26 U.S.C. § 431 — Minimum funding standards for multiem-

Page 1506 TITLE 26—INTERNAL REVENUE CODE § 431 ‘‘(4) NOTICE.—In the case of a plan amendment adopted in order to comply with this section, any no- tice required under section 204(h) of such Act [29 U.S.C. 1054(h)] or section 4980F(e) of such Code shall be provided within 15 days of the effective date of such plan amendment. This subsection shall not apply to any plan unless such plan is maintained pur- suant to one or more collective bargaining agree- ments between employee representatives and 1 or more employers. ‘‘(h) EXCLUSION OF CERTAIN EMPLOYEES FROM MIN- IMUM COVERAGE REQUIREMENTS.— ‘‘(1) IN GENERAL.—[Amended section 410 of this title.] ‘‘(2) EFFECTIVE DATE.—The amendment made by this subsection [amending section 410 of this title] shall apply to years beginning before, on, or after the date of the enactment of this Act [Aug. 17, 2006]. ‘‘(i) EXTENSION OF SPECIAL RULE FOR ADDITIONAL FUNDING REQUIREMENTS.—In the case of an employer which is a commercial passenger airline, section 302(d)(12) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1082(d)(12)] and section 412(l)(12) of the Internal Revenue Code of 1986, as in effect before the date of the enactment of this Act [Aug. 17, 2006], shall each be applied— ‘‘(1) by substituting ‘January 1, 2008’ for ‘December 28, 2005’ in subparagraph (D)(i) thereof, and ‘‘(2) without regard to subparagraph (D)(ii). ‘‘(j) EFFECTIVE DATE.—Except as otherwise provided in this section, the provisions of and amendments made by this section [amending section 410 of this title and section 1322 of Title 29, Labor] shall apply to plan years ending after the date of the enactment of this Act [Aug. 17, 2006].’’ [Pub. L. 110–458, title I, § 126(b), Dec. 23, 2008, 122 Stat. 5116, provided that: ‘‘The amendment made by this sec- tion [amending section 402(e)(4)(C) of Pub. L. 109–280, set out above] shall apply to plan years beginning after December 31, 2007.’’] [Pub. L. 110–28, title VI, § 6614(b), May 25, 2007, 121 Stat. 181, provided that: ‘‘The amendment made by sub- section (a) [amending section 402(i)(1) of Pub. L. 109–280, set out above] shall take effect as if included in section 402 of the Pension Protection Act of 2006 [Pub. L. 109–280].’’] [Pub. L. 110–28, title VI, § 6615(b), May 25, 2007, 121 Stat. 181, provided that: ‘‘The amendment made by this section [amending section 402(a)(2) of Pub. L. 109–280, set out above] shall take effect as if included in the provisions of the Pension Protection Act of 2006 [Pub. L. 109–280] to which such amendment relates.’’] § 431. Minimum funding standards for multiem- ployer plans (a) In general 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 ap- plies to the plan) over the total credits to such account for such years. (b) Funding standard account (1) Account required Each multiemployer plan to which this part applies shall establish and maintain a funding standard account. Such account shall be cred- ited and charged solely as provided in this sec- tion. (2) Charges to account For a plan year, the funding standard ac- count 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 amor- tized)— (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 aris- ing 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 mean- ing of section 412(c)(3)) 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 amor- tized) over a period of 5 plan years any amount credited to the funding standard ac- count 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 (E) the amount necessary to amortize in equal annual installments (until fully amor- tized) over a period of 20 years the contribu- tions which would be required to be made under the plan but for the provisions of sec- tion 412(c)(7)(A)(i)(I) (as in effect on the day before the date of the enactment of the Pen- sion Protection Act of 2006). (3) Credits to account For a plan year, the funding standard ac- count 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 amor- tized)— (i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan aris- ing 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, Page 1507 TITLE 26—INTERNAL REVENUE CODE § 431 (C) the amount of the waived funding defi- ciency (within the meaning of section 412(c)(3)) for the plan year, and (D) in the case of a plan year for which the accumulated funding deficiency is deter- mined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the al- ternative 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 ac- count. (4) Special rule for amounts first amortized in plan years before 2008 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 Pro- tection 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 ef- fect. (5) Combining and offsetting amounts to be amortized Under regulations prescribed by the Sec- retary, 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 re- maining amortization period for all items entering into such combined amount, and (B) may be offset against amounts re- quired 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 The funding standard account (and items therein) shall be charged or credited (as deter- mined 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 deter- mine costs. (7) Special rules relating to charges and cred- its to funding standard account For purposes of this part— (A) Withdrawal liability Any amount received by a multiemployer plan in payment of all