29 U.S.C. § 1389 — De minimis rule

Page 705 TITLE 29—LABOR § 1389 1 So in original. Probably should be ‘‘title),’’. 2 See References in Text note below. (B) If the plan sponsor determines under para- graph (1) that the employer has no further li- ability to the plan for the partial withdrawal, then the bond shall be cancelled. (C) If the plan sponsor determines under para- graph (1) that the employer continues to have li- ability to the plan for the partial withdrawal, then— (i) the bond shall be paid to the plan, (ii) the employer shall immediately be liable for the outstanding amount of liability due with respect to the plan year for which the bond was posted, and (iii) the employer shall continue to make the partial withdrawal liability payments as they are due. (b) Obligation of employer for payments for par- tial withdrawal for plan years beginning after the second consecutive plan year; other criteria applicable If— (1) for any 2 consecutive plan years following a partial withdrawal under section 1385(a)(1) of this title, the number of contribution base units with respect to which the employer has an obligation to contribute for each such year exceeds 30 percent of the total number of con- tribution base units with respect to which the employer had an obligation to contribute for the high base year (within the meaning of sec- tion 1385(b)(1)(B)(ii) of this title,1 and (2) the total number of contribution base units with respect to which all employers under the plan have obligations to contribute in each of such 2 consecutive years is not less than 90 percent of the total number of con- tribution base units for which all employers had obligations to contribute in the partial withdrawal plan year; then, the employer shall have no obligation to make payments with respect to such partial withdrawal (other than delinquent payments) for plan years beginning after the second such consecutive plan year. (c) Pro rata reduction of amount of partial with- drawal liability payment of employer for plan year following partial withdrawal year In any case in which, in any plan year fol- lowing a partial withdrawal under section 1385(a)(1) of this title, the number of contribu- tion base units with respect to which the em- ployer has an obligation to contribute for such year equals or exceeds 110 percent (or such other percentage as the plan may provide by amend- ment and which is not prohibited under regula- tions prescribed by the corporation) of the num- ber of contribution base units with respect to which the employer had an obligation to con- tribute in the partial withdrawal year, then the amount of the employer’s partial withdrawal li- ability payment for such year shall be reduced pro rata, in accordance with regulations pre- scribed by the corporation. (d) Building and construction industry; enter- tainment industry (1) An employer to whom section 1383(b) 2 of this title (relating to the building and construc- tion industry) applies is liable for a partial with- drawal only if the employer’s obligation to con- tribute under the plan is continued for no more than an insubstantial portion of its work in the craft and area jurisdiction of the collective bar- gaining agreement of the type for which con- tributions are required. (2) An employer to whom section 1383(c) 2 of this title (relating to the entertainment indus- try) applies shall have no liability for a partial withdrawal except under the conditions and to the extent prescribed by the corporation by reg- ulation. (e) Reduction or elimination of partial with- drawal liability under any conditions; cri- teria; procedures applicable (1) The corporation may prescribe regulations providing for the reduction or elimination of partial withdrawal liability under any condi- tions with respect to which the corporation de- termines that reduction or elimination of par- tial withdrawal liability is consistent with the purposes of this chapter. (2) Under such regulations, reduction of with- drawal liability shall be provided only with re- spect to subsequent changes in the employer’s contributions for the same operations, or under the same collective bargaining agreement, that gave rise to the partial withdrawal, and changes in the employer’s contribution base units with respect to other facilities or other collective bargaining agreements shall not be taken into account. (3) The corporation shall prescribe by regula- tion a procedure by which a plan may by amend- ment adopt rules for the reduction or elimi- nation of partial withdrawal liability under any other conditions, subject to the approval of the corporation based on its determination that adoption of such rules by the plan is consistent with the purposes of this chapter. (Pub. L. 93–406, title IV, § 4208, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1224.) Editorial Notes REFERENCES IN TEXT ‘‘Section 1383(b) of this title’’ and ‘‘section 1383(c) of this title’’, referred to in subsec. (d), were in the origi- nal ‘‘section 4202(b)’’ and ‘‘section 4202(c)’’, respec- tively, meaning section 4202(b) and section 4202(c) of the Employee Retirement Income Security Act of 1974 and were editorially translated as the probable intent of Congress in view of section 4202 of the Employee Re- tirement Income Security Act of 1974, which is classi- fied to section 1382 of this title, not having subsection designations and the subject matter of section 4203 of the Act which is classified to section 1383 of this title. This chapter, referred to in