§ 1107.
Limitation with respect to acquisition and holding of employer securities and employer real property by certain plans
(a)
Percentage limitation
(1)
A plan may not acquire or hold—
(A)
any employer security which is not a qualifying employer security, or
(B)
any employer real property which is not qualifying employer real property.
(2)
A plan may not acquire any qualifying employer security or qualifying employer real property, if immediately after such acquisition the aggregate fair market value of employer securities and employer real property held by the plan exceeds 10 percent of the fair market value of the assets of the plan.
(3)
(A)
After December 31, 1984, a plan may not hold any qualifying employer securities or qualifying employer real property (or both) to the extent that the aggregate fair market value of such securities and property determined on December 31, 1984, exceeds 10 percent of the greater of—
(i)
the fair market value of the assets of the plan, determined on December 31, 1984, or
(ii)
the fair market value of the assets of the plan determined on January 1, 1975.
(B)
Subparagraph (A) of this paragraph shall not apply to any plan which on any date after
December 31, 1974; and before
January 1, 1985, did not hold employer securities or employer real property (or both) the aggregate fair market value of which determined on such date exceeded 10 percent of the greater of
1
So in original. Probably should be followed by a dash.
(i)
the fair market value of the assets of the plan, determined on such date, or
(ii)
the fair market value of the assets of the plan determined on January 1, 1975.
(4)
(A)
After December 31, 1979, a plan may not hold any employer securities or employer real property in excess of the amount specified in regulations under subparagraph (B). This subparagraph shall not apply to a plan after the earliest date after December 31, 1974, on which it complies with such regulations.
(B)
Not later than December 31, 1976, the Secretary shall prescribe regulations which shall have the effect of requiring that a plan divest itself of 50 percent of the holdings of employer securities and employer real property which the plan would be required to divest before January 1, 1985, under paragraph (2) or subsection (c) (whichever is applicable).
(c)
Election
(1)
A plan which makes the election, under paragraph (3) shall be treated as satisfying the requirement of subsection (a)(3) if and only if employer securities held on any date after December 31, 1974 and before January 1, 1985 have a fair market value, determined as of December 31, 1974, not in excess of 10 percent of the lesser of—
(A)
the fair market value of the assets of the plan determined on such date (disregarding any portion of the fair market value of employer securities which is attributable to appreciation of such securities after December 31, 1974) but not less than the fair market value of plan assets on January 1, 1975, or
(B)
an amount equal to the sum of (i) the total amount of the contributions to the plan received after December 31, 1974, and prior to such date, plus (ii) the fair market value of the assets of the plan, determined on January 1, 1975.
(2)
For purposes of this subsection, in the case of an employer security held by a plan after January 1, 1975, the ownership of which is derived from ownership of employer securities held by the plan on January 1, 1975, or from the exercise of rights derived from such ownership, the value of such security held after January 1, 1975, shall be based on the value as of January 1, 1975, of the security from which ownership was derived. The Secretary shall prescribe regulations to carry out this paragraph.
(3)
An election under this paragraph may not be made after December 31, 1975. Such an election shall be made in accordance with regulations prescribed by the Secretary, and shall be irrevocable. A plan may make an election under this paragraph only if on January 1, 1975, the plan holds no employer real property. After such election and before January 1, 1985 the plan may not acquire any employer real property.
(d)
Definitions
For purposes of this section—
(1)
The term “employer security” means a security issued by an employer of employees covered by the plan, or by an affiliate of such employer. A contract to which
section 1108(b)(5) of this title applies shall not be treated as a security for purposes of this section.
(2)
The term “employer real property” means real property (and related personal property) which is leased to an employer of employees covered by the plan, or to an affiliate of such employer. For purposes of determining the time at which a plan acquires employer real property for purposes of this section, such property shall be deemed to be acquired by the plan on the date on which the plan acquires the property or on the date on which the lease to the employer (or affiliate) is entered into, whichever is later.
(3)
(A)
The term “eligible individual account plan” means an individual account plan which is (i) a profit-sharing, stock bonus, thrift, or savings plan; (ii) an employee stock ownership plan; or (iii) a money purchase plan which was in existence on
September 2, 1974, and which on such date invested primarily in qualifying employer securities. Such term excludes an individual retirement account or annuity described in
section 408 of title 26.
(B)
Notwithstanding subparagraph (A), a plan shall be treated as an eligible individual account plan with respect to the acquisition or holding of qualifying employer real property or qualifying employer securities only if such plan explicitly provides for acquisition and holding of qualifying employer securities or qualifying employer real property (as the case may be). In the case of a plan in existence on September 2, 1974, this subparagraph shall not take effect until January 1, 1976.
(C)
The term “eligible individual account plan” does not include any individual account plan the benefits of which are taken into account in determining the benefits payable to a participant under any defined benefit plan.
(4)
The term “qualifying employer real property” means parcels of employer real property—
(A)
if a substantial number of the parcels are dispersed geographically;
(B)
if each parcel of real property and the improvements thereon are suitable (or adaptable without excessive cost) for more than one use;
(C)
even if all of such real property is leased to one lessee (which may be an employer, or an affiliate of an employer); and
(D)
if the acquisition and retention of such property comply with the provisions of this part (other than
section 1104(a)(1)(B) of this title to the extent it requires diversification, and sections 1104(a)(1)(C), 1106 of this title, and subsection (a) of this section).