or part of an employ- er’s withdrawal liability under part 1 of sub- title E of title IV of the Employee Retire- ment Income Security Act of 1974 shall be considered an amount contributed by the employer to or under the plan. The Sec- retary may prescribe by regulation addi- tional charges and credits to a multiem- ployer plan’s funding standard account to the extent necessary to prevent withdrawal liability payments from being unduly re- flected as advance funding for plan liabil- ities. (B) Adjustments when a multiemployer plan leaves reorganization If a multiemployer plan is not in reorga- nization in the plan year but was in reorga- nization 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 subse- quent plan years by being amortized in equal annual installments (until fully am- ortized) over 30 plan years. The preceding sentence shall not apply to the extent of any accumulated funding defi- ciency under section 4243(a) of such Act as of the end of the last plan year that the plan was in reorganization. (C) Plan payments to supplemental program or withdrawal liability payment fund Any amount paid by a plan during a plan year to the Pension Benefit Guaranty Cor- poration 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 re- duce the amount of contributions considered received by the plan for the plan year. (D) Interim withdrawal liability payments 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. (E) Election for deferral of charge for portion of net experience loss 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 Protec- tion Act of 2006) for any plan year, the fund- ing standard account shall be charged in the plan year to which the portion of the net ex- perience 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). (F) Financial assistance Any amount of any financial assistance from the Pension Benefit Guaranty Corpora- tion 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. (G) Short-term benefits 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 an- nuity but are payable under the terms of the plan for a period that does not exceed 14 Page 1508 TITLE 26—INTERNAL REVENUE CODE § 431 years from the effective date of the amend- ment, paragraph (2)(B)(ii) shall be applied separately with respect to such increase in unfunded past service liability by sub- stituting the number of years of the period during which such benefits are payable for ‘‘15’’. (8) Special relief rules Notwithstanding any other provision of this subsection— (A) Amortization of net investment losses (i) In general A multiemployer plan with respect to which the solvency test under subpara- graph (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 amor- tized 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 invest- ment loss was incurred. (ii) Coordination with extensions If this subparagraph applies for any plan year— (I) no extension of the amortization pe- riod 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 pe- riod exceeding 30 years. (iii) Net investment losses For purposes of this subparagraph— (I) In general Net investment losses shall be deter- mined in the manner prescribed by the Secretary on the basis of the difference between actual and expected returns (in- cluding any difference attributable to any criminally fraudulent investment arrangement). (II) Criminally fraudulent investment ar- rangements 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. (B) Expanded smoothing period (i) In general A multiemployer plan with respect to which the solvency test under subpara- graph (C) is met may change its asset valuation method in a manner which— (I) spreads the difference between ex- pected 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 Au- gust 31, 2008, the value of plan assets at any time shall not be less than 80 per- cent 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 methods If this subparagraph applies for any plan year— (I) 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 (II) such changes shall be deemed ap- proved by the Secretary under section 302(d)(1) of the Employee Retirement In- come Security Act of 1974 and section 412(d)(1). (iii) Amortization of reduction in unfunded accrued liability If this subparagraph and subparagraph (A) both apply for any plan year, the plan shall treat any reduction in unfunded ac- crued liability resulting from the applica- tion of this subparagraph as a separate ex- perience amortization base, to be amor- tized 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. (C) Solvency test The solvency test under this paragraph is met only if the plan actuary certifies that the plan is projected to have sufficient as- sets to timely pay expected benefits and an- ticipated expenditures over the amortization period, taking into account the changes in the funding standard account under this paragraph. (D) Restriction on benefit increases If subparagraph (A) or (B) apply to a mul- tiemployer plan for any plan year, then, in addition to any other applicable restrictions on benefit increases, a plan amendment in- creasing benefits may not go into effect dur- ing 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 applica- tion 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 bal- ances would have been if the benefit in- crease had not been adopted, or (ii) the amendment is required as a con- dition of qualification under part I of sub- chapter D or to comply with