29 USC 1084 - Minimum funding standards for multiemployer plans

View all text of Part 3 [§ 1081 - § 1086]

§ 1084. Minimum funding standards for multiemployer plans

(a) In general

(b) Funding standard account

(1) Account required

(2) Charges to accountFor a plan year, the funding standard account shall be charged with the sum of—

(A) the normal cost of the plan for the plan year,

(B) the amounts necessary to amortize in equal annual installments (until fully amortized)—

(i) 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,

(ii) 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,

(iii) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years, and

(iv) 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,

(C) the amount necessary to amortize each waived funding deficiency (within the meaning of section 1082(c)(3) of this title) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years,

(D) 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 1082(b)(3)(D) of this title (as in effect on the day before August 17, 2006), and

(E) 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 1082(c)(7)(A)(i)(I) of this title (as in effect on the day before August 17, 2006).

(3) Credits to accountFor a plan year, the funding standard account shall be credited with the sum of—

(A) the amount considered contributed by the employer to or under the plan for the plan year,

(B) the amount necessary to amortize in equal annual installments (until fully amortized)—

(i) 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,

(ii) separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 15 plan years, and

(iii) 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,

(C) the amount of the waived funding deficiency (within the meaning of section 1082(c)(3) of this title) for the plan year, and

(D) 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 1085 of this title (as in effect on the day before August 17, 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.

(4) Special rule for amounts first amortized in plan years before 2008

(5) Combining and offsetting amounts to be amortizedUnder regulations prescribed by the Secretary of the Treasury, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—

(A) 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

(B) 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.

(6) Interest

(7) Special rules relating to charges and credits to funding standard accountFor purposes of this part—

(A) Withdrawal liability

(B) Adjustments when a multiemployer plan leaves reorganizationIf 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—

(i) shall be eliminated by an offsetting credit or charge (as the case may be), but

(ii) 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 1423(a) 1

1 See References in Text note below.

of this title as of the end of the last plan year that the plan was in reorganization.

(C)

(D) Interim withdrawal liability payments

(E) Election for deferral of charge for portion of net experience loss

(F) Financial assistance

(G) Short-term benefits

(8) Special relief rulesNotwithstanding any other provision of this subsection—

(A) Amortization of net investment losses

(i) In generalA 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—(I) beginning with the plan year in which such portion is first recognized in the actuarial value of assets, and(II) 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.

(ii) Coordination with extensionsIf this subparagraph applies for any plan year—(I) no extension of the amortization period under clause (i) shall be allowed under subsection (d), and(II) 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.

(iii) Net investment lossesFor purposes of this subparagraph—(I) In general(II) Criminally fraudulent investment arrangements

(B) Expanded smoothing period

(i) In generalA multiemployer plan with respect to which the solvency test under subparagraph (C) is met may change its asset valuation method in a manner which—(I) 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,(II) 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(III) makes both changes described in subclauses (I) and (II) to such method.

(ii) Asset valuation methodsIf this subparagraph applies for any plan year—(I) the Secretary of the Treasury 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(II) such changes shall be deemed approved by such Secretary under section 1082(d)(1) of this title and section 412(d)(1) of title 26.

(iii) Amortization of reduction in unfunded accrued liability

(D) Restriction on benefit increasesIf 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—

(i) the plan actuary certifies that—(I) 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(II) 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

(ii) the amendment is required as a condition of qualification under part I of subchapter D of chapter 1 of title 26 or to comply with other applicable law.

(E) ReportingA plan sponsor of a plan to which this paragraph applies shall—

(i) give notice of such application to participants and beneficiaries of the plan, and

(ii) 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.

(F) Relief for 2020 and 2021A 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)—

(i) by substituting “February 29, 2020” for “August 31, 2008” each place it appears in subparagraphs (A)(i), (B)(i)(I), and (B)(i)(II),

(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

(iii) 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 1432 of this title. For purposes of the application of this subparagraph, the Secretary of the Treasury shall rely on the plan sponsor’s calculations of plan losses unless such calculations are clearly erroneous.

(1) Determinations to be made under funding method

(2) Valuation of assets

(A) In general

(B) Election with respect to bonds

(3) Actuarial assumptions must be reasonableFor 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—

(A) each of which is reasonable (taking into account the experience of the plan and reasonable expectations), and

(B) which, in combination, offer the actuary’s best estimate of anticipated experience under the plan.

