29 USC 1085 - Additional funding rules for multiemployer plans in endangered status or critical status

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

§ 1085.

Additional funding rules for multiemployer plans in endangered status or critical status

(a)

General rule

(1)

if the plan is in endangered status—

(A)

the plan sponsor shall adopt and implement a funding improvement plan in accordance with the requirements of subsection (c), and

(B)

the requirements of subsection (d) shall apply during the funding plan adoption period and the funding improvement period,

(2)

if the plan is in critical status—

(A)

the plan sponsor shall adopt and implement a rehabilitation plan in accordance with the requirements of subsection (e), and

(B)

the requirements of subsection (f) shall apply during the rehabilitation plan adoption period and the rehabilitation period, and

(3)

if the plan is in critical and declining status—

(A)

the requirements of paragraph (2) shall apply to the plan; and

(B)

the plan sponsor may, by plan amendment, suspend benefits in accordance with the requirements of subsection (e)(9).

(b)

Determination of endangered and critical status

For purposes of this section—

(1)

Endangered status

A multiemployer plan is in endangered status for a plan year if, as determined by the plan actuary under paragraph (3), the plan is not in critical status for the plan year and is not described in paragraph (5), and, as of the beginning of the plan year, either—

(A)

the plan’s funded percentage for such plan year is less than 80 percent, or

(B)

the plan has an accumulated funding deficiency for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan years, taking into account any extension of amortization periods under section 1084(d) of this title.

For purposes of this section, a plan shall be treated as in seriously endangered status for a plan year if the plan is described in both subparagraphs (A) and (B).

(2)

Critical status

A multiemployer plan is in critical status for a plan year if, as determined by the plan actuary under paragraph (3), the plan is described in 1 or more of the following subparagraphs as of the beginning of the plan year:

(A)

A plan is described in this subparagraph if—

(i)

the funded percentage of the plan is less than 65 percent, and

(ii)

the sum of—

(I)

the fair market value of plan assets, plus

(II)

the present value of the reasonably anticipated employer contributions for the current plan year and each of the 6 succeeding plan years, assuming that the terms of all collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years,

is less than the present value of all nonforfeitable benefits projected to be payable under the plan during the current plan year and each of the 6 succeeding plan years (plus administrative expenses for such plan years).

(B)

A plan is described in this subparagraph if—

(i)

the plan has an accumulated funding deficiency for the current plan year, not taking into account any extension of amortization periods under section 1084(d) of this title, or

(ii)

the plan is projected to have an accumulated funding deficiency for any of the 3 succeeding plan years (4 succeeding plan years if the funded percentage of the plan is 65 percent or less), not taking into account any extension of amortization periods under section 1084(d) of this title.

(C)

A plan is described in this subparagraph if—

(i)

(I)

the plan’s normal cost for the current plan year, plus interest (determined at the rate used for determining costs under the plan) for the current plan year on the amount of unfunded benefit liabilities under the plan as of the last date of the preceding plan year, exceeds

(II)

the present value of the reasonably anticipated employer and employee contributions for the current plan year,

(ii)

the present value, as of the beginning of the current plan year, of nonforfeitable benefits of inactive participants is greater than the present value of nonforfeitable benefits of active participants, and

(iii)

the plan has an accumulated funding deficiency for the current plan year, or is projected to have such a deficiency for any of the 4 succeeding plan years, not taking into account any extension of amortization periods under section 1084(d) of this title.

(D)

A plan is described in this subparagraph if the sum of—

(i)

the fair market value of plan assets, plus

(ii)

the present value of the reasonably anticipated employer contributions for the current plan year and each of the 4 succeeding plan years, assuming that the terms of all collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years,

is less than the present value of all benefits projected to be payable under the plan during the current plan year and each of the 4 succeeding plan years (plus administrative expenses for such plan years).

(3)

Annual certification by plan actuary

(A)

In general

Not later than the 90th day of each plan year of a multiemployer plan, the plan actuary shall certify to the Secretary of the Treasury and to the plan sponsor—

(i)

whether or not the plan is in endangered status for such plan year, or would be in endangered status for such plan year but for paragraph (5),,1

 So in original.

whether or not the plan is or will be in critical status for such plan year or for any of the succeeding 5 plan years, and whether or not the plan is or will be in critical and declining status for such plan year, and

(ii)

in the case of a plan which is in a funding improvement or rehabilitation period, whether or not the plan is making the scheduled progress in meeting the requirements of its funding improvement or rehabilitation plan.

