29 U.S.C. § 1391 — Methods for computing withdrawal liability

submitted 46 years ago by Pub. L. 93-406 to r/title-29-LABOR · 3,445 words · no verdicts yet

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This section provides several methods for calculating the unfunded vested benefits assigned to an employer that withdraws from a multiemployer plan. It uses plan changes, older unfunded benefits, reallocated amounts, approved alternative methods, transfers, and mergers, with specified proportional-share formulas.

(a) The amount assigned to a withdrawing employer is calculated under subsection (b), (c), or (d). (b) General method. (1) Unless subsection (c) or (d) applies, the amount is the employer’s share of: (A) the unamortized change in the plan’s unfunded vested benefits for plan years ending after September 25, 1980; (B) any unamortized unfunded vested benefits at the end of the last plan year before September 26, 1980; and (C) unamortized reallocated unfunded vested benefits. If the total under paragraphs (2), (3), and (4) is negative, the assigned amount is zero. (2) For each post-September 25, 1980 plan year in which the employer had a contribution duty and which ended before withdrawal, add the employer’s proportional share of that year’s unamortized change. A year’s change is its end-of-year unfunded vested benefits minus the unamortized pre-September 26, 1980 amount and the unamortized changes for earlier post-September 25, 1980 years. A change is unamortized by reducing it 5 percent for each later plan year. The pre-September 26, 1980 amount is likewise reduced by 5 percent for each later year. The employer’s share is the unamortized amount at the end of the year before withdrawal multiplied by a fraction. The numerator is the employer’s required contributions for the change year and four preceding years. The denominator is all employers’ contributions for those five years, excluding contributions in those years by employers that withdrew in the change year. (3) The employer’s share of the pre-September 26, 1980 amount is that amount multiplied by a fraction. The numerator is the employer’s required contributions for the most recent five plan years before that date. The denominator is contributions for those years by all employers that had a contribution duty in the first plan year ending on or after that date and had not withdrawn before it. (4) The employer’s share of reallocated unfunded vested benefits is the total of its shares for plan years before withdrawal. Unless the corporation’s regulations say otherwise, a year’s reallocated amount is the total of amounts the plan sponsor determines that year are uncollectible because of title 11 or similar proceedings, will not be assessed because of sections 1389, 1399(c)(1)(B), or 1405, or are uncollectible or unassessable for other reasons under regulatory-consistent standards. That amount is reduced by 5 percent for each later plan year. The employer’s share is the unamortized amount at the end of the year before withdrawal multiplied by the fraction in paragraph (2). (c) Amended-plan methods. (1) A multiemployer plan, other than one primarily covering building and construction workers, may be amended to use one of paragraphs (2)–(5) instead of subsection (b) or (d). A building-and-construction plan described in section 1383(b)(1)(B)(i) may, as regulations allow, use a different method for an employer not described in section 1383(b)(1)(A). (2) Under this method, the amount is the sum of (B) and (C). (B) Multiply the plan’s pre-September 26, 1980 unfunded vested benefits, reduced as though fully amortized in equal annual payments over 15 years beginning with the first plan year ending on or after that date, by a fraction whose numerator is the employer’s required contributions for the last five pre-date years and whose denominator is all contributions in those years by employers that had a contribution duty in the first post-date plan year and had not withdrawn before the date. (C) Multiply the plan’s unfunded vested benefits before withdrawal, less collectible