(5)
The term “qualifying employer security” means an employer security which is—
(B)
a marketable obligation (as defined in subsection (e)), or
(C)
an interest in a publicly traded partnership (as defined in
section 7704(b) of title 26), but only if such partnership is an existing partnership as defined in section 10211(c)(2)(A) of the Revenue Act of 1987 (
[Public Law 100–203]).
After December 17, 1987, in the case of a plan other than an eligible individual account plan, an employer security described in subparagraph (A) or (C) shall be considered a qualifying employer security only if such employer security satisfies the requirements of subsection (f)(1).
(6)
The term “employee stock ownership plan” means an individual account plan—
(A)
which is a stock bonus plan which is qualified, or a stock bonus plan and money purchase plan both of which are qualified, under
section 401 of title 26, and which is designed to invest primarily in qualifying employer securities, and
(B)
which meets such other requirements as the Secretary of the Treasury may prescribe by regulation.
(7)
A corporation is an affiliate of an employer if it is a member of any controlled group of corporations (as defined in
section 1563(a) of title 26, except that “applicable percentage” shall be substituted for “80 percent” wherever the latter percentage appears in such section) of which the employer who maintains the plan is a member. For purposes of the preceding sentence, the term “applicable percentage” means 50 percent, or such lower percentage as the Secretary may prescribe by regulation. A person other than a corporation shall be treated as an affiliate of an employer to the extent provided in regulations of the Secretary. An employer which is a person other than a corporation shall be treated as affiliated with another person to the extent provided by regulations of the Secretary. Regulations under this paragraph shall be prescribed only after consultation and coordination with the Secretary of the Treasury.
(8)
The Secretary may prescribe regulations specifying the extent to which conversions, splits, the exercise of rights, and similar transactions are not treated as acquisitions.
(9)
For purposes of this section, an arrangement which consists of a defined benefit plan and an individual account plan shall be treated as 1 plan if the benefits of such individual account plan are taken into account in determining the benefits payable under such defined benefit plan.
(e)
Marketable obligations
For purposes of subsection (d)(5), the term “marketable obligation” means a bond, debenture, note, or certificate, or other evidence of indebtedness (hereinafter in this subsection referred to as “obligation”) if—
(1)
such obligation is acquired—
(A)
on the market, either (i) at the price of the obligation prevailing on a national securities exchange which is registered with the Securities and Exchange Commission, or (ii) if the obligation is not traded on such a national securities exchange, at a price not less favorable to the plan than the offering price for the obligation as established by current bid and asked prices quoted by persons independent of the issuer;
(B)
from an underwriter, at a price (i) not in excess of the public offering price for the obligation as set forth in a prospectus or offering circular filed with the Securities and Exchange Commission, and (ii) at which a substantial portion of the same issue is acquired by persons independent of the issuer; or
(C)
directly from the issuer, at a price not less favorable to the plan than the price paid currently for a substantial portion of the same issue by persons independent of the issuer;
(2)
immediately following acquisition of such obligation—
(A)
not more than 25 percent of the aggregate amount of obligations issued in such issue and outstanding at the time of acquisition is held by the plan, and
(B)
at least 50 percent of the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer; and
(3)
immediately following acquisition of the obligation, not more than 25 percent of the assets of the plan is invested in obligations of the employer or an affiliate of the employer.
(f)
Maximum percentage of stock held by plan; time of holding or acquisition; necessity of legally binding contract
(1)
Stock satisfies the requirements of this paragraph if, immediately following the acquisition of such stock—
(A)
no more than 25 percent of the aggregate amount of stock of the same class issued and outstanding at the time of acquisition is held by the plan, and
(B)
at least 50 percent of the aggregate amount referred to in subparagraph (A) is held by persons independent of the issuer.
(2)
Until January 1, 1993, a plan shall not be treated as violating subsection (a) solely by holding stock which fails to satisfy the requirements of paragraph (1) if such stock—
(A)
has been so held since December 17, 1987, or
(B)
was acquired after December 17, 1987, pursuant to a legally binding contract in effect on December 17, 1987, and has been so held at all times after the acquisition.
([Pub. L. 93–406, title I, § 407], Sept. 2, 1974, [88 Stat. 880]; [Pub. L. 100–203, title IX, § 9345(a)(1)], (2), (b), Dec. 22, 1987, [101 Stat. 1330–373]; [Pub. L. 101–239, title VII], §§ 7881(l)(1)–(4), 7891(a)(1), 7894(e)(2), Dec. 19, 1989, [103 Stat. 2443], 2445, 2450; [Pub. L. 101–540, § 1], Nov. 8, 1990, [104 Stat. 2379]; [Pub. L. 105–34, title XV, § 1524(a)], Aug. 5, 1997, [111 Stat. 1071]; [Pub. L. 109–280, title IX, § 901(b)(2)], Aug. 17, 2006, [120 Stat. 1032].)