(B)

Actuarial projections of assets and liabilities

(i)

In general

Except as provided in clause (iv), in making the determinations and projections under this subsection, the plan actuary shall make projections required for the current and succeeding plan years of the current value of the assets of the plan and the present value of all liabilities to participants and beneficiaries under the plan for the current plan year as of the beginning of such year. The actuary’s projections shall be based on reasonable actuarial estimates, assumptions, and methods that, except as provided in clause (iii), offer the actuary’s best estimate of anticipated experience under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—

(I)

the actuarial statement required under section 1023(d) of this title with respect to the most recently filed annual report, or

(II)

the actuarial valuation for the preceding plan year.

(ii)

Determinations of future contributions

Any actuarial projection of plan assets shall assume—

(I)

reasonably anticipated employer contributions for the current and succeeding plan years, assuming that the terms of the one or more collective bargaining agreements pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan years, or

(II)

that employer contributions for the most recent plan year will continue indefinitely, but only if the plan actuary determines there have been no significant demographic changes that would make such assumption unreasonable.

(iii)

Projected industry activity

(iv)

 So in original. Two cls. (iv) have been enacted.

Projections relating to critical status in succeeding plan years

(iv)

 ² Projections of critical and declining status

In determining whether a plan is in critical and declining status as described in subsection (e)(9), clauses (i), (ii), and (iii) shall apply, except that—

(I)

if reasonable, the plan actuary shall assume that each contributing employer in compliance continues to comply through the end of the rehabilitation period or such later time as provided in subsection (e)(3)(A)(ii) with the terms of the rehabilitation plan that correspond to the schedule adopted or imposed under subsection (e), and

(II)

the plan actuary shall take into account any suspensions of benefits described in subsection (e)(9) adopted in a prior plan year that are still in effect.

(C)

Penalty for failure to secure timely actuarial certification

(D)

Notice

(i)

In general

(ii)

Plans in critical status

If it is certified under subparagraph (A) that a multiemployer plan is or will be in critical status, the plan sponsor shall include in the notice under clause (i) an explanation of the possibility that—

(I)

adjustable benefits (as defined in subsection (e)(8)) may be reduced, and

(II)

such reductions may apply to participants and beneficiaries whose benefit commencement date is on or after the date such notice is provided for the first plan year in which the plan is in critical status.

(iii)

In the case of a multiemployer plan that would be in endangered status but for paragraph (5), the plan sponsor shall provide notice to the bargaining parties and the Pension Benefit Guaranty Corporation that the plan would be in endangered status but for such paragraph.

(iv)

Model notice

(v)

Notice of projection to be in critical status in a future plan year

(4)

Election to be in critical status

Notwithstanding paragraph (2) and subject to paragraph (3)(B)(iv)—

(A)

the plan sponsor of a multiemployer plan that is not in critical status for a plan year but that is projected by the plan actuary, pursuant to the determination under paragraph (3), to be in critical status in any of the succeeding 5 plan years may, not later than 30 days after the date of the certification under paragraph (3)(A), elect to be in critical status effective for the current plan year,

(B)

the plan year in which the plan sponsor elects to be in critical status under subparagraph (A) shall be treated for purposes of this section as the first year in which the plan is in critical status, regardless of the date on which the plan first satisfies the criteria for critical status under paragraph (2), and

(C)

a plan that is in critical status under this paragraph shall not emerge from critical status except in accordance with subsection (e)(4)(B).

(5)

Special rule

A plan is described in this paragraph if—

(A)

as part of the actuarial certification of endangered status under paragraph (3)(A) for the plan year, the plan actuary certifies that the plan is projected to no longer be described in either paragraph (1)(A) or paragraph (1)(B) as of the end of the tenth plan year ending after the plan year to which the certification relates, and

(B)

the plan was not in critical or endangered status for the immediately preceding plan year.