outstanding withdrawal claims from earlier withdrawals and less the part of (B)(i) allocated to employers with contribution duties in the preceding year and in the first post-date year, by a fraction. The numerator is the employer’s required contributions for the last five years before withdrawal. The denominator is all employer contributions for those years, increased by earlier-period contributions collected then and reduced by contributions from employers that withdrew during those years. The corporation may regulate adjustments to denominators to ease administration. (3) Multiply the plan’s unfunded vested benefits before withdrawal, less collectible claims from earlier withdrawals, by a fraction whose numerator is the employer’s required contributions for the last five years before withdrawal and whose denominator is all contributions for those years, increased by earlier-period contributions collected then and reduced by contributions from employers that withdrew during those years. (4) The amount is: (A) benefits attributable to participants’ service with the employer, plus the employer’s share of benefits not attributable to service with the employer or other currently contributing employers; (B) service-attributable benefits equal nonforfeitable benefits attributable to the employer’s service minus the employer’s allocated share of plan assets; (C) relevant plan assets equal total assets multiplied by the ratio of nonforfeitable benefits attributable to currently contributing employers to all nonforfeitable benefits; (D) the plan must choose one method for allocating those assets: the ratio of the employer’s nonforfeitable benefits to those of all currently contributing employers; the ratio of the employer’s accumulated contributions to all such employers’ accumulated contributions; or the corresponding ratio after subtracting accumulated benefit payments attributable to the employer from the numerator and those attributable to the employers from the denominator. (E) Benefits not attributable to currently contributing employers equal the excess of all nonforfeitable benefits over those attributable to those employers, minus the excess of all assets over the assets calculated in (C), minus collectible claims from employers withdrawing before the prior year. (F) The employer’s share is the amount in (E), limited to the same ratio of that amount for all employers as the employer’s amount in (C) bears to all employers’ amounts in (C). (G) The corporation may regulate other asset-allocation methods. (5) The corporation must regulate a process for plans to adopt another alternative method, subject to approval if it would not significantly increase loss risk to participants, beneficiaries, or the corporation. It may provide standard approaches and waive or change approval requirements. An alternative method must allocate substantially all unfunded vested benefits among employers with contribution duties. Unless regulations provide otherwise, a plan may use more than five but no more than ten plan years for any numerator or denominator. The corporation may permit denominator adjustments to ease administration. A plan may use a specified plan year with no unfunded vested benefits instead of the pre-September 26, 1980 year as a fresh start. (d) Plans covered by section 404(c). For a plan covered by 26 U.S.C. § 404(c), or its continuation, the subsection (c)(3) method applies unless the plan adopts another authorized method. Sections 1384, 1389, 1399(c)(1)(B), and 1405 do not apply to such a withdrawal unless the plan adopts them. (e) Transferred liabilities. If liabilities are transferred to another plan because of a withdrawal or partial withdrawal, reduce the employer’s liability by the value, at the end of the last plan year ending on or before withdrawal, of the transferred unfunded vested benefits. (f) Mergers. After a multiemployer-plan merger, apply subsections (b), (c), or (d) as the corporation’s regulations provide. If withdrawal occurs in the first year after the merger, calculate as though the plans had remained separate.

