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

Page 706 TITLE 29—LABOR § 1390 ed benefits allocable under section 1391 of this title to an employer who withdraws from a plan shall be reduced by the smaller of— (1) 3⁄4 of 1 percent of the plan’s unfunded vested obligations (determined as of the end of the plan year ending before the date of with- drawal), or (2) $50,000, reduced by the amount, if any, by which the un- funded vested benefits allowable to the em- ployer, determined without regard to this sub- section, exceeds $100,000. (b) Amendment of plan for reduction of amount of unfunded vested benefits allocable to em- ployer withdrawn from plan A plan may be amended to provide for the re- duction of the amount determined under section 1391 of this title by not more than the greater of— (1) the amount determined under subsection (a), or (2) the lesser of— (A) the amount determined under sub- section (a)(1), or (B) $100,000, reduced by the amount, if any, by which the amount determined under section 1391 of this title for the employer, determined without re- gard to this subsection, exceeds $150,000. (c) Nonapplicability This section does not apply— (1) to an employer who withdraws in a plan year in which substantially all employers withdraw from the plan, or (2) in any case in which substantially all em- ployers withdraw from the plan during a pe- riod of one or more plan years pursuant to an agreement or arrangement to withdraw, to an employer who withdraws pursuant to such agreement or arrangement. (d) Presumption of employer withdrawal from plan pursuant to agreement or arrangement applicable in action or proceeding to deter- mine or collect withdrawal liability In any action or proceeding to determine or collect withdrawal liability, if substantially all employers have withdrawn from a plan within a period of 3 plan years, an employer who has withdrawn from such plan during such period shall be presumed to have withdrawn from the plan pursuant to an agreement or arrangement, unless the employer proves otherwise by a pre- ponderance of the evidence. (Pub. L. 93–406, title IV, § 4209, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1225.) § 1390. Nonapplicability of withdrawal liability for certain temporary contribution obliga- tion periods; exception (a) An employer who withdraws from a plan in complete or partial withdrawal is not liable to the plan if the employer— (1) first had an obligation to contribute to the plan after September 26, 1980, (2) had an obligation to contribute to the plan for no more than the lesser of— (A) 6 consecutive plan years preceding the date on which the employer withdraws, or (B) the number of years required for vest- ing under the plan, (3) was required to make contributions to the plan for each such plan year in an amount equal to less than 2 percent of the sum of all employer contributions made to the plan for each such year, and (4) has never avoided withdrawal liability because of the application of this section with respect to the plan. (b) Subsection (a) shall apply to an employer with respect to a plan only if— (1) the plan is amended to provide that sub- section (a) applies; (2) the plan provides, or is amended to pro- vide, that the reduction under section 411(a)(3)(E) of title 26 applies with respect to the employees of the employer; and (3) the ratio of the assets of the plan for the plan year preceding the first plan year for which the employer was required to contribute to the plan to the benefit payments made dur- ing that plan year was at least 8 to 1. (Pub. L. 93–406, title IV, § 4210, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1226; amended Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445; Pub. L. 109–280, title II, § 204(c)(1), Aug. 17, 2006, 120 Stat. 887.) Editorial Notes AMENDMENTS 2006—Subsec. (b)(1) to (4). Pub. L. 109–280 redesignated pars. (2) to (4) as (1) to (3), respectively, and struck out former par. (1) which read as follows: ‘‘the plan is not a plan which primarily covers employees in the build- ing and construction industry;’’. 1989—Subsec. (b)(3). Pub. L. 101–239 substituted ‘‘In- ternal Revenue Code of 1986’’ for ‘‘Internal Revenue Code of 1954’’, which for purposes of codification was translated as ‘‘title 26’’ thus requiring no change in text. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–280, title II, § 204(c)(3), Aug. 17, 2006, 120 Stat. 887, provided that: ‘‘The amendments made by this subsection [amending this section and section 1391 of this title] shall apply with respect to plan with- drawals occurring on or after January 1, 2007.’’ EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 7891(f) of Pub. L. 101–239, set out as a note under section 1002 of this title. § 1391. Methods for computing withdrawal liabil- ity (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 sub- section (b), (c), or (d) of this section. Page 707 TITLE 29—LABOR § 1391 1 So in original. The period probably should be a comma. (b) Factors determining computation of amount of unfunded vested benefits allocable to em- ployer withdrawn from plan (1) Except as provided in subsections (c) and (d), the amount of unfunded vested benefits allo- cable 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 de- termined under paragraph (3); and (C) the employer’s proportional share of the unamortized amounts of the reallocated un- funded vested benefits (if any) as determined under paragraph (4). If the sum of the amounts determined with re- spect 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 em- ployer’s proportional shares of the unamortized amount of the change in unfunded vested bene- fits 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 with- drawal 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 un- funded 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 be- fore September 26, 1980, is the amount of the un- funded 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 pre- ceding 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 con- tributions made by employers who had an obligation to contribute under the plan for the plan year in which such change arose re- duced 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 be- fore 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 end- ing 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 un- funded vested benefits is the sum of the employ- er’s proportional share of the unamortized amount of the reallocated unfunded vested bene- fits for each plan year ending before the plan year in which the employer withdrew from the plan. (B) Except as otherwise provided in regula- tions prescribed by the corporation, the reallo- cated unfunded vested benefits for a plan year is the sum of— (i) any amount which the plan sponsor deter- mines 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 de- termines 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 sec- tion 1399 of this title has been sent, and (iii) any amount which the plan sponsor de- termines to be uncollectible or unassessable in that plan year for other reasons under stand- ards not inconsistent with regulations pre- scribed by the corporation. (C) The unamortized amount of the reallo- cated unfunded vested benefits with respect to a plan year is the reallocated unfunded vested benefits for the plan year, reduced by 5 percent Page 708 TITLE 29—LABOR § 1391 of such reallocated unfunded vested benefits for each succeeding plan year. (D) An employer’s proportional share of the unamortized amount of the reallocated un- funded vested benefits with respect to a plan year is the product of— (i) the unamortized amount of the reallo- cated 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 deter- mination respecting amount of unfunded vested benefits allocable to employer with- drawn from plan; factors determining com- putation of amount (1) A multiemployer plan, other than a plan which primarily covers employees in the build- ing and construction industry, may be amended to provide that the amount of unfunded vested benefits allocable to an employer that with- draws from the plan is an amount determined under paragraph (2), (3), (4), or (5) of this sub- section, 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 pro- vided in regulations prescribed by the corpora- tion, to provide that the amount of the unfunded vested benefits allocable to an employer not de- scribed 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 ben- efits allocable to any employer under this para- graph is the sum of the amounts determined under subparagraphs (B) and (C). (B) The amount determined under this sub- paragraph 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 obliga- tions were being fully amortized in level an- nual 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 con- tribute 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 sub- paragraph 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 liabil- ity which can reasonably be expected to be collected, with respect to employers with- drawing before such plan year, and that por- tion of the amount determined under sub- paragraph (B)(i) which is allocable to em- ployers who have an obligation to contribute under the plan in the plan year preceding the plan year in which the employer with- draws and who also had an obligation to con- tribute 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 with- draws, increased by the amount of any em- ployer 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 sec- tion, consistent with the purposes of this sub- chapter, where such adjustment would be appro- priate 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 out- standing 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 em- ployer 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 ben- efits allocable to an employer under this para- graph 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 attrib- Page 709 TITLE 29—LABOR § 1391 utable 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 pre- ceding 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 corpora- tion) decreased by the share of plan assets deter- mined 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 al- located to nonforfeitable benefits which are at- tributable 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 deter- mined 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 attrib- utable 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 em- ployer 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 frac- tion— (I) the numerator of which is the value of the nonforfeitable benefits which are attrib- utable to service with the employer, and (II) the