26 U.S.C. § 9704 — Liability of assigned operators

Page 4160 TITLE 26—INTERNAL REVENUE CODE § 9704 (ii) by the amount reserved for plan ad- ministration under subsection (d). (C) Increases The amount determined under subpara- graph (A)(ii) shall be increased— (i) by any reduction in the total pre- mium payments required to be paid under section 9704(a) by reason of transfers de- scribed in section 9705, (ii) by any carryover to the plan year from any preceding plan year which— (I) is derived from amounts described in section 9704(e)(3)(B)(i), and (II) the trustees elect to use to pay benefits for the current plan year, and (iii) any interest earned by the Combined Fund which the trustees elect to use to pay benefits for the current plan year. (3) Qualified providers The trustees of the Combined Fund shall not enter into an agreement under paragraph (1) with any provider of services which is of a type which is required to be certified by the Secretary of Health and Human Services when providing services under title XVIII of the So- cial Security Act unless the provider is so cer- tified. (4) Effective date Benefits shall be provided under paragraph (1) on and after February 1, 1993. (c) Death benefits coverage (1) In general The trustees of the Combined Fund shall provide death benefits coverage to each eligi- ble beneficiary described in subsection (f)(1) which is identical to the benefits provided under the 1950 UMWA Pension Plan or 1974 UMWA Pension Plan, whichever is applicable, on July 20, 1992. Such coverage shall be pro- vided on and after February 1, 1993. (2) Termination of coverage The 1950 UMWA Pension Plan and the 1974 UMWA Pension Plan shall each be amended to provide that death benefits coverage shall not be provided to eligible beneficiaries on and after February 1, 1993. This paragraph shall not prohibit such plans from subsequently pro- viding death benefits not described in para- graph (1). (d) Reserves for administration The trustees of the Combined Fund may re- serve for each plan year, for use in payment of the administrative costs of the Combined Fund, an amount not to exceed 5 percent of the pre- miums to be paid to the Combined Fund under section 9704(a) during the plan year. (e) Limitation on enrollment The Combined Fund shall not enroll any indi- vidual who is not receiving benefits under the 1950 UMWA Benefit Plan or the 1974 UMWA Ben- efit Plan as of July 20, 1992. (f) Eligible beneficiary For purposes of this subchapter, the term ‘‘eli- gible beneficiary’’ means an individual who— (1) is a coal industry retiree who, on July 20, 1992, was eligible to receive, and receiving, benefits from the 1950 UMWA Benefit Plan or the 1974 UMWA Benefit Plan, or (2) on such date was eligible to receive, and receiving, benefits in either such plan by rea- son of a relationship to such retiree. (Added Pub. L. 102–486, title XIX, § 19143(a), Oct. 24, 1992, 106 Stat. 3041.) Editorial Notes REFERENCES IN TEXT The Social Security Act, referred to in subsec. (b)(3), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is classified generally to subchapter XVIII (§ 1395 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. PART II—FINANCING Sec. 9704. Liability of assigned operators. 9705. Transfers. 9706. Assignment of eligible beneficiaries. § 9704. Liability of assigned operators (a) Annual premiums Each assigned operator shall pay to the Com- bined Fund for each plan year beginning on or after February 1, 1993, an annual premium equal to the sum of the following three premiums— (1) the health benefit premium determined under subsection (b) for such plan year, plus (2) the death benefit premium determined under subsection (c) for such plan year, plus (3) the unassigned beneficiaries premium de- termined under subsection (d) for such plan year. Any related person with respect to an assigned operator shall be jointly and severally liable for any premium required to be paid by such oper- ator. (b) Health benefit premium For purposes of this chapter— (1) In general The health benefit premium for any plan year for any assigned operator shall be an amount equal to the product of the per bene- ficiary premium for the plan year multiplied by the number of eligible beneficiaries as- signed to such operator under section 9706. (2) Per beneficiary premium The Commissioner of Social Security shall calculate a per beneficiary premium for each plan year beginning on or after February 1, 1993, which is equal to the sum of— (A) the amount determined by dividing— (i) the aggregate amount of payments from the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for health bene- fits (less reimbursements but including ad- ministrative costs) for the plan year begin- ning July 1, 1991, for all individuals cov- ered under such plans for such plan year, by (ii) the number of such individuals, plus (B) the amount determined under subpara- graph (A) multiplied by the percentage (if any) by which the medical component of the Page 4161 TITLE 26—INTERNAL REVENUE CODE § 9704 Consumer Price Index for the calendar year in which the