the actual law source: uscode.house.gov ↗public domain

(a) Determination of amount of unfunded vested benefits allocable to employer withdrawn from plan

The amount of the unfunded vested benefits allocable to an employer that withdraws from a plan shall be determined in accordance with subsection (b), (c), or (d) of this section.

(b) Factors determining computation of amount of unfunded vested benefits allocable to employer withdrawn from plan

(1)

Except as provided in subsections (c) and (d), the amount of unfunded vested benefits allocable to an employer that withdraws is the sum of—

(A)

the employer’s proportional share of the unamortized amount of the change in the plan’s unfunded vested benefits for plan years ending after September 25, 1980, as determined under paragraph (2),

(B)

the employer’s proportional share, if any, of the unamortized amount of the plan’s unfunded vested benefits at the end of the plan year ending before September 26, 1980, as determined under paragraph (3); and

(C)

the employer’s proportional share of the unamortized amounts of the reallocated unfunded vested benefits (if any) as determined under paragraph (4).

If the sum of the amounts determined with respect to an employer under paragraphs (2), (3), and (4) is negative, the unfunded vested benefits allocable to the employer shall be zero.

(2)

(A)

An employer’s proportional share of the unamortized amount of the change in the plan’s unfunded vested benefits for plan years ending after September 25, 1980, is the sum of the employer’s proportional shares of the unamortized amount of the change in unfunded vested benefits for each plan year in which the employer has an obligation to contribute under the plan ending—

(i)

after such date, and

(ii)

before the plan year in which the withdrawal of the employer occurs.

(B)

The change in a plan’s unfunded vested benefits for a plan year is the amount by which—

(i)

the unfunded vested benefits at the end of the plan year; exceeds

(ii)

the sum of—

(I)

the unamortized amount of the unfunded vested benefits for the last plan year ending before September 26, 1980, and

(II)

the sum of the unamortized amounts of the change in unfunded vested benefits for each plan year ending after September 25, 1980, and preceding the plan year for which the change is determined.

(C)

The unamortized amount of the change in a plan’s unfunded vested benefits with respect to a plan year is the change in unfunded vested benefits for the plan year, reduced by 5 percent of such change for each succeeding plan year.

(D)

The unamortized amount of the unfunded vested benefits for the last plan year ending before September 26, 1980, is the amount of the unfunded vested benefits as of the end of that plan year reduced by 5 percent of such amount for each succeeding plan year.

(E)

An employer’s proportional share of the unamortized amount of a change in unfunded vested benefits is the product of—

(i)

the unamortized amount of such change (as of the end of the plan year preceding the plan year in which the employer withdraws); multiplied by

(ii)

a fraction—

(I)

the numerator of which is the sum of the contributions required to be made under the plan by the employer for the year in which such change arose and for the 4 preceding plan years, and

(II)

the denominator of which is the sum for the plan year in which such change arose and the 4 preceding plan years of all contributions made by employers who had an obligation to contribute under the plan for the plan year in which such change arose reduced by the contributions made in such years by employers who had withdrawn from the plan in the year in which the change arose.

(3)

An employer’s proportional share of the unamortized amount of the plan’s unfunded vested benefits for the last plan year ending before September 26, 1980, is the product of—

(A)

such unamortized amount; multiplied by—

(B)

a fraction—

(i)

the numerator of which is the sum of all contributions required to be made by the employer under the plan for the most recent 5 plan years ending before September 26, 1980, and

(ii)

the denominator of which is the sum of all contributions made for the most recent 5 plan years ending before September 26, 1980, by all employers—

(I)

who had an obligation to contribute under the plan for the first plan year ending on or after such date, and

(II)

who had not withdrawn from the plan before such date.

(4)

(A)

An employer’s proportional share of the unamortized amount of the reallocated unfunded vested benefits is the sum of the employer’s proportional share of the unamortized amount of the reallocated unfunded vested benefits for each plan year ending before the plan year in which the employer withdrew from the plan.

(B)

Except as otherwise provided in regulations prescribed by the corporation, the reallocated unfunded vested benefits for a plan year is the sum of—

(i)

any amount which the plan sponsor determines in that plan year to be uncollectible for reasons arising out of cases or proceedings under title 11, or similar proceedings.1

(ii)

any amount which the plan sponsor determines in that plan year will not be assessed as a result of the operation of section 1389, 1399(c)(1)(B), or 1405 of this title against an employer to whom a notice described in section 1399 of this title has been sent, and

(iii)

any amount which the plan sponsor determines to be uncollectible or unassessable in that plan year for other reasons under standards not inconsistent with regulations prescribed by the corporation.

(C)

The unamortized amount of the reallocated unfunded vested benefits with respect to a plan year is the reallocated unfunded vested benefits for the plan year, reduced by 5 percent of such reallocated unfunded vested benefits for each succeeding plan year.

(D)

An employer’s proportional share of the unamortized amount of the reallocated unfunded vested benefits with respect to a plan year is the product of—

(i)

the unamortized amount of the reallocated unfunded vested benefits (as of the end of the plan year preceding the plan year in which the employer withdraws); multiplied by

(ii)

the fraction defined in paragraph (2)(E)(ii).

