29 U.S.C. § 1426 — Insolvent plans

Page 725 TITLE 29—LABOR § 1426 (f) Agreement between plan sponsors of old plan and new plan to transfer in compliance with other statutory provisions; reduction of with- drawal liability of employer from old plan; amount of withdrawal liability of employer to new plan (1) Notwithstanding subsections (b) and (e), the plan sponsors of the old plan and the new plan may agree to a transfer of assets and liabil- ities that complies with sections 1411 and 1414 of this title, rather than this section, except that the employer’s liability with respect to the withdrawal from the old plan shall be reduced under subsection (c) as if assets and liabilities had been transferred in accordance with this section. (2) If the employer withdraws from the new plan within 240 months after the effective date of a transfer of assets and liabilities described in this section, the amount of the employer’s with- drawal liability to the new plan shall be the greater of— (A) the employer’s withdrawal liability de- termined under part 1 of this subtitle with re- spect to the new plan, or (B) the amount by which the employer’s withdrawal liability to the old plan was re- duced under subsection (c), reduced by 5 per- cent for each 12-month period following the ef- fective date of the transfer and ending before the date of the withdrawal from the new plan. (g) Definitions For purposes of this section— (1) ‘‘appropriate amount of assets’’ means the amount by which the value of the non- forfeitable benefits to be transferred exceeds the amount of the employer’s withdrawal li- ability to the old plan (determined under part 1 of this subtitle without regard to section 1391(e) of this title), and (2) ‘‘certified change of collective bargaining representative’’ means a change of collective bargaining representative certified under the Labor-Management Relations Act, 1947 [29 U.S.C. 141 et seq.], or the Railway Labor Act [45 U.S.C. 151 et seq.]. (Pub. L. 93–406, title IV, § 4235, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1247; amended Pub. L. 98–369, div. A, title V, § 558(b)(1)(A), July 18, 1984, 98 Stat. 899.) Editorial Notes REFERENCES IN TEXT Section 1421 of this title, referred to in subsec. (e)(1), was repealed by Pub. L. 113–235, div. O, title I, § 108(a)(1), Dec. 16, 2014, 128 Stat. 2786. The Labor-Management Relations Act, 1947, referred to in subsec. (g)(2), is act June 23, 1947, ch. 120, 61 Stat. 136, which is classified principally to chapter 7 (§ 141 et seq.) of this title. For complete classification of this Act to the Code, see section 141 of this title and Tables. The Railway Labor Act, referred to in subsec. (g)(2), is act May 20, 1926, ch. 347, 44 Stat. 577, which is classi- fied principally to chapter 8 (§ 151 et seq.) of Title 45, Railroads. For complete classification of this Act to the Code, see section 151 of Title 45 and Tables. AMENDMENTS 1984—Subsec. (a). Pub. L. 98–369 substituted ‘‘Sep- tember 25, 1980’’ for ‘‘April 28, 1980’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective Sept. 26, 1980, see section 1461(e)(4) of this title. PART 3—INSOLVENT PLANS Editorial Notes CODIFICATION Pub. L. 113–235, div. O, title I, § 108(a)(3)(C), Dec. 16, 2014, 128 Stat. 2787, which directed amendment of part 3 of subtitle D of title IV of the Employee Retirement Income Security Act of 1974 by striking the heading and inserting ‘‘insolvent plans’’, was executed in this part, which is part 3 of subtitle E of title IV of the Act, to reflect the probable intent of Congress. §§ 1421 to 1425. Repealed. Pub. L. 113–235, div. O, title I, § 108(a)(1), Dec. 16, 2014, 128 Stat. 2786 Section 1421, Pub. L. 93–406, title IV, § 4241, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1249; amended Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445, related to reorganization status. Section 1422, Pub. L. 93–406, title IV, § 4242, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1251, related to notice of reorganization and funding re- quirements. Section 1423, Pub. L. 93–406, title IV, § 4243, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1252; amended Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445; Pub. L. 109–280, title I, § 108(b)(6)–(9), formerly § 107(b)(6)–(9), Aug. 17, 2006, 120 Stat. 820, renumbered Pub. L. 111–192, title II, § 202(a), June 25, 2010, 124 Stat. 1297, related to minimum con- tribution requirement. Section 1424, Pub. L. 93–406, title IV, § 4244, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1255, related to overburden credit against minimum contribution requirement. Section 1425, Pub. L. 93–406, title IV, § 4244A, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1257; amended Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445, related to adjustments in ac- crued benefits. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable with respect to plan years begin- ning after Dec. 31, 2014, see section 108(c) of div. O of Pub. L. 113–235, set out as a note under section 418 of Title 26, Internal Revenue Code. § 1426. Insolvent plans (a) Suspension of payments of benefits; condi- tions, amount, etc. Notwithstanding sections 1053 and 1054 of this title, in any case in which benefit payments under an insolvent multiemployer plan exceed the resource benefit level, any such payments of benefits which are not basic benefits shall be suspended, in accordance with this section, to the extent necessary to reduce the sum of such payments and the payments of such basic bene- fits to the greater of the resource benefit level or the level of basic benefits, unless an alter- native procedure is prescribed by the corpora- tion under section 1322a(g)(5) of this title. (b) Determination of insolvency status for plan year; definitions For purposes of this section, for a plan year— (1) a multiemployer plan is insolvent if the plan’s available resources are not sufficient to Page 726 TITLE 29—LABOR § 1426 1 So in original. Probably should be ‘‘section’’. 2 So in original. pay benefits under the plan when due for the plan year, or if the plan is determined to be in- solvent under subsection (d); (2) ‘‘resource benefit level’’ means the level of monthly benefits determined under sub- sections (c)(1) and (3) and (d)(3) to be the high- est level which can be paid out of the plan’s available resources; (3) ‘‘available resources’’ means the plan’s cash, marketable assets, contributions, with- drawal liability payments, and earnings, less reasonable administrative expenses and amounts owed for such plan year to the cor- poration under section 1431(b)(2) of this title; and (4) ‘‘insolvency year’’ means a plan year in which a plan is insolvent. (c) Determination by plan sponsor of plan in crit- ical status of resource benefit level of plan for each insolvency year; uniform applica- tion of suspension of benefits; adjustments of benefit payments (1) The plan sponsor of a plan in critical sta- tus, as described in subsection 1 1085(b)(2) of this title, shall determine in writing the plan’s re- source benefit level for each insolvency year, based on the plan sponsor’s reasonable projec- tion of the plan’s available resources and the benefits payable under the plan. (2)(A) The suspension of benefit payments under this section shall, in accordance with reg- ulations prescribed by the Secretary of the Treasury, apply in substantially uniform pro- portions to the benefits of all persons in pay sta- tus under the plan, except that the Secretary of the Treasury may prescribe rules under which benefit suspensions for different participant groups may be varied equitably to reflect vari- ations in contribution rates and other relevant factors including differences in negotiated levels of financial support for plan benefit obligations. (B) For purposes of this paragraph— (i) the term ‘‘person in pay status’’ means— (I) a participant or beneficiary on the last day of the base plan year who, at any time during such year, was paid an early, late, normal, or disability retirement benefit (or a death benefit related to a retirement ben- efit), and (II) to the extent provided in regulations prescribed by the Secretary of the Treasury, any other person who is entitled to such a benefit under the plan. (ii) the base plan year for any plan year is— (I) if there is a relevant collective bar- gaining agreement, the last plan year ending at least 6 months before the relevant effec- tive date, or (II) if there is no relevant collective bar- gaining agreement, the last plan year ending at least 12 months before the beginning of the plan year. (iii) a relevant collective bargaining agree- ment is a collective bargaining agreement— (I) which is in effect for at least 6 months during the plan year, and (II) which has not been in effect for more than 36 months as of the end of the plan year. (iv) the relevant effective date is the earliest of the effective dates for the relevant collec- tive bargaining agreements. (3) Notwithstanding paragraph (2), if a plan sponsor determines in writing a resource benefit level for a plan year which is below the level of basic benefits, the payment of all benefits other than basic benefits must be