(4) Treatment of certain changes as experience gain or lossFor purposes of this section, if—

(A) a change in benefits under the Social Security Act [42 U.S.C. 301 et seq.] or in other retirement benefits created under Federal or State law, or

(B) a change in the definition of the term “wages” under section 3121 of title 26, or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5) of title 26,

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.

(5) Full fundingIf, 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—

(A) the funding standard account shall be credited with the amount of such excess, and

(B) 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.

(6) Full-funding limitation

(A) In generalFor purposes of paragraph (5), the term “full-funding limitation” means the excess (if any) of—

(i) 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

(ii) the lesser of—(I) the fair market value of the plan’s assets, or(II) the value of such assets determined under paragraph (2).

(B) Minimum amount

(i) In generalIn no event shall the full-funding limitation determined under subparagraph (A) be less than the excess (if any) of—(I) 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(II) the value of the plan’s assets determined under paragraph (2).

(ii) Assets

(D) Current liabilityFor purposes of this paragraph—

(i) In general

(ii) Treatment of unpredictable contingent event benefitsFor purposes of clause (i), any benefit contingent on an event other than—(I) age, service, compensation, death, or disability, or(II) an event which is reasonably and reliably predictable (as determined by the Secretary of the Treasury),

shall not be taken into account until the event on which the benefit is contingent occurs.

(iii) Interest rate used

(iv) Mortality tables(I) Commissioners’ standard table(II) Secretarial authority

(v) Separate mortality tables for the disabledNotwithstanding clause (iv)—(I) In general(II) Special rule for disabilities occurring after 1994

(vi) Periodic review

(E) Required change of interest rateFor purposes of determining a plan’s current liability for purposes of this paragraph—

(i) In general

(ii) Permissible rangeFor purposes of this subparagraph—(I) In general(II) Secretarial authority

(iii) AssumptionsNotwithstanding paragraph (3)(A), the interest rate used under the plan shall be—(I) determined without taking into account the experience of the plan and reasonable expectations, but(II) consistent with the assumptions which reflect the purchase rates which would be used by insurance companies to satisfy the liabilities under the plan.

(7) Annual valuation

(A) In general

(B) Valuation date

(i) Current year

(ii) Use of prior year valuation

(iii) Adjustments

(iv) Limitation

(8) Time when certain contributions deemed made

(d) Extension of amortization periods for multiemployer plans

(1) Automatic extension upon application by certain plans

(A) In generalIf the plan sponsor of a multiemployer plan—

(i) submits to the Secretary of the Treasury 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

(ii) includes with the application a certification by the plan’s actuary described in subparagraph (B),

the Secretary of the Treasury 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).

(B) CriteriaA certification with respect to a multiemployer plan is described in this subparagraph if the plan’s actuary certifies that, based on reasonable assumptions—

(i) 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,

(ii) the plan sponsor has adopted a plan to improve the plan’s funding status,

(iii) the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended, and

(iv) the notice required under paragraph (3)(A) has been provided.

(2) Alternative extension

(A) In general

(B) DeterminationThe Secretary of the Treasury may grant an extension under subparagraph (A) if such Secretary determines that—

(i) such extension would carry out the purposes of this chapter and would provide adequate protection for participants under the plan and their beneficiaries, and

(ii) the failure to permit such extension would—(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial curtailment of pension benefit levels or employee compensation, and(II) be adverse to the interests of plan participants in the aggregate.

(3) Advance notice

(A) In general

(B) Consideration of relevant information

(Pub. L. 93–406, title I, § 304, as added Pub. L. 109–280, title II, § 201(a), Aug. 17, 2006, 120 Stat. 858; amended Pub. L. 111–192, title II, § 211(a)(1), June 25, 2010, 124 Stat. 1302; Pub. L. 113–235, div. O, title I, §§ 101(b)(1), 108(a)(3)(B), Dec. 16, 2014, 128 Stat. 2774, 2787; Pub. L. 113–295, div. A, title I, § 171(b), Dec. 19, 2014, 128 Stat. 4023; Pub. L. 117–2, title IX, § 9703(a)(1), Mar. 11, 2021, 135 Stat. 188.)