other applica- ble law. Page 1509 TITLE 26—INTERNAL REVENUE CODE § 431 (E) Reporting A plan sponsor of a plan to which this paragraph applies shall— (i) give notice of such application to par- ticipants 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 2021 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 ap- plication 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 experi- ence losses related to reductions in con- tributions, reductions in employment, and deviations from anticipated retirement rates, as determined by the plan sponsor)’’ after ‘‘net investment losses’’ in subpara- graph (A)(i), and (iii) by substituting ‘‘this subparagraph or subparagraph (A)’’ for ‘‘this subpara- graph and subparagraph (A) both’’ in sub- paragraph (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 subpara- graph, the Secretary shall rely on the plan sponsor’s calculations of plan losses unless such calculations are clearly erroneous. (c) Additional rules (1) Determinations to be made under funding method For purposes of this part, normal costs, ac- crued liability, past service liabilities, and ex- perience gains and losses shall be determined under the funding method used to determine costs under the plan. (2) Valuation of assets (A) In general 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. (B) Election with respect to bonds 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 subpara- graph shall be made at such time and in such manner as the Secretary shall by regula- tions provide, shall apply to all such evi- dences of indebtedness, and may be revoked only with the consent of the Secretary. (3) Actuarial assumptions must be reasonable For purposes of this section, all costs, liabil- ities, 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 actu- ary’s best estimate of anticipated experience under the plan. (4) Treatment of certain changes as experience gain or loss For purposes of this section, if— (A) a change in benefits under the Social Security Act 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, or a change in the amount of such wages taken into ac- count under regulations prescribed for pur- poses of section 401(a)(5), results in an increase or decrease in accrued liability under a plan, such increase or de- crease shall be treated as an experience loss or gain. (5) Full funding 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— (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 sub- paragraph (B) of subsection (b)(3) which are required to be amortized shall be considered fully amortized for purposes of such subpara- graphs. (6) Full-funding limitation (A) In general For purposes of paragraph (5), the term ‘‘full-funding limitation’’ means the excess (if any) of— (i) the accrued liability (including nor- mal cost) under the plan (determined under the entry age normal funding meth- od if such accrued liability cannot be di- rectly calculated under the funding meth- od 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 general In no event shall the full-funding limita- tion 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 accru- ing during the plan year), over Page 1510 TITLE 26—INTERNAL REVENUE CODE § 431 1 See References in Text note below. (II) the value of the plan’s assets deter- mined under paragraph (2). (ii) Assets For purposes of clause (i), assets shall not be reduced by any credit balance in the funding standard account. (C) Full funding limitation For purposes of this paragraph, unless oth- erwise provided by the plan, the accrued li- ability 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)). (D) Current liability For purposes of this paragraph— (i) In general The term ‘‘current liability’’ means all liabilities to employees and their bene- ficiaries under the plan. (ii) Treatment of unpredictable contingent event benefits For 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), shall not be taken into account until the event on which the benefit is contingent oc- curs. (iii) Interest rate used The rate of interest used to determine current liability under this paragraph shall be the rate of interest determined under subparagraph (E). (iv) Mortality tables (I) Commissioners’ standard table In the case of plan years beginning be- fore the first plan year to which the first tables prescribed under subclause (II) apply, the mortality table used in deter- mining current liability under this para- graph shall be the table prescribed by the Secretary which is based on the pre- vailing commissioners’ standard table (described in section 807(d)(5)(A)) 1 used to determine reserves for group annuity contracts issued on January 1, 1993. (II) Secretarial authority The Secretary may by regulation pre- scribe for plan years beginning after De- cember 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 ta- bles, the Secretary shall take into ac- count results of available independent studies of mortality of individuals cov- ered by pension plans. (v) Separate mortality tables for the dis- abled Notwithstanding clause (iv)— (I) In general The Secretary shall establish mor- tality tables which may be used (in lieu of the tables under clause (iv)) to deter- mine current liability under this sub- section for individuals who are entitled to benefits under the plan on account of disability. The Secretary shall establish separate tables for individuals whose dis- abilities occur in plan years