plan year begins exceeds such component for 1992. (3) Adjustments for medicare reductions If, by reason of a reduction in benefits under title XVIII of the Social Security Act, the level of health benefits under the Combined Fund would be reduced, the trustees of the Combined Fund shall increase the per bene- ficiary premium for the plan year in which the reduction occurs and each subsequent plan year by the amount necessary to maintain the level of health benefits which would have been provided without such reduction. (c) Death benefit premium The death benefit premium for any plan year for any assigned operator shall be equal to the applicable percentage of the amount, actuarially determined, which the Combined Fund will be required to pay during the plan year for death benefits coverage described in section 9703(c). (d) Unassigned beneficiaries premium (1) Plan years ending on or before September 30, 2006 For plan years ending on or before Sep- tember 30, 2006, the unassigned beneficiaries premium for any assigned operator shall be equal to the applicable percentage of the prod- uct of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under sec- tion 9706 to any person for such plan year. (2) Plan years beginning on or after October 1, 2006 (A) In general For plan years beginning on or after Octo- ber 1, 2006, subject to subparagraph (B), there shall be no unassigned beneficiaries premium, and benefit costs with respect to eligible beneficiaries who are not assigned under section 9706 to any person for any such plan year shall be paid from amounts trans- ferred under section 9705(b). (B) Inadequate transfers If, for any plan year beginning on or after October 1, 2006, the amounts transferred under section 9705(b) are less than the amounts required to be transferred to the Combined Fund under subsection (h)(2)(A) or (i) of section 402 of the Surface Mining Con- trol and Reclamation Act of 1977 (30 U.S.C. 1232), then the unassigned beneficiaries pre- mium for any assigned operator shall be equal to the operator’s applicable percentage of the amount required to be so transferred which was not so transferred. (e) Premium accounts; adjustments (1) Accounts The trustees of the Combined Fund shall es- tablish and maintain 3 separate accounts for each of the premiums described in subsections (b), (c), and (d). Such accounts shall be cred- ited with the premiums received and amounts transferred under section 9705(b) and debited with expenditures allocable to such premiums. (2) Allocations (A) Administrative expenses Administrative costs for any plan year shall be allocated to premium accounts under paragraph (1) on the basis of expendi- tures (other than administrative costs) from such accounts during the preceding plan year. (B) Interest Interest shall be allocated to the account established for health benefit premiums. (3) Shortfalls and surpluses (A) In general Except as provided in subparagraph (B), if, for any plan year, there is a shortfall or sur- plus in any premium account, the premium for the following plan year for each assigned operator shall be proportionately reduced or increased, whichever is applicable, by the amount of such shortfall or surplus. Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in deter- mining whether there is a surplus in the ac- count for purposes of this paragraph. (B) Exception Subparagraph (A) shall not apply to any surplus in the health benefit premium ac- count or the unassigned beneficiaries pre- mium account which is attributable to— (i) the excess of the premiums credited to such account for a plan year over the benefits (and administrative costs) debited to such account for the plan year, but such excess shall only be available for purposes of the carryover described in section 9703(b)(2)(C)(ii) (relating to carryovers of premiums not used to provide benefits), or (ii) interest credited under paragraph (2)(B) for the plan year or any preceding plan year. (C) No authority for increased payments Nothing in this paragraph shall be con- strued to allow expenditures for health care benefits for any plan year in excess of the limit under section 9703(b)(2). (f) Applicable percentage For purposes of this section— (1) In general The term ‘‘applicable percentage’’ means, with respect to any assigned operator, the per- centage determined by dividing the number of eligible beneficiaries assigned under section 9706 to such operator by the total number of eligible beneficiaries assigned under section 9706 to all such operators (determined on the basis of assignments as of October 1, 1993). (2) Annual adjustments In the case of any plan year beginning on or after October 1, 1994, the applicable percentage for any assigned operator shall be redeter- mined under paragraph (1) by making the fol- lowing changes to the assignments as of Octo- ber 1, 1993: (A) Such assignments shall be modified to reflect any changes during the period begin- Page 4162 TITLE 26—INTERNAL REVENUE CODE § 9704 1 So in original. Probably should be ‘‘Commissioner’’. ning October 1, 1993, and ending on the last