subsec. (e)(1), (3), was in the original ‘‘this Act’’, meaning Pub. L. 93–406, known as the Employee Retirement Income Security Act of 1974. Titles I, III, and IV of such Act are classified prin- cipally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of this title and Tables. § 1389. De minimis rule (a) Reduction of unfunded vested benefits allo- cable to employer withdrawn from plan Except in the case of a plan amended under subsection (b), the amount of the unfunded vest- Page 706 TITLE 29—LABOR § 1390 ed benefits allocable under section 1391 of this title to an employer who withdraws from a plan shall be reduced by the smaller of— (1) 3⁄4 of 1 percent of the plan’s unfunded vested obligations (determined as of the end of the plan year ending before the date of with- drawal), or (2) $50,000, reduced by the amount, if any, by which the un- funded vested benefits allowable to the em- ployer, determined without regard to this sub- section, exceeds $100,000. (b) Amendment of plan for reduction of amount of unfunded vested benefits allocable to em- ployer withdrawn from plan A plan may be amended to provide for the re- duction of the amount determined under section 1391 of this title by not more than the greater of— (1) the amount determined under subsection (a), or (2) the lesser of— (A) the amount determined under sub- section (a)(1), or (B) $100,000, reduced by the amount, if any, by which the amount determined under section 1391 of this title for the employer, determined without re- gard to this subsection, exceeds $150,000. (c) Nonapplicability This section does not apply— (1) to an employer who withdraws in a plan year in which substantially all employers withdraw from the plan, or (2) in any case in which substantially all em- ployers withdraw from the plan during a pe- riod of one or more plan years pursuant to an agreement or arrangement to withdraw, to an employer who withdraws pursuant to such agreement or arrangement. (d) Presumption of employer withdrawal from plan pursuant to agreement or arrangement applicable in action or proceeding to deter- mine or collect withdrawal liability In any action or proceeding to determine or collect withdrawal liability, if substantially all employers have withdrawn from a plan within a period of 3 plan years, an employer who has withdrawn from such plan during such period shall be presumed to have withdrawn from the plan pursuant to an agreement or arrangement, unless the employer proves otherwise by a pre- ponderance of the evidence. (Pub. L. 93–406, title IV, § 4209, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1225.) § 1390. Nonapplicability of withdrawal liability for certain temporary contribution obliga- tion periods; exception (a) An employer who withdraws from a plan in complete or partial withdrawal is not liable to the plan if the employer— (1) first had an obligation to contribute to the plan after September 26, 1980, (2) had an obligation to contribute to the plan for no more than the lesser of— (A) 6 consecutive plan years preceding the date on which the employer withdraws, or (B) the number of years required for vest- ing under the plan, (3) was required to make contributions to the plan for each such plan year in an amount equal to less than 2 percent of the sum of all employer contributions made to the plan for each such year, and (4) has never avoided withdrawal liability because of the application of this section with respect to the plan. (b) Subsection (a) shall apply to an employer with respect to a plan only if— (1) the plan is amended to provide that sub- section (a) applies; (2) the plan provides, or is amended to pro- vide, that the reduction under section 411(a)(3)(E) of title 26 applies with respect to the employees of the employer; and (3) the ratio of the assets of the plan for the plan year preceding the first plan year for which the employer was required to contribute to the plan to the benefit payments made dur- ing that plan year was at least 8 to 1. (Pub. L. 93–406, title IV, § 4210, as added Pub. L. 96–364, title I, § 104(2), Sept. 26, 1980, 94 Stat. 1226; amended Pub. L. 101–239, title VII, § 7891(a)(1), Dec. 19, 1989, 103 Stat. 2445; Pub. L. 109–280, title II, § 204(c)(1), Aug. 17, 2006, 120 Stat. 887.) Editorial Notes AMENDMENTS 2006—Subsec. (b)(1) to (4). Pub. L. 109–280 redesignated pars. (2) to (4) as (1) to (3), respectively, and struck out former par. (1) which read as follows: ‘‘the plan is not a plan which primarily covers employees in the build- ing and construction industry;’’. 1989—Subsec. (b)(3). Pub. L. 101–239 substituted ‘‘In- ternal Revenue Code of 1986’’ for ‘‘Internal Revenue Code of 1954’’, which for purposes of codification was translated as ‘‘title 26’’ thus requiring no change in text. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–280, title II, § 204(c)(3), Aug. 17, 2006, 120 Stat. 887, provided that: ‘‘The amendments made by this subsection [amending this section and section 1391 of this title] shall apply with respect to plan with- drawals occurring on or after January 1, 2007.’’ EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 7891(f) of Pub. L. 101–239, set out as a note under section 1002 of this title. § 1391. Methods for computing withdrawal liabil- ity (a) Determination of amount of unfunded vested benefits allocable to employer withdrawn from plan The amount of the unfunded vested benefits allocable to an employer that withdraws from a plan shall be determined in accordance with sub- section (b), (c), or (d) of this section.