beginning before January 1, 1995, and for individ- uals whose disabilities occur in plan years beginning on or after such date. (II) Special rule for disabilities occurring after 1994 In the case of disabilities occurring in plan years beginning after December 31, 1994, the tables under subclause (I) shall apply only with respect to individuals described in such subclause who are dis- abled within the meaning of title II of the Social Security Act and the regula- tions thereunder. (vi) Periodic review 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 nec- essary, by regulation update the tables to reflect the actual experience of pension plans and projected trends in such experi- ence. (E) Required change of interest rate For purposes of determining a plan’s cur- rent liability for purposes of this para- graph— (i) In general 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 inter- est within the permissible range. (ii) Permissible range For purposes of this subparagraph— (I) In general 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 per- cent below, the weighted average of the rates of interest on 30-year Treasury se- curities during the 4-year period ending on the last day before the beginning of the plan year. (II) Secretarial authority If the Secretary finds that the lowest rate of interest permissible under sub- clause (I) is unreasonably high, the Sec- retary may prescribe a lower rate of in- terest, except that such rate may not be less than 80 percent of the average rate determined under such subclause. Page 1511 TITLE 26—INTERNAL REVENUE CODE § 431 (iii) Assumptions Notwithstanding paragraph (3)(A), the interest rate used under the plan shall be— (I) determined without taking into ac- count the experience of the plan and rea- sonable 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 For purposes of this section, a determina- tion 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 re- quired in particular cases under regulations prescribed by the Secretary. (B) Valuation date (i) Current year 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 with- in one month prior to the beginning of such year. (ii) Use of prior year valuation The valuation referred to in subpara- graph (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 li- ability (as defined in paragraph (6)(D) without regard to clause (iv) thereof). (iii) Adjustments Information under clause (ii) shall, in ac- cordance with regulations, be actuarially adjusted to reflect significant differences in participants. (iv) Limitation A change in funding method to use a prior year valuation, as provided in clause (ii), may not be made unless as of the valu- ation 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 li- ability (as defined in paragraph (6)(D) without regard to clause (iv) thereof). (8) Time when certain contributions deemed made For purposes of this section, any contribu- tions 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 subpara- graph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary. (d) Extension of amortization periods for multi- employer plans (1) Automatic extension upon application by certain plans (A) In general If the plan sponsor of a multiemployer plan— (i) submits to the Secretary an applica- tion for an extension of the period of years required to amortize any unfunded liabil- ity described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), and (ii) includes with the application a cer- tification 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 exten- sion under paragraph (2). (B) Criteria A certification with respect to a multiem- ployer plan is described in this subparagraph if the plan’s actuary certifies that, based on reasonable assumptions— (i) absent the extension under subpara- graph (A), the plan would have an accumu- lated 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 suffi- cient assets to timely pay expected bene- fits 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 If the plan sponsor of a multiemployer plan submits to the Secretary an application for an extension of the period of years re- quired 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 pe- riod 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 sub- paragraph (B). Such extension shall be in ad- dition to any extension under paragraph (1). (B) Determination The Secretary may grant an extension under subparagraph (A) if the Secretary de- termines that— (i) 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 (ii) the failure to permit such extension would— (I) result in a substantial risk to the voluntary continuation of the plan, or a Page 1512 TITLE 26—INTERNAL REVENUE CODE § 431 substantial curtailment of pension ben- efit levels or employee compensation, and (II) be adverse to the interests of plan participants in the aggregate. (C) Action by Secretary The Secretary shall act upon any applica- tion for an extension under this paragraph within 180 days of the submission of such ap- plication. If the Secretary rejects the appli- cation for an extension under this para- graph, the Secretary shall provide notice to the plan detailing the specific reasons for the rejection, including references to the cri- teria set forth above. (3) Advance notice (A) In general The Secretary shall, before granting an ex- tension under this subsection, require each applicant to provide evidence satisfactory to such Secretary that