(c) Amendment of multiemployer plan for determination respecting amount of unfunded vested benefits allocable to employer withdrawn from plan; factors determining computation of amount

(1)

A multiemployer plan, other than a plan which primarily covers employees in the building and construction industry, may be amended to provide that the amount of unfunded vested benefits allocable to an employer that withdraws from the plan is an amount determined under paragraph (2), (3), (4), or (5) of this subsection, rather than under subsection (b) or (d). A plan described in section 1383(b)(1)(B)(i) of this title (relating to the building and construction industry) may be amended, to the extent provided in regulations prescribed by the corporation, to provide that the amount of the unfunded vested benefits allocable to an employer not described in section 1383(b)(1)(A) of this title shall be determined in a manner different from that provided in subsection (b).

(2)

(A)

The amount of the unfunded vested benefits allocable to any employer under this paragraph is the sum of the amounts determined under subparagraphs (B) and (C).

(B)

The amount determined under this subparagraph is the product of—

(i)

the plan’s unfunded vested benefits as of the end of the last plan year ending before September 26, 1980, reduced as if those obligations were being fully amortized in level annual installments over 15 years beginning with the first plan year ending on or after such date; multiplied by

(ii)

a fraction—

(I)

the numerator of which is the sum of all contributions required to be made by the employer under the plan for the last 5 plan years ending before September 26, 1980, and

(II)

the denominator of which is the sum of all contributions made for the last 5 plan years ending before September 26, 1980, by all employers who had an obligation to contribute under the plan for the first plan year ending after September 25, 1980, and who had not withdrawn from the plan before such date.

(C)

The amount determined under this subparagraph is the product of—

(i)

an amount equal to—

(I)

the plan’s unfunded vested benefits as of the end of the plan year preceding the plan year in which the employer withdraws, less

(II)

the sum of the value as of such date of all outstanding claims for withdrawal liability which can reasonably be expected to be collected, with respect to employers withdrawing before such plan year, and that portion of the amount determined under subparagraph (B)(i) which is allocable to employers who have an obligation to contribute under the plan in the plan year preceding the plan year in which the employer withdraws and who also had an obligation to contribute under the plan for the first plan year ending after September 25, 1980; multiplied by

(ii)

a fraction—

(I)

the numerator of which is the total amount required to be contributed under the plan by the employer for the last 5 plan years ending before the date on which the employer withdraws, and

(II)

the denominator of which is the total amount contributed under the plan by all employers for the last 5 plan years ending before the date on which the employer withdraws, increased by the amount of any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed by an employer who withdrew from the plan under this part during those plan years.

(D)

The corporation may by regulation permit adjustments in any denominator under this section, consistent with the purposes of this subchapter, where such adjustment would be appropriate to ease administrative burdens of plan sponsors in calculating such denominators.

(3)

The amount of the unfunded vested benefits allocable to an employer under this paragraph is the product of—

(A)

the plan’s unfunded vested benefits as of the end of the plan year preceding the plan year in which the employer withdraws, less the value as of the end of such year of all outstanding claims for withdrawal liability which can reasonably be expected to be collected from employers withdrawing before such year; multiplied by

(B)

a fraction—

(i)

the numerator of which is the total amount required to be contributed by the employer under the plan for the last 5 plan years ending before the withdrawal, and

(ii)

the denominator of which is the total amount contributed under the plan by all employers for the last 5 plan years ending before the withdrawal, increased by any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed to the plan during those plan years by employers who withdrew from the plan under this section during those plan years.

(4)

(A)

The amount of the unfunded vested benefits allocable to an employer under this paragraph is equal to the sum of—

(i)

the plan’s unfunded vested benefits which are attributable to participants’ service with the employer (determined as of the end of the plan year preceding the plan year in which the employer withdraws), and

(ii)

the employer’s proportional share of any unfunded vested benefits which are not attributable to service with the employer or other employers who are obligated to contribute under the plan in the plan year preceding the plan year in which the employer withdraws (determined as of the end of the plan year preceding the plan year in which the employer withdraws).