day of the preceding plan year pursuant to the appeals process under section 9706(f). (B) The total number of assigned eligible beneficiaries shall be reduced by the eligible beneficiaries of assigned operators which (and all related persons with respect to which) had ceased business (within the meaning of section 9701(c)(6)) during the pe- riod described in subparagraph (A). (C) In the case of plan years beginning on or after October 1, 2007, the total number of assigned eligible beneficiaries shall be re- duced by the eligible beneficiaries whose as- signments have been revoked under section 9706(h). (g) Payment of premiums (1) In general The annual premium under subsection (a) for any plan year shall be payable in 12 equal monthly installments, due on the twenty-fifth day of each calendar month in the plan year. In the case of the plan year beginning Feb- ruary 1, 1993, the annual premium under sub- section (a) shall be added to such premium for the plan year beginning October 1, 1993. (2) Deductibility Any premium required by this section shall be deductible without regard to any limitation on deductibility based on the prefunding of health benefits. (h) Information The trustees of the Combined Fund shall, not later than 60 days after the enactment date, fur- nish to the Commissioner of Social Security in- formation as to the benefits and covered bene- ficiaries under the fund, and such other informa- tion as the Secretary 1 may require to compute any premium under this section. (i) Transition rules (1) 1988 agreement operators (A) 1st year costs During the plan year of the Combined Fund beginning February 1, 1993, the 1988 agreement operators shall make contribu- tions to the Combined Fund in amounts nec- essary to pay benefits and administrative costs of the Combined Fund incurred during such year, reduced by the amount trans- ferred to the Combined Fund under section 9705(a) on February 1, 1993. (B) Deficits from merged plans During the period beginning February 1, 1993, and ending September 30, 1994, the 1988 agreement operators shall make contribu- tions to the Combined Fund as are necessary to pay off the expenses accrued (and remain- ing unpaid) by the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of Feb- ruary 1, 1993, reduced by the assets of such plans as of such date. (C) Failure If any 1988 agreement operator fails to meet any obligation under this paragraph, any contributions of such operator to the Combined Fund or any other plan described in section 404(c) shall not be deductible under this title until such time as the fail- ure is corrected. (D) Premium reductions (i) 1st year payments In the case of a 1988 agreement operator making contributions under subparagraph (A), the premium of such operator under subsection (a) shall be reduced by the amount paid under subparagraph (A) by such operator for the plan year beginning February 1, 1993. (ii) Deficit payments In the case a 1988 agreement operator making contributions under subparagraph (B), the premium of such operator under subsection (a) shall be reduced by the amounts which are paid to the Combined Fund by reason of claims arising in con- nection with the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of Feb- ruary 1, 1993, including claims based on the ‘‘evergreen clause’’ found in the language of the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan, and which are al- located to such operator under subpara- graph (E). (iii) Limitation Clause (ii) shall not apply to the extent the amounts paid exceed the contribu- tions. (iv) Plan years Premiums under subsection (a) shall be reduced for the first plan year for which amounts described in clause (i) or (ii) are available and for any succeeding plan year until such amounts are exhausted. (E) Allocations of contributions and refunds Contributions under subparagraphs (A) and (B), and premium reductions under subpara- graph (D)(ii), shall be made ratably on the basis of aggregate contributions made by such operators under the applicable 1988 coal wage agreements as of January 31, 1993. (2) 1st plan year In the case of the plan year of the Combined Fund beginning February 1, 1993— (A) the premiums under subsections (a)(1) and (a)(3) shall be 67 percent of such pre- miums without regard to this paragraph, and (B) the premiums under subsection (a) shall be paid as provided in subsection (g). (3) Startup costs The 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan shall pay the costs of the Combined Fund incurred before February 1, 1993. For purposes of this section, such costs shall be treated as administrative expenses in- curred for the plan year beginning February 1, 1993. (j) Prepayment of premium liability (1) In general If— Page 4163 TITLE 26—INTERNAL REVENUE CODE § 9704 (A) a payment meeting the requirements of paragraph (3) is made to the Combined Fund by or on behalf of— (i) any assigned operator to which this subsection applies, or (ii) any related person to any assigned operator described in clause (i), and (B) the common parent of the controlled group of corporations