the applicant has pro- vided 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 no- tice 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. (B) Consideration of relevant information The Secretary shall consider any relevant information provided by a person to whom notice was given under paragraph (1). (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.) Editorial Notes REFERENCES IN TEXT The Employee Retirement Income Security Act of 1974, referred to in subsecs. (b)(7)(A) to (D), (8)(B)(ii)(II), (F) and (d)(3)(A), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829. Title IV of the Act is classified principally to sub- chapter III (§ 1301 et seq.) of chapter 18 of Title 29, Labor. Part 1 of subtitle E of title IV of the Act is clas- sified generally to part 1 (§ 1381 et seq.) of subtitle E of subchapter III of chapter 18 of Title 29. Sections 302, 4001, 4222, 4223, 4243, and 4262 of the Act are classified to sections 1082, 1301, 1402, 1403, 1423, and 1432, respec- tively, of Title 29. For complete classification of this Act to the Code, see Short Title note set out under sec- tion 1001 of Title 29 and Tables. The date of the enactment of the Pension Protection Act of 2006, referred to in subsec. (b)(2)(D), (E), (3)(D), (4), (7)(E), is the date of enactment of Pub. L. 109–280, which was approved Aug. 17, 2006. The Social Security Act, referred to in subsec. (c)(4)(A), (6)(D)(v)(II), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, which is classified generally to chapter 7 (§ 301 et seq.) of Title 42, The Public Health and Welfare. Title II of the Act is classified generally to subchapter II (§ 401 et seq.) of chapter 7 of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. Section 807(d)(5), referred to in subsec. (c)(6)(D)(iv)(I), was repealed by Pub. L. 115–97, title I, § 13517(a)(2)(A), Dec. 22, 2017, 131 Stat. 2144. The Pension Protection Act of 2006, referred to in subsec. (d)(2)(B)(i), is Pub. L. 109–280, Aug. 17, 2006, 120 Stat. 780. For complete classification of this Act to the Code, see Short Title of 2006 Amendment note set out under section 1001 of Title 29, Labor, and Tables. AMENDMENTS 2021—Subsec. (b)(8)(F). Pub. L. 117–2 added subpar. (F). 2018—Subsec. (d)(2)(B)(i). Pub. L. 115–141 substituted ‘‘the Pension Protection Act of 2006’’ for ‘‘this Act’’. 2014—Subsec. (a). Pub. L. 113–235, § 108(b)(3)(A), amended subsec. (a) generally. Prior to amendment, subsec. (a) related to accumulated funding deficiency of multiemployer plan. Subsec. (d)(1)(C). Pub. L. 113–295, which directed amendment of subpar. (C) by substituting ‘‘December 31, 2015’’ for ‘‘December 31, 2014’’, could not be executed because of previous repeal of subpar. (C) by Pub. L. 113–235, § 101(b)(2). See below. Pub. L. 113–235, § 101(b)(2), struck out subpar. (C). Text read as follows: ‘‘The preceding provisions of this para- graph shall not apply with respect to any application submitted after December 31, 2014.’’ 2010—Subsec. (b)(8). Pub. L. 111–192 added par. (8). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Pub. L. 117–2, title IX, § 9703(b), Mar. 11, 2021, 135 Stat. 189, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section and section 1084 of Title 29, Labor] shall take effect as of the first day of the first plan year ending on or after February 29, 2020, except that any election a plan makes pursuant to this section that affects the plan’s funding standard account for the first plan year beginning after February 29, 2020, shall be disregarded for purposes of applying the provisions of section 305 of the Employee Retirement Income Se- curity Act of 1974 [29 U.S.C. 1085] and section 432 of the Internal Revenue Code of 1986 to such plan year. ‘‘(2) RESTRICTIONS ON BENEFIT INCREASES.—Notwith- standing paragraph (1), the restrictions on plan amend- ments increasing benefits in sections 304(b)(8)(D) of such Act [29 U.S.C. 1084(b)(8)(D)] and 431(b)(8)(D) of such Code, as applied by the amendments made by this sec- tion, shall take effect on the date of enactment of this Act [Mar. 11, 2021].’’ EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113–295, div. A, title I, § 171(c), Dec. 19, 2014, 128 Stat. 4023, provided that: ‘‘The amendments made by this section [amending this section and section 1084 of Title 29, Labor] shall apply to applications submitted under section 431(d)(1)(A) of the Internal Revenue Code of 1986 and section 304(d)(1)(C) of the Employee Retire- ment Income Security Act of 1974 [29 U.S.C. 1084(d)(1)(C)] after December 31, 2014.’’ Amendment by section 108(b)(3)(A) of Pub. L. 113–235 applicable with respect to plan years beginning after Dec. 31, 2014, see section 108(c) of div. O of Pub. L. 113–235, set out as an Effective Date of Repeal note under section 418 of this title. EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–192, title II, § 211(b), June 25, 2010, 124 Stat. 1306, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section and section 1084 of Title 29, Labor] shall take effect as of the first day of the first plan year ending after August 31, 2008, except that any election a plan makes pursuant to this section that af- fects the plan’s funding standard account for the first plan year beginning after August 31, 2008, shall be dis- regarded for purposes of applying the provisions of sec- Page 1513 TITLE 26—INTERNAL REVENUE CODE § 432 tion 305 of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1085] and section 432 of the Inter- nal Revenue Code of 1986 to such plan year. ‘‘(2) RESTRICTIONS ON BENEFIT INCREASES.