(B)

The plan’s unfunded vested benefits which are attributable to participants’ service with the employer is the amount equal to the value of nonforfeitable benefits under the plan which are attributable to participants’ service with such employer (determined under plan rules not inconsistent with regulations of the corporation) decreased by the share of plan assets determined under subparagraph (C) which is allocated to the employer as provided under subparagraph (D).

(C)

The value of plan assets determined under this subparagraph is the value of plan assets allocated to nonforfeitable benefits which are attributable to service with the employers who have an obligation to contribute under the plan in the plan year preceding the plan year in which the employer withdraws, which is determined by multiplying—

(i)

the value of the plan assets as of the end of the plan year preceding the plan year in which the employer withdraws, by

(ii)

a fraction—

(I)

the numerator of which is the value of nonforfeitable benefits which are attributable to service with such employers, and

(II)

the denominator of which is the value of all nonforfeitable benefits under the plan

as of the end of the plan year.

(D)

The share of plan assets, determined under subparagraph (C), which is allocated to the employer shall be determined in accordance with one of the following methods which shall be adopted by the plan by amendment:

(i)

by multiplying the value of plan assets determined under subparagraph (C) by a fraction—

(I)

the numerator of which is the value of the nonforfeitable benefits which are attributable to service with the employer, and

(II)

the denominator of which is the value of the nonforfeitable benefits which are attributable to service with all employers who have an obligation to contribute under the plan in the plan year preceding the plan year in which the employer withdraws;

(ii)

by multiplying the value of plan assets determined under subparagraph (C) by a fraction—

(I)

the numerator of which is the sum of all contributions (accumulated with interest) which have been made to the plan by the employer for the plan year preceding the plan year in which the employer withdraws and all preceding plan years; and

(II)

the denominator of which is the sum of all contributions (accumulated with interest) which have been made to the plan (for the plan year preceding the plan year in which the employer withdraws and all preceding plan years) by all employers who have an obligation to contribute to the plan for the plan year preceding the plan year in which the employer withdraws; or

(iii)

by multiplying the value of plan assets under subparagraph (C) by a fraction—

(I)

the numerator of which is the amount determined under clause (ii)(I) of this subparagraph, less the sum of benefit payments (accumulated with interest) made to participants (and their beneficiaries) for the plan years described in such clause (ii)(I) which are attributable to service with the employer; and

(II)

the denominator of which is the amount determined under clause (ii)(II) of this subparagraph, reduced by the sum of benefit payments (accumulated with interest) made to participants (and their beneficiaries) for the plan years described in such clause (ii)(II) which are attributable to service with respect to the employers described in such clause (ii)(II).

(E)

The amount of the plan’s unfunded vested benefits for a plan year preceding the plan year in which an employer withdraws, which is not attributable to service with employers who have an obligation to contribute under the plan in the plan year preceding the plan year in which such employer withdraws, is equal to—

(i)

an amount equal to—

(I)

the value of all nonforfeitable benefits under the plan at the end of such plan year, reduced by

(II)

the value of nonforfeitable benefits under the plan at the end of such plan year which are attributable to participants’ service with employers who have an obligation to contribute under the plan for such plan year; reduced by

(ii)

an amount equal to—

(I)

the value of the plan assets as of the end of such plan year, reduced by

(II)

the value of plan assets as of the end of such plan year as determined under subparagraph (C); reduced by

(iii)

the value of all outstanding claims for withdrawal liability which can reasonably be expected to be collected with respect to employers withdrawing before the year preceding the plan year in which the employer withdraws.

(F)

The employer’s proportional share described in subparagraph (A)(ii) for a plan year is the amount determined under subparagraph (E) for the employer, but not in excess of an amount which bears the same ratio to the sum of the amounts determined under subparagraph (E) for all employers under the plan as the amount determined under subparagraph (C) for the employer bears to the sum of the amounts determined under subparagraph (C) for all employers under the plan.