suspended for that plan year. (4)(A) If, by the end of an insolvency year, the plan sponsor determines in writing that the plan’s available resources in that insolvency year could have supported benefit payments above the resource benefit level for that insol- vency year, the plan sponsor shall distribute the excess resources to the participants and bene- ficiaries who received benefit payments from the plan in that insolvency year, in accordance with regulations prescribed by the Secretary of the Treasury. (B) For purposes of this paragraph, the term ‘‘excess resources’’ means available resources above the amount necessary to support the re- source benefit level, but no greater than the amount necessary to pay benefits for the plan year at the benefit levels under the plan. (5) If, by the end of an insolvency year, any benefit has not been paid at the resource benefit level, amounts up to the resource benefit level which were unpaid shall be distributed to the participants and beneficiaries, in accordance with regulations prescribed by the Secretary of the Treasury, to the extent possible taking into account the plan’s total available resources in that insolvency year. (6) Except as provided in paragraph (4) or (5), a plan is not required to make retroactive ben- efit payments with respect to that portion of a benefit which was suspended under this section. (d) Applicability and determinations respecting plan assets; time for determinations of re- source benefit level and level of basic bene- fits (1) As of the end of the first plan year in which a plan is in critical status, as described in sub- section 1 1085(b)(2) of this title,,2 and at least every 3 plan years thereafter (unless the plan is no longer in critical status, as described in sub- section 1 1085(b)(2) of this title,),2 the plan spon- sor shall compare the value of plan assets for that plan year with the total amount of benefit payments made under the plan for that plan year. Unless the plan sponsor determines that the value of plan assets exceeds 3 times the total amount of benefit payments, the plan sponsor shall determine whether the plan will be insol- vent in any of the next 5 plan years. If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the compari- son under this paragraph at least annually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years. (2) If, at any time, the plan sponsor of a plan in critical status, as described in subsection 1 1085(b)(2) of this title, reasonably determines, taking into account the plan’s recent and antici- Page 727 TITLE 29—LABOR § 1426 3 So in original. The comma probably should be ‘‘and’’. pated financial experience, that the plan’s avail- able resources are not sufficient to pay benefits under the plan when due for the next plan year, the plan sponsor shall make such determination available to interested parties. (3) The plan sponsor of a plan in critical sta- tus, as described in subsection 1 1085(b)(2) of this title, shall determine in writing for each insol- vency year the resource benefit level and the level of basic benefits no later than 3 months be- fore the insolvency year. (4) For purposes of this subsection, the value of plan assets shall be the value of the available plan assets determined under regulations pre- scribed by the Secretary of the Treasury. (e) Notice, etc., requirements of plan sponsor of plan in critical status regarding insolvency and resource benefit levels (1) If the plan sponsor of a plan in critical sta- tus, as described in subsection 1 1085(b)(2) of this title, determines under subsection (d)(1) or (2) that the plan may become insolvent (within the meaning of subsection (b)(1)), the plan sponsor shall— (A) notify the Secretary of the Treasury,3 the parties described in section 1021(f)(1) of this title of that determination, and (B) inform the parties described in section 1021(f)(1) of this title that if insolvency occurs certain benefit payments will be suspended, but that basic benefits will continue to be paid. (2) No later than 2 months before the first day of each insolvency year, the plan sponsor of a plan in critical status, as described in sub- section 1 1085(b)(2) of this title, shall notify the Secretary of the Treasury, the corporation, and the parties described in paragraph (1)(B) of the resource benefit level determined in writing for that insolvency year. (3) In any case in which the plan sponsor an- ticipates that the resource benefit level for an insolvency year may not exceed the level of basic benefits, the plan sponsor shall notify the corporation. (4) Notice