described in paragraph (2)(B) is jointly and severally liable for any premium under this section which (but for this subsection) would be required to be paid by the assigned operator or related person, then such common parent (and no other per- son) shall be liable for such premium. (2) Assigned operators to which subsection ap- plies (A) In general This subsection shall apply to any as- signed operator if— (i) the assigned operator (or a related person to the assigned operator)— (I) made contributions to the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for employment during the period covered by the 1988 agreement; and (II) is not a 1988 agreement operator, (ii) the assigned operator (and all related persons to the assigned operator) are not actively engaged in the production of coal as of July 1, 2005, and (iii) the assigned operator was, as of July 20, 1992, a member of a controlled group of corporations described in subparagraph (B). (B) Controlled group of corporations A controlled group of corporations is de- scribed in this subparagraph if the common parent of such group is a corporation the shares of which are publicly traded on a United States exchange. (C) Coordination with repeal of assignments A person shall not fail to be treated as an assigned operator to which this subsection applies solely because the person ceases to be an assigned operator by reason of section 9706(h)(1) if the person otherwise meets the requirements of this subsection and is liable for the payment of premiums under section 9706(h)(3). (D) Controlled group For purposes of this subsection, the term ‘‘controlled group of corporations’’ has the meaning given such term by section 52(a). (3) Requirements A payment meets the requirements of this paragraph if— (A) the amount of the payment is not less than the present value of the total premium liability under this chapter with respect to the Combined Fund of the assigned opera- tors or related persons described in para- graph (1) or their assignees, as determined by the operator’s or related person’s enrolled actuary (as defined in section 7701(a)(35)) using actuarial methods and assumptions each of which is reasonable and which are reasonable in the aggregate, as determined by such enrolled actuary; (B) such enrolled actuary files with the Secretary of Labor a signed actuarial report containing— (i) the date of the actuarial valuation ap- plicable to the report; and (ii) a statement by the enrolled actuary signing the report that, to the best of the actuary’s knowledge, the report is com- plete and accurate and that in the actu- ary’s opinion the actuarial assumptions used are in the aggregate reasonably re- lated to the experience of the operator and to reasonable expectations; and (C) 90 calendar days have elapsed after the report required by subparagraph (B) is filed with the Secretary of Labor, and the Sec- retary of Labor has not notified the assigned operator in writing that the requirements of this paragraph have not been satisfied. (4) Use of prepayment The Combined Fund shall— (A) establish and maintain an account for each assigned operator or related person by, or on whose behalf, a payment described in paragraph (3) was made, (B) credit such account with such payment (and any earnings thereon), and (C) use all amounts in such account exclu- sively to pay premiums that would (but for this subsection) be required to be paid by the assigned operator. Upon termination of the obligations for the premium liability of any assigned operator or related person for which such account is main- tained, all funds remaining in such account (and earnings thereon) shall be refunded to such person as may be designated by the com- mon parent described in paragraph (1)(B). (Added Pub. L. 102–486, title XIX, § 19143(a), Oct. 24, 1992, 106 Stat. 3042; amended Pub. L. 103–296, title I, § 108(h)(9)(A), Aug. 15, 1994, 108 Stat. 1487; Pub. L. 109–432, div. C, title II, §§ 211(a), 212(a)(2), Dec. 20, 2006, 120 Stat. 3020, 3024; Pub. L. 115–141, div. U, title IV, § 401(a)(344), Mar. 23, 2018, 132 Stat. 1200.) Editorial Notes REFERENCES IN TEXT The Social Security Act, referred to in subsec. (b)(3), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is classified generally to subchapter XVIII (§ 1395 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. AMENDMENTS 2018—Subsec. (d)(2)(B). Pub. L. 115–141 substituted ‘‘1232),’’ for ‘‘1232)),’’. 2006—Subsec. (d). Pub. L. 109–432, § 212(a)(2)(A), reen- acted heading without change and amended text of sub- sec. (d) generally. Prior to amendment, text read as fol- lows: ‘‘The unassigned beneficiaries premium for any plan year for any assigned operator shall be equal to the applicable percentage of the product of the per ben- eficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under section 9706 to any person for such plan year.’’ Page 4164 TITLE 26—INTERNAL REVENUE CODE § 9705 Subsec. (e)(1). Pub. L. 109–432, § 212(a)(2)(B)(i), inserted ‘‘and amounts transferred under section 9705(b)’’ after ‘‘premiums received’’. Subsec. (e)(3)(A). Pub. L. 109–432, § 212(a)(2)(B)(ii), in- serted at end ‘‘Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in determining whether there is a surplus in the account for purposes of this paragraph.’’ Subsec. (f)(2)(C). Pub. L. 109–432, § 212(a)(2)(C), added subpar. (C). Subsec. (j). Pub. L. 109–432, § 211(a), added subsec. (j). 1994—Subsecs. (b)(2), (h). Pub. L. 103–296 substituted ‘‘Commissioner of Social Security’’ for ‘‘Secretary of Health and Human Services’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–432, div. C, title II, § 212(a)(4), Dec. 20, 2006, 120 Stat. 3025, provided that: ‘‘The amendments made by this subsection [amending this section and sections 9705 and 9706 of this title] shall apply to plan years of the Combined Fund beginning after September 30, 2006.’’ EFFECTIVE DATE OF 1994 AMENDMENT Amendment by Pub. L. 103–296 effective Mar. 31, 1995, see section 110(a) of Pub. L. 103–296, set out as a note under section 401 of Title 42, The Public Health and Welfare. § 9705. Transfers (a) Transfer of assets from 1950 UMWA Pension Plan (1) In general From the funds reserved under paragraph (2), the board of trustees of the 1950 UMWA Pen- sion Plan shall transfer to the Combined Fund— (A) $70,000,000 on February 1, 1993, (B) $70,000,000 on October 1, 1993, and (C) $70,000,000 on October 1, 1994. (2) Reservation Immediately upon the enactment date, the board of trustees of the 1950 UMWA Pension Plan shall segregate $210,000,000 from the gen- eral assets of the plan. Such funds shall be held in the plan until disbursed pursuant to paragraph (1). Any interest on such funds shall be deposited into the general assets of the 1950 UMWA Pension Plan. (3) Use of funds Amounts transferred to the Combined Fund under paragraph (1) shall— (A) in the case of the transfer on February 1, 1993, be used to proportionately reduce the premium of each assigned operator under section 9704(a) for the plan year of the Fund beginning February 1, 1993, and (B) in the case of any other such transfer, be used to proportionately reduce the unas- signed beneficiary premium under section 9704(a)(3) and the death benefit premium under section 9704(a)(2) of each assigned op- erator for the plan year in which transferred and for any subsequent plan year in which such funds remain available. Such funds may not be used to pay any amounts required to be paid by the 1988 agree- ment operators under section 9704(i)(1)(B). (4) Tax treatment; validity of transfer (A) No deduction No deduction shall be allowed under this title with respect to any transfer pursuant to paragraph (1), but such transfer shall not adversely affect the deductibility (under ap- plicable provisions of this title) of contribu- tions previously made by employers, or amounts hereafter contributed by employ- ers, to the 1950 UMWA Pension Plan, the 1950 UMWA Benefit Plan, the 1974 UMWA Pen- sion Plan, the 1974 UMWA Benefit Plan, the 1992 UMWA Benefit Plan, or the Combined Fund. (B) Other tax provisions Any transfer pursuant to paragraph (1)— (i) shall not be treated as an employer reversion from a qualified plan for pur- poses of section 4980, and (ii) shall not be includible in the gross income of any employer maintaining the 1950 UMWA Pension Plan. (5) Treatment of transfer Any transfer pursuant to paragraph (1) shall not be deemed to violate, or to be prohibited by, any provision of law, or to cause the set- tlors, joint board of trustees, employers or any related person to incur or be subject to liabil- ity, taxes, fines, or penalties of any kind what- soever. (b) Transfers (1) In general The Combined Fund shall include any amount transferred to the Fund under sub- sections (h) and (i) of section 402 of the Sur- face Mining Control and Reclamation Act of 1977 (30 U.S.C. 1232). (2) Use of funds Any amount transferred under paragraph (1) for any fiscal year shall be used to pay bene- fits and administrative costs of beneficiaries of the Combined Fund or for such other pur- poses as are specifically provided in the Act described in paragraph (1). (Added Pub. L. 102–486, title XIX, § 19143(a), Oct. 24, 1992, 106 Stat. 3046; amended Pub. L. 109–432, div. C, title II, § 212(a)(1), Dec. 20, 2006, 120 Stat. 3023; Pub. L. 115–141, div. U, title IV, § 401(a)(345), (346), Mar. 23, 2018, 132 Stat. 1200, 1201.) Editorial Notes AMENDMENTS 2018—Subsec. (b)(1). Pub. L. 115–141, § 401(a)(345), sub- stituted ‘‘1232’’ for ‘‘1232(h)’’. Subsec. (b)(2). Pub. L. 115–141, § 401(a)(346), substituted ‘‘Act’’ for ‘‘Acts’’. 2006—Subsec. (b). Pub. L. 109–432, § 212(a)(1)(C), struck out ‘‘from abandoned mine reclamation fund’’ after ‘‘Transfers’’ in heading. Subsec. (b)(1). Pub. L. 109–432, § 212(a)(1)(A), sub- stituted ‘‘subsections (h) and (i) of section 402’’ for ‘‘section 402(h)’’. Subsec. (b)(2). Pub. L. 109–432, § 212(a)(1)(B), reenacted heading without change and amended text of par. (2) generally. Prior to amendment, text read as follows: ‘‘Any amount transferred under paragraph (1) for any fiscal year shall be used to proportionately reduce the unassigned beneficiary premium under section