(G)

The corporation may prescribe by regulation other methods which a plan may adopt for allocating assets to determine the amount of the unfunded vested benefits attributable to service with the employer and to determine the employer’s share of unfunded vested benefits not attributable to service with employers who have an obligation to contribute under the plan in the plan year in which the employer withdraws.

(5)

(A)

The corporation shall prescribe by regulation a procedure by which a plan may, by amendment, adopt any other alternative method for determining an employer’s allocable share of unfunded vested benefits under this section, subject to the approval of the corporation based on its determination that adoption of the method by the plan would not significantly increase the risk of loss to plan participants and beneficiaries or to the corporation.

(B)

The corporation may prescribe by regulation standard approaches for alternative methods, other than those set forth in the preceding paragraphs of this subsection, which a plan may adopt under subparagraph (A), for which the corporation may waive or modify the approval requirements of subparagraph (A). Any alternative method shall provide for the allocation of substantially all of a plan’s unfunded vested benefits among employers who have an obligation to contribute under the plan.

(C)

Unless the corporation by regulation provides otherwise, a plan may be amended to provide that a period of more than 5 but not more than 10 plan years may be used for determining the numerator and denominator of any fraction which is used under any method authorized under this section for determining an employer’s allocable share of unfunded vested benefits under this section.

(D)

(E)Fresh start option.—

Notwithstanding paragraph (1), a plan may be amended to provide that the withdrawal liability method described in subsection (b) shall be applied by substituting the plan year which is specified in the amendment and for which the plan has no unfunded vested benefits for the plan year ending before September 26, 1980.

(d) Method of calculating allocable share of employer of unfunded vested benefits set forth in subsection (c)(3); applicability of certain statutory provisions

(1)

The method of calculating an employer’s allocable share of unfunded vested benefits set forth in subsection (c)(3) shall be the method for calculating an employer’s allocable share of unfunded vested benefits under a plan to which section 404(c) of title 26, or a continuation of such a plan, applies, unless the plan is amended to adopt another method authorized under subsection (b) or (c).

(2)

Sections 1384, 1389, 1399(c)(1)(B), and 1405 of this title shall not apply with respect to the withdrawal of an employer from a plan described in paragraph (1) unless the plan is amended to provide that any of such sections apply.

(e) Reduction of liability of withdrawn employer in case of transfer of liabilities to another plan incident to withdrawal or partial withdrawal of employer

In the case of a transfer of liabilities to another plan incident to an employer’s withdrawal or partial withdrawal, the withdrawn employer’s liability under this part shall be reduced in an amount equal to the value, as of the end of the last plan year ending on or before the date of the withdrawal, of the transferred unfunded vested benefits.

(f) Computations applicable in case of withdrawal following merger of multiemployer plans

In the case of a withdrawal following a merger of multiemployer plans, subsection (b), (c), or (d) shall be applied in accordance with regulations prescribed by the corporation; except that, if a withdrawal occurs in the first plan year beginning after a merger of multiemployer plans, the determination under this section shall be made as if each of the multiemployer plans had remained separate plans.

Source credit: (Pub. L. 93–406, title IV, § 4211, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1226; amended Pub. L. 98–369, div. A, title V, § 558(b)(1)(A), (B), July 18, 1984, 98 Stat. 899; Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445; Pub. L. 109–280, title II, § 204(c)(2), Aug. 17, 2006, 120 Stat. 887.)

history & why it existsrecord from the source credit

1980Enacted · Pub. L. 93-406 · 94 Stat. 1226
1984Amended · Pub. L. 98-369 · 98 Stat. 899
1989Amended · Pub. L. 101-239 · 103 Stat. 2445
2006Amended · Pub. L. 109-280 · 120 Stat. 887

A history note hasn’t been published yet. The record shows enactment by Pub. L. 93-406 on 1980-09-26.

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