required by this subsection shall be given in accordance with regulations prescribed by the corporation, except that notice to the Secretary of the Treasury shall be given in ac- cordance with regulations prescribed by the Sec- retary of the Treasury. (5) The corporation may prescribe a time other than the time prescribed by this section for the making of a determination or the filing of a no- tice under this section. (f) Financial assistance from corporation; condi- tions and criteria applicable (1) If the plan sponsor of an insolvent plan, for which the resource benefit level is above the level of basic benefits, anticipates that, for any month in an insolvency year, the plan will not have funds sufficient to pay basic benefits, the plan sponsor may apply for financial assistance from the corporation under section 1431 of this title. (2) A plan sponsor who has determined a re- source benefit level for an insolvency year which is below the level of basic benefits shall apply for financial assistance from the corporation under section 1431 of this title. (g) Application of subsections (a) and (c) Subsections (a) and (c) shall not apply to a plan that, for the plan year, is operating under section 1085(e)(9) of this title, regarding benefit suspensions by certain multiemployer plans in critical and declining status. (Pub. L. 93–406, title IV, § 4245, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1259; amended Pub. L. 109–280, title II, § 203(a), Aug. 17, 2006, 120 Stat. 886; Pub. L. 113–235, div. O, title I, § 108(a)(2), Dec. 16, 2014, 128 Stat. 2786.) Editorial Notes AMENDMENTS 2014—Subsec. (c)(1). Pub. L. 113–235, § 108(a)(2)(A), sub- stituted ‘‘critical status, as described in subsection 1085(b)(2) of this title,’’ for ‘‘reorganization’’. Subsec. (c)(2). Pub. L. 113–235, § 108(a)(2)(B), des- ignated existing provisions as subpar. (A), struck out ‘‘(within the meaning of section 1421(b)(6) of this title)’’ after ‘‘pay status’’, and added subpar. (B). Subsec. (d). Pub. L. 113–235, § 108(a)(2)(A), substituted ‘‘critical status, as described in subsection 1085(b)(2) of this title,’’ for ‘‘reorganization’’ wherever appearing. Subsec. (d)(1). Pub. L. 113–235, § 108(a)(2)(C)(i), struck out ‘‘(determined in accordance with section 1423(b)(3)(B)(ii) of this title)’’ after ‘‘compare the value of plan assets’’. Subsec. (d)(4). Pub. L. 113–235, § 108(a)(2)(C)(ii), added par. (4). Subsec. (e). Pub. L. 113–235, § 108(a)(2)(A), substituted ‘‘critical status, as described in subsection 1085(b)(2) of this title,’’ for ‘‘reorganization’’ in pars. (1) and (2). Subsec. (e)(1)(A). Pub. L. 113–235, § 108(a)(2)(D)(i), sub- stituted ‘‘the parties described in section 1021(f)(1) of this title’’ for ‘‘the corporation, the parties described in section 1422(a)(2) of this title, and the plan participants and beneficiaries’’. Subsec. (e)(1)(B). Pub. L. 113–235, § 108(a)(2)(D)(ii), sub- stituted ‘‘section 1021(f)(1) of this title’’ for ‘‘section 1422(a)(2) of this title and the plan participants and beneficiaries’’. Subsec. (g). Pub. L. 113–235, § 108(a)(2)(E), added sub- sec. (g). 2006—Subsec. (d)(1). Pub. L. 109–280 substituted ‘‘5 plan years’’ for ‘‘3 plan years’’ the second place it ap- peared and inserted at end ‘‘If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the comparison under this paragraph at least an- nually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–235 applicable with re- spect 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 Title 26, Internal Revenue Code. EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–280, title II, § 203(b), Aug. 17, 2006, 120 Stat. 886, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply with respect to Page 728 TITLE 29—LABOR § 1431 determinations made in plan years beginning after 2007.’’ WITHDRAWAL LIABILITY OF EMPLOYER FROM PLAN TER- MINATING WHILE PLAN INSOLVENT WITHIN THIS SEC- TION: DETERMINATIONS, FACTORS, ETC. Pub. L. 96–364, title I, § 108(c)(3), Sept. 26, 1980, 94 Stat. 1268, provided that: ‘‘(A) For the purpose of determining the withdrawal liability of an employer under title IV of the Employee Retirement Income Security Act of 1974 [this sub- chapter] from a plan that terminates while the plan is insolvent (within the meaning of section 4245 of such Act [this section]), the plan’s unfunded vested benefits shall be reduced by an amount equal to the sum of all overburden credits that were applied in determining the plan’s accumulated funding deficiency for all plan years preceding the first plan year in which the plan is insolvent, plus interest thereon. ‘‘(B) The provisions of subparagraph (A) apply only if— ‘‘(i) the plan would have been eligible for the over- burden credit in the last plan year beginning before the date of the enactment of this Act [Sept. 26, 1980], if section 4243 of the Employee Retirement Income Security Act of 1974 [former section 1423 of this title] had been in effect for that plan year, and ‘‘(ii) the Pension Benefit Guaranty Corporation de- termines that the reduction of unfunded vested bene- fits under subparagraph (A) would not significantly increase the risk of loss to the corporation.’’ PART 4—FINANCIAL ASSISTANCE § 1431. Assistance by corporation (a) Authority; procedure applicable; amount If, upon receipt of an application for financial assistance under section 1426(f) of this title or section 1441(d) of this title, the corporation verifies that the plan is or will be insolvent and unable to pay basic benefits when due, the cor- poration shall provide the plan financial assist- ance in an amount sufficient to enable the plan to pay basic benefits under the plan. (b) Conditions; repayment terms (1) Financial assistance shall be provided under such conditions as the corporation deter- mines are equitable and are appropriate to pre- vent unreasonable loss to the corporation with respect to the plan. (2) A plan which has received financial assist- ance shall repay the amount of such assistance to the corporation on reasonable terms con- sistent with regulations prescribed by the cor- poration. (c) Assistance pending final determination of ap- plication Pending determination of the amount de- scribed in subsection (a), the corporation may provide financial assistance in such amounts as it considers appropriate in order to avoid undue hardship to plan participants and beneficiaries. (Pub. L. 93–406, title IV, § 4261, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1261.) Editorial Notes EFFECTIVE DATE Part effective Sept. 26, 1980, except as specifically provided, see section 1461(e) of this title. § 1432. Special financial assistance by the cor- poration (a) Special financial assistance (1) In general The corporation shall provide special finan- cial assistance to an eligible multiemployer plan under this section, upon the application of a plan sponsor of such a plan for such assist- ance. (2) Inapplicability of certain repayment obliga- tion A plan receiving special financial assistance pursuant to this section shall not be subject to repayment obligations with respect to such special financial assistance. (b) Eligible multiemployer plans (1) In general For purposes of this section, a multiem- ployer plan is an eligible multiemployer plan if— (A) the plan is in critical and declining status (within the meaning of section 1085(b)(6) of this title) in any plan year be- ginning in 2020 through 2022; (B) a suspension of benefits has been ap- proved with respect to the plan under sec- tion 1085(e)(9) of this title as of March 11, 2021; (C) in any plan year beginning in 2020 through 2022, the plan is certified by the plan actuary to be in critical status (within the meaning of section 1085(b)(2) of this title), has a modified funded percentage of less than 40 percent, and has a ratio of active to inactive participants which is less than 2 to 3; or (D) the plan became insolvent for purposes of section 418E of title 26 after December 16, 2014, and has remained so insolvent and has not been terminated as of March 11, 2021. (2) Modified funded percentage For purposes of paragraph (1)(C), the term ‘‘modified funded percentage’’ means the per- centage equal to a fraction the numerator of which is current value of plan assets (as de- fined in section 1002(26) of this title) and the denominator of which is current liabilities (as defined in section 431(c)(6)(D) of title 26 and section 1084(c)(6)(D) of this title). (c) Applications for special financial assistance Within 120 days of March 11, 2021, the corpora- tion shall issue regulations or guidance setting forth requirements for special financial assist- ance applications under this section. In such regulations or guidance, the corporation shall— (1) limit the materials required for a special financial assistance application to the min- imum necessary to make a determination on the application; (2) specify effective dates for transfers of special financial assistance following approval of an application, based on the effective date of the supporting actuarial analysis and the date on which the application is submitted; and (3) provide for an alternate application for special financial assistance under this section,