26 USC 4971 - Taxes on failure to meet minimum funding standards

U.S Code last checked for updates: Nov 22, 2024

§ 4971.

Taxes on failure to meet minimum funding standards

(a)

Initial tax

If at any time during any taxable year an employer maintains a plan to which section 412 applies, there is hereby imposed for the taxable year a tax equal to—

(1)

in the case of a single-employer plan, 10 percent of the aggregate unpaid minimum required contributions for all plan years remaining unpaid as of the end of any plan year ending with or within the taxable year,

(2)

in the case of a multiemployer plan, 5 percent of the accumulated funding deficiency determined under section 431 as of the end of any plan year ending with or within the taxable year, and

(3)

in the case of a CSEC plan, 10 percent of the CSEC accumulated funding deficiency as of the end of the plan year ending with or within the taxable year.

(b)

Additional tax

If—

(1)

a tax is imposed under subsection (a)(1) on any unpaid minimum required contribution and such amount remains unpaid as of the close of the taxable period,

(2)

a tax is imposed under subsection (a)(2) on any accumulated funding deficiency and the accumulated funding deficiency is not corrected within the taxable period, or

(3)

a tax is imposed under subsection (a)(3) on any CSEC accumulated funding deficiency and the CSEC accumulated funding deficiency is not corrected within the taxable period,

there is hereby imposed a tax equal to 100 percent of the unpaid minimum required contribution, accumulated funding deficiency, or CSEC accumulated funding deficiency, whichever is applicable, to the extent not so paid or corrected.

(c)

Definitions

For purposes of this section—

(1)

Accumulated funding deficiency

(2)

Correct

(3)

Taxable period

The term “taxable period” means, with respect to an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, the period beginning with the end of the plan year in which there is an accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, and ending on the earlier of—

(A)

the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a), or

(B)

the date on which the tax imposed by subsection (a) is assessed.

(4)

Unpaid minimum required contribution

(A)

In general

(B)

Ordering rule

(5)

CSEC accumulated funding deficiency

(d)

Notification of the Secretary of Labor

Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)—

(1)

to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, CSEC accumulated funding deficiency, or unpaid minimum required contribution, whichever is applicable, or

(2)

to comment on the imposition of such tax.

(e)

Liability for tax

(1)

In general

(2)

Joint and several liability where employer member of controlled group

(A)

In general

(B)

Controlled group

(f)

Failure to pay liquidity shortfall

(1)

In general

In the case of a plan to which section 430(j)(4) or 433(f) applies, there is hereby imposed a tax of 10 percent of the excess (if any) of—

(A)

the amount of the liquidity shortfall for any quarter, over

(B)

the amount of such shortfall which is paid by the required installment under section 430(j) or 433(f), whichever is applicable, for such quarter (but only if such installment is paid on or before the due date for such installment).

(2)

Additional tax

(3)

Definitions and special rule

(A)

Liquidity shortfall; quarter

(B)

Special rule

(4)

Waiver by Secretary

If the taxpayer establishes to the satisfaction of the Secretary that—

(A)

the liquidity shortfall described in paragraph (1) was due to reasonable cause and not willful neglect, and

(B)

reasonable steps have been taken to remedy such liquidity shortfall,

the Secretary may waive all or part of the tax imposed by this subsection.

(g)

Multiemployer plans in endangered or critical status

(1)

In general

Except as provided in this subsection—

(A)

no tax shall be imposed under this section for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in critical status pursuant to section 432, and

(B)

any tax imposed under this subsection for a taxable year with respect to a multiemployer plan if, for the plan years ending with or within the taxable year, the plan is in endangered status pursuant to section 432 shall be in addition to any other tax imposed by this section.

(2)

Failure to comply with funding improvement or rehabilitation plan

(A)

In general

(B)

Amount of tax

(C)

Liability for tax

(3)

Failure to meet requirements for plans in endangered or critical status

If—

(A)

a plan which is in seriously endangered status fails to meet the applicable benchmarks by the end of the funding improvement period, or

(B)

a plan which is in critical status either—

(i)

fails to meet the requirements of section 432(e) by the end of the rehabilitation period, or

(ii)

has received a certification under section 432(b)(3)(A)(ii) for 3 consecutive plan years that the plan is not making the scheduled progress in meeting its requirements under the rehabilitation plan,

the plan shall be treated as having an accumulated funding deficiency for purposes of this section for the last plan year in such funding improvement, rehabilitation, or 3-consecutive year period (and each succeeding plan year until such benchmarks or requirements are met) in an amount equal to the greater of the amount of the contributions necessary to meet such benchmarks or requirements or the amount of such accumulated funding deficiency without regard to this paragraph.

(4)

Failure to adopt rehabilitation plan

(A)

In general

(B)

Amount of tax

The amount of the tax imposed under subparagraph (A) with respect to any plan sponsor for any taxable year shall be the greater of—

(i)

the amount of tax imposed under subsection (a) for the taxable year (determined without regard to this subsection), or

(ii)

the amount equal to $1,100 multiplied by the number of days during the taxable year which are included in the period beginning on the day following the close of the 240-day period described in section 432(e)(1)(A) and ending on the day on which the rehabilitation plan is adopted.

(C)

Liability for tax

(i)

In general

(ii)

Plan sponsor

(5)

Waiver

(6)

Terms used in section 432

(h)

Failure of a CSEC plan sponsor to adopt funding restoration plan

(1)

In general

(2)

Amount of tax

(3)

Waiver by Secretary

(4)

Liability for tax

(i)

Cross references

(Added Pub. L. 93–406, title II, § 1013(b), Sept. 2, 1974, 88 Stat. 920; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–364, title II, § 204, Sept. 26, 1980, 94 Stat. 1287; Pub. L. 96–596, § 2(a)(1)(J), (2)(H), Dec. 24, 1980, 94 Stat. 3469, 3471; Pub. L. 100–203, title IX, §§ 9304(c)(1), 9305(a), Dec. 22, 1987, 101 Stat. 1330–348, 1330–351; Pub. L. 103–465, title VII, § 751(a)(9)(B), Dec. 8, 1994, 108 Stat. 5020; Pub. L. 104–188, title I, § 1464(a), Aug. 20, 1996, 110 Stat. 1824; Pub. L. 109–280, title I, § 114(e)(1)–(4), title II, § 212(b), Aug. 17, 2006, 120 Stat. 854, 855, 915; Pub. L. 110–458, title I, §§ 101(d)(2)(F), 102(b)(2)(I), (3)(A), Dec. 23, 2008, 122 Stat. 5099, 5103; Pub. L. 113–97, title II, § 202(c)(8), (9), Apr. 7, 2014, 128 Stat. 1137, 1138; Pub. L. 115–141, div. U, title IV, § 401(a)(225)–(228), (b)(44), Mar. 23, 2018, 132 Stat. 1195, 1204.)

cite as: 26 USC 4971