of years required to amortize any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), the Secretary may extend the amortization period for a period of time (not in excess of 10 years reduced by the number of years of any extension under paragraph (1) with respect to such unfunded liability) if the Secretary makes the determination described in subparagraph (B). Such extension shall be in addition to any extension under paragraph (1).
The Secretary may grant an extension under subparagraph (A) if the Secretary determines that—
such extension would carry out the purposes of the Pension Protection Act of 2006 and would provide adequate protection for participants under the plan and their beneficiaries, and
the failure to permit such extension would—
result in a substantial risk to the voluntary continuation of the plan, or a substantial curtailment of pension benefit levels or employee compensation, and
be adverse to the interests of plan participants in the aggregate.
The Secretary shall act upon any application for an extension under this paragraph within 180 days of the submission of such application. If the Secretary rejects the application for an extension under this paragraph, the Secretary shall provide notice to the plan detailing the specific reasons for the rejection, including references to the criteria set forth above.
The Secretary shall, before granting an extension under this subsection, require each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing of the application for such extension to each affected party (as defined in section 4001(a)(21) of the Employee Retirement Income Security Act of 1974) with respect to the affected plan. Such notice shall include a description of the extent to which the plan is funded for benefits which are guaranteed under title IV of such Act and for benefit liabilities.
The Secretary shall consider any relevant information provided by a person to whom notice was given under paragraph (1).
Source credit: (Added Pub. L. 109–280, title II, § 211(a), Aug. 17, 2006, 120 Stat. 890; amended Pub. L. 111–192, title II, § 211(a)(2), June 25, 2010, 124 Stat. 1304; Pub. L. 113–235, div. O, title I, §§ 101(b)(2), 108(b)(3)(A), Dec. 16, 2014, 128 Stat. 2774, 2788; Pub. L. 113–295, div. A, title I, § 171(a), Dec. 19, 2014, 128 Stat. 4023; Pub. L. 115–141, div. U, title IV, § 401(a)(101), Mar. 23, 2018, 132 Stat. 1189; Pub. L. 117–2, title IX, § 9703(a)(2), Mar. 11, 2021, 135 Stat. 189.)
- 2006Enacted · Pub. L. 109-280 · 120 Stat. 890
- 2010Amended · Pub. L. 111-192 · 124 Stat. 1304
- 2014Amended · Pub. L. 113-235 · 128 Stat. 2774, 2788
- 2014Amended · Pub. L. 113-295 · 128 Stat. 4023
- 2018Amended · Pub. L. 115-141 · 132 Stat. 1189
- 2021Amended · Pub. L. 117-2 · 135 Stat. 189
A history note hasn’t been published yet. The record shows enactment by Pub. L. 109-280 on 2006-08-17.
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