denominator of which is the value of the nonforfeitable benefits which are at- tributable 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 frac- tion— (I) the numerator of which is the sum of all contributions (accumulated with inter- est) 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 inter- est) which have been made to the plan (for the plan year preceding the plan year in which the employer withdraws and all pre- ceding 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 sub- paragraph, less the sum of benefit payments (accumulated with interest) made to partici- pants (and their beneficiaries) for the plan years described in such clause (ii)(I) which are attributable to service with the em- ployer; 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 inter- est) made to participants (and their bene- ficiaries) for the plan years described in such clause (ii)(II) which are attributable to serv- ice 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’ serv- ice 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 sub- paragraph (C); reduced by (iii) the value of all outstanding claims for withdrawal liability which can reasonably be expected to be collected with respect to em- ployers withdrawing before the year preceding the plan year in which the employer with- draws. (F) The employer’s proportional share de- scribed 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 de- termined under subparagraph (C) for the em- ployer bears to the sum of the amounts deter- mined under subparagraph (C) for all employers under the plan. (G) The corporation may prescribe by regula- tion 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. Page 710 TITLE 29—LABOR § 1392 (5)(A) The corporation shall prescribe by regu- lation 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, sub- ject 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 bene- ficiaries or to the corporation. (B) The corporation may prescribe by regula- tion standard approaches for alternative meth- ods, other than those set forth in the preceding paragraphs of this subsection, which a plan may adopt under subparagraph (A), for which the cor- poration may waive or modify the approval re- quirements of subparagraph (A). Any alternative method shall provide for the allocation of sub- stantially all of a plan’s unfunded vested bene- fits among employers who have an obligation to contribute under the plan. (C) Unless the corporation by regulation pro- vides otherwise, a plan may be amended to pro- vide 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 employ- er’s allocable share of unfunded vested benefits under this section. (D) The corporation may by regulation permit adjustments in any denominator under this sec- tion, consistent with the purposes of this sub- chapter, where such adjustment would be appro- priate to ease administrative burdens of plan sponsors in calculating such denominators. (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 amend- ment 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 em- ployer 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 un- funded 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 sub- section (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 with- drawal of employer In the case of a transfer of liabilities to an- other 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 with- drawal 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 begin- ning after a merger of multiemployer plans, the determination under this section shall be made as if each of the multiemployer plans had re- mained separate plans. (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.) Editorial Notes AMENDMENTS 2006—Subsec. (c)(5)(E). Pub. L. 109–280 added subpar. (E). 1989—Subsec. (d)(1). Pub. L. 101–239 substituted ‘‘In- ternal Revenue Code of 1986’’ for ‘‘Internal Revenue Code of 1954’’, which for purposes of codification was translated as ‘‘title 26’’ thus requiring no change in text. 1984—Subsec. (b). Pub. L. 98–369, § 558(b)(1)(A), (B), substituted ‘‘September 25, 1980’’ for ‘‘April 28, 1980’’ in pars. (1)(A) and (2)(A), (B)(ii)(II), and ‘‘September 26, 1980’’ for ‘‘April 29, 1980’’ in pars. (1)(B) and (2)(B)(ii)(I), (D), and in par. (3) in provisions preceding subpar. (A) and in subpar. (B)(i), (ii). Subsec. (c)(2). Pub. L. 98–369, § 558(b)(1)(A), (B), sub- stituted ‘‘September 25, 1980’’ for ‘‘April 28, 1980’’ in subpars. (B)(ii)(II) and (C)(i)(II) and ‘‘September 26, 1980’’ for ‘‘April 29, 1980’’ in subpar. (B)(i), (ii)(I), (II). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–280 applicable with re- spect to plan withdrawals occurring on or after Jan. 1, 2007, see section 204(c)(3) of Pub. L. 109–280, set out as a note under section 1390 of this title. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 7891(f) of Pub. L. 101–239, set out as a note under section 1002 of this title. § 1392. Obligation to contribute (a) ‘‘Obligation to contribute’’ defined For purposes of this part, the term ‘‘obligation to contribute’’ means an obligation to con- tribute arising— (1) under one or more collective bargaining (or related) agreements, or (2) as a result of a duty under applicable labor-management relations law, but does not include an obligation to pay with- drawal liability under this section or to pay de- linquent contributions.