—Notwith- standing paragraph (1), the restrictions on plan amend- ments increasing benefits in sections 304(b)(8)(D) of such Act [29 U.S.C. 1084(b)(8)(D)] and 431(b)(8)(D) of such Code, as added by this section, shall take effect on the date of enactment of this Act [June 25, 2010].’’ EFFECTIVE DATE Pub. L. 109–280, title II, § 211(b), Aug. 17, 2006, 120 Stat. 898, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [enacting this section] shall apply to plan years beginning after 2007. ‘‘(2) SPECIAL RULE FOR CERTAIN AMORTIZATION EXTEN- SIONS.—If the Secretary of the Treasury grants an ex- tension under section 304 of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1084] and section 412(e) of the Internal Revenue Code of 1986 with respect to any application filed with the Secretary of the Treasury on or before June 30, 2005, the extension (and any modification thereof) shall be applied and adminis- tered under the rules of such sections as in effect before the enactment of this Act [Aug. 17, 2006], including the use of the rate of interest determined under section 6621(b) of such Code.’’ SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER AN AGREEMENT APPROVED BY THE PENSION BENEFIT GUARANTY CORPORATION For applicability of this section to a multiemployer plan that is a party to an agreement that was approved by the Pension Benefit Guaranty Corporation prior to June 30, 2005, and that increases benefits and provides for certain withdrawal liability rules, see section 206 of Pub. L. 109–280, set out as a note under section 412 of this title. § 432. Additional funding rules for multiemployer plans in endangered status or critical status (a) General rule For purposes of this part, in the case of a mul- tiemployer plan in effect on July 16, 2006— (1) if the plan is in endangered status— (A) the plan sponsor shall adopt and imple- ment a funding improvement plan in accord- ance with the requirements of subsection (c), and (B) the requirements of subsection (d) shall apply during the funding plan adoption period and the funding improvement period, (2) if the plan is in critical status— (A) the plan sponsor shall adopt and imple- ment a rehabilitation plan in accordance with the requirements of subsection (e), and (B) the requirements of subsection (f) shall apply during the rehabilitation plan adop- tion period and the rehabilitation period, (3) if the plan is in critical and declining sta- tus— (A) the requirements of paragraph (2) shall apply to the plan; and (B) the plan sponsor may, by plan amend- ment, suspend benefits in accordance with the requirements of subsection (e)(9), and (4) if the plan is an eligible multiemployer plan which is applying for or receiving special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974, the requirements of subsection (k) shall apply to the plan. (b) Determination of endangered and critical sta- tus For purposes of this section— (1) Endangered status A multiemployer plan is in endangered sta- tus for a plan year if, as determined by the plan actuary under paragraph (3), the plan is not in critical status for the plan year and is not described in paragraph (5), and, as of the beginning of the plan year, either— (A) the plan’s funded percentage for such plan year is less than 80 percent, or (B) the plan has an accumulated funding deficiency for such plan year, or is projected to have such an accumulated funding defi- ciency for any of the 6 succeeding plan years, taking into account any extension of amortization periods under section 431(d). For purposes of this section, a plan shall be treated as in seriously endangered status for a plan year if the plan is described in both sub- paragraphs (A) and (B). (2) Critical status A multiemployer plan is in critical status for a plan year if, as determined by the plan actuary under paragraph (3), the plan is de- scribed in 1 or more of the following subpara- graphs as of the beginning of the plan year: (A) A plan is described in this subpara- graph if— (i) the funded percentage of the plan is less than 65 percent, and (ii) the sum of— (I) the fair market value of plan assets, plus (II) the present value of the reasonably anticipated employer contributions for the current plan year and each of the 6 succeeding plan years, assuming that the terms of all collective bargaining agree- ments pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years, is less than the present value of all non- forfeitable benefits projected to be payable under the plan during the current plan year and each of the 6 succeeding plan years (plus administrative expenses for such plan years). (B) A plan is described in this subpara- graph if— (i) the plan has an accumulated funding deficiency for the current plan year, not taking into account any extension of am- ortization periods under section 431(d), or (ii) the plan is projected to have an accu- mulated funding deficiency for any of the 3 succeeding plan years (4 succeeding plan years if the funded percentage of the plan is 65 percent or less), not taking into ac- count any extension of amortization peri- ods under section 431(d). (C) A plan is described in this subpara- graph if— (i)(I) the plan’s normal cost for the cur- rent plan year, plus interest (determined at the rate used for determining costs