(6)

Critical and declining status

(c)

Funding improvement plan must be adopted for multiemployer plans in endangered status

(1)

In general

In any case in which a multiemployer plan is in endangered status for a plan year, the plan sponsor, in accordance with this subsection—

(A)

shall adopt a funding improvement plan not later than 240 days following the required date for the actuarial certification of endangered status under subsection (b)(3)(A), and

(B)

within 30 days after the adoption of the funding improvement plan—

(i)

shall provide to the bargaining parties 1 or more schedules showing revised benefit structures, revised contribution structures, or both, which, if adopted, may reasonably be expected to enable the multiemployer plan to meet the applicable benchmarks in accordance with the funding improvement plan, including—

(I)

one proposal for reductions in the amount of future benefit accruals necessary to achieve the applicable benchmarks, assuming no amendments increasing contributions under the plan (other than amendments increasing contributions necessary to achieve the applicable benchmarks after amendments have reduced future benefit accruals to the maximum extent permitted by law), and

(II)

one proposal for increases in contributions under the plan necessary to achieve the applicable benchmarks, assuming no amendments reducing future benefit accruals under the plan, and

(ii)

may, if the plan sponsor deems appropriate, prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks in accordance with the funding improvement plan.

For purposes of this section, the term “applicable benchmarks” means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph (5)).

(2)

Exception for years after process begins

(3)

Funding improvement plan

(A)

In general

A funding improvement plan is a plan which consists of the actions, including options or a range of options to be proposed to the bargaining parties, formulated to provide, based on reasonably anticipated experience and reasonable actuarial assumptions, for the attainment by the plan during the funding improvement period of the following requirements:

(i)

Increase in plan’s funding percentage

The plan’s funded percentage as of the close of the funding improvement period equals or exceeds a percentage equal to the sum of—

(I)

such percentage as of the beginning of the first plan year for which the plan is certified to be in endangered status pursuant to paragraph (b)(3), plus

(II)

33 percent of the difference between 100 percent and the percentage under subclause (I).

(ii)

Avoidance of accumulated funding deficiencies

(B)

Seriously endangered plans

(4)

Funding improvement period

For purposes of this section—

(A)

In general

The funding improvement period for any funding improvement plan adopted pursuant to this subsection is the 10-year period beginning on the first day of the first plan year of the multiemployer plan beginning after the earlier of—

(i)

the second anniversary of the date of the adoption of the funding improvement plan, or

(ii)

the expiration of the collective bargaining agreements in effect on the due date for the actuarial certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering, as of such due date, at least 75 percent of the active participants in such multiemployer plan.

(B)

Seriously endangered plans

(C)

Coordination with changes in status

(i)

Plans no longer in endangered status

(ii)

Plans in critical status

(D)

Plans in endangered status at end of period

(5)

Special rules for seriously endangered plans more than 70 percent funded

(A)

In general

If the funded percentage of a plan in seriously endangered status was more than 70 percent as of the beginning of the initial determination year—

(i)

paragraphs (3)(B) and (4)(B) shall apply only if the plan’s actuary certifies, within 30 days after the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of the plan and the collective bargaining agreements in effect at the time of such certification, the plan is not projected to meet the requirements of paragraph (3)(A) (without regard to paragraphs (3)(B) and (4)(B)), and

(ii)

if there is a certification under clause (i), the plan may, in formulating its funding improvement plan, only take into account the rules of paragraph 4

 So in original. Probably should be “paragraphs”.

(3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which the last of the collective bargaining agreements described in paragraph (4)(A)(ii) expires.

(B)

Special rule after expiration of agreements

(6)

Updates to funding improvement plan and schedules

(A)

Funding improvement plan

(B)

Schedules

(C)

Duration of schedule

(7)

Imposition of schedule where failure to adopt funding improvement plan

(A)

Initial contribution schedule

If—

(i)

a collective bargaining agreement providing for contributions under a multiemployer plan that was in effect at the time the plan entered endangered status expires, and

(ii)

after receiving one or more schedules from the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the funding improvement plan and a schedule from the plan sponsor,

the plan sponsor shall implement the schedule described in paragraph (1)(B)(i)(I) beginning on the date specified in subparagraph (C).

(B)

Subsequent contribution schedule

If—

(i)

a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a funding improvement plan (or imposed under subparagraph (A)) expires while the plan is still in endangered status, and

(ii)

after receiving one or more updated schedules from the plan sponsor under paragraph (6)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated funding improvement plan and a schedule from the plan sponsor,

then the contribution schedule applicable under the expired collective bargaining agreement, as updated and in effect on the date the collective bargaining agreement expires, shall be implemented by the plan sponsor beginning on the date specified in subparagraph (C).

(C)

Date of implementation

(D)

Failure to make scheduled contributions

(8)

Funding plan adoption period

(d)

Rules for operation of plan during adoption and improvement periods

(1)

Compliance with funding improvement plan

(A)

In general

(B)

Special rules for benefit increases

(2)

Special rules for plan adoption period

During the period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending on the date of the adoption of a funding improvement plan—

(A)

the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides for—

(i)

a reduction in the level of contributions for any participants,

(ii)

a suspension of contributions with respect to any period of service, or

(iii)

any new direct or indirect exclusion of younger or newly hired employees from plan participation, and

(B)

no amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan may be adopted unless the amendment is required as a condition of qualification under part I of subchapter D of chapter 1 of title 26 or to comply with other applicable law.

(e)

Rehabilitation plan must be adopted for multiemployer plans in critical status

(1)

In general

In any case in which a multiemployer plan is in critical status for a plan year, the plan sponsor, in accordance with this subsection—

(A)

shall adopt a rehabilitation plan not later than 240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and

(B)

within 30 days after the adoption of the rehabilitation plan—

(i)

shall provide to the bargaining parties 1 or more schedules showing revised benefit structures, revised contribution structures, or both, which, if adopted, may reasonably be expected to enable the multiemployer plan to emerge from critical status in accordance with the rehabilitation plan, and

(ii)

may, if the plan sponsor deems appropriate, prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan.

The schedule or schedules described in subparagraph (B)(i) shall reflect reductions in future benefit accruals and adjustable benefits, and increases in contributions, that the plan sponsor determines are reasonably necessary to emerge from critical status. One schedule shall be designated as the default schedule and such schedule shall assume that there are no increases in contributions under the plan other than the increases necessary to emerge from critical status after future benefit accruals and other benefits (other than benefits the reduction or elimination of which are not permitted under section 1054(g) of this title) have been reduced to the maximum extent permitted by law.

(2)

Exception for years after process begins

(3)

Rehabilitation plan

For purposes of this section—

(A)

In general

A rehabilitation plan is a plan which consists of—

(i)

actions, including options or a range of options to be proposed to the bargaining parties, formulated, based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease to be in critical status by the end of the rehabilitation period and may include reductions in plan expenditures (including plan mergers and consolidations), reductions in future benefit accruals or increases in contributions, if agreed to by the bargaining parties, or any combination of such actions, or

(ii)

if the plan sponsor determines that, based on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not reasonably be expected to emerge from critical status by the end of the rehabilitation period, reasonable measures to emerge from critical status at a later time or to forestall possible insolvency (within the meaning of section 1426 of this title).

A rehabilitation plan must provide annual standards for meeting the requirements of such rehabilitation plan. Such plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies, shall set forth the alternatives considered, explain why the plan is not reasonably expected to emerge from critical status by the end of the rehabilitation period, and specify when, if ever, the plan is expected to emerge from critical status in accordance with the rehabilitation plan.

(B)

Updates to rehabilitation plan and schedules

(i)

Rehabilitation plan

(ii)

Schedules

(iii)

Duration of schedule

(C)

Imposition of schedule where failure to adopt rehabilitation plan

(i)

Initial contribution schedule

If—

(I)

a collective bargaining agreement providing for contributions under a multiemployer plan that was in effect at the time the plan entered critical status expires, and

(II)

after receiving one or more schedules from the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the rehabilitation plan and a schedule from the plan sponsor under paragraph (1)(B)(i),

the plan sponsor shall implement the schedule described in the last sentence of paragraph (1) beginning on the date specified in clause (iii).

(ii)

Subsequent contribution schedule

If—

(I)

a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a rehabilitation plan (or imposed under subparagraph (C)(i)) expires while the plan is still in critical status, and

(II)

after receiving one or more updated schedules from the plan sponsor under subparagraph (B)(ii), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated rehabilitation plan and a schedule from the plan sponsor,

(iii)

Date of implementation

(iv)

Failure to make scheduled contributions

(4)

Rehabilitation period

For purposes of this section—

(A)

In general

The rehabilitation period for a plan in critical status is the 10-year period beginning on the first day of the first plan year of the multiemployer plan following the earlier of—

(i)

the second anniversary of the date of the adoption of the rehabilitation plan, or

(ii)

the expiration of the collective bargaining agreements in effect on the due date for the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering, as of such date 6

 So in original. Probably should be followed by a comma.

at least 75 percent of the active participants in such multiemployer plan.

If a plan emerges from critical status as provided under subparagraph (B) before the end of such 10-year period, the rehabilitation period shall end with the plan year preceding the plan year for which the determination under subparagraph (B) is made.

(B)

Emergence

(i)

In general

A plan in critical status shall remain in such status until a plan year for which the plan actuary certifies, in accordance with subsection (b)(3)(A), that—

(I)

the plan is not described in one or more of the subparagraphs in subsection (b)(2) as of the beginning of the plan year;

(II)

the plan is not projected to have an accumulated funding deficiency for the plan year or any of the 9 succeeding plan years, without regard to the use of the shortfall method but taking into account any extension of amortization periods under section 1084(d)(2) of this title or section 1084 of this title (as in effect prior to the enactment of the Pension Protection Act of 2006); and

(III)

the plan is not projected to become insolvent within the meaning of section 1426 of this title for any of the 30 succeeding plan years.

(ii)

Plans with certain amortization extensions

(I)

Special emergence rule

Notwithstanding clause (i), a plan in critical status that has an automatic extension of amortization periods under section 1084(d)(1) of this title shall no longer be in critical status if the plan actuary certifies for a plan year, in accordance with subsection (b)(3)(A), that—

(aa)

(bb)

the plan is not projected to become insolvent within the meaning of section 1426 of this title for any of the 30 succeeding plan years,

regardless of whether the plan is described in one or more of the subparagraphs in subsection (b)(2) as of the beginning of the plan year.

(II)

Reentry into critical status

A plan that emerges from critical status under subclause (I) shall not reenter critical status for any subsequent plan year unless—

(aa)

the plan is projected to have an accumulated funding deficiency for the plan year or any of the 9 succeeding plan years, without regard to the use of the shortfall method but taking into account any extension of amortization periods under section 1084(d) of this title; or

(bb)

the plan is projected to become insolvent within the meaning of section 1426 of this title for any of the 30 succeeding plan years.

(5)

Rehabilitation plan adoption period

(6)

Limitation on reduction in rates of future accruals

Any reduction in the rate of future accruals under the default schedule described in the last sentence of paragraph (1) shall not reduce the rate of future accruals below—

(A)

a monthly benefit (payable as a single life annuity commencing at the participant’s normal retirement age) equal to 1 percent of the contributions required to be made with respect to a participant, or the equivalent standard accrual rate for a participant or group of participants under the collective bargaining agreements in effect as of the first day of the initial critical year, or

(B)

if lower, the accrual rate under the plan on such first day.

The equivalent standard accrual rate shall be determined by the plan sponsor based on the standard or average contribution base units which the plan sponsor determines to be representative for active participants and such other factors as the plan sponsor determines to be relevant. Nothing in this paragraph shall be construed as limiting the ability of the plan sponsor to prepare and provide the bargaining parties with alternative schedules to the default schedule that establish lower or higher accrual and contribution rates than the rates otherwise described in this paragraph.

(7)

Automatic employer surcharge

(A)

Imposition of surcharge

(B)

Enforcement of surcharge

(C)

Surcharge to terminate upon collective bargaining agreement renegotiation

(D)

Surcharge not to apply until employer receives notice

(E)

Surcharge not to generate increased benefit accruals

(8)

Benefit adjustments

(A)

Adjustable benefits

(i)

In general

(ii)

Exception for retirees

(iii)

Plan sponsor flexibility

(iv)

Adjustable benefit defined

For purposes of this paragraph, the term “adjustable benefit” means—

(I)

benefits, rights, and features under the plan, including post-retirement death benefits, 60-month guarantees, disability benefits not yet in pay status, and similar benefits,

(II)

any early retirement benefit or retirement-type subsidy (within the meaning of section 1054(g)(2)(A) of this title) and any benefit payment option (other than the qualified joint and survivor annuity), and

(III)

benefit increases that would not be eligible for a guarantee under section 1322a of this title on the first day of initial critical year because the increases were adopted (or, if later, took effect) less than 60 months before such first day.

(B)

Normal retirement benefits protected

(C)

Notice requirements

(i)

In general

No reduction may be made to adjustable benefits under subparagraph (A) unless notice of such reduction has been given at least 30 days before the general effective date of such reduction for all participants and beneficiaries to—

(I)

plan participants and beneficiaries,

(II)

each employer who has an obligation to contribute (within the meaning of section 1392(a) of this title) under the plan, and

(III)

each employee organization which, for purposes of collective bargaining, represents plan participants employed by such an employer.

(ii)

Content of notice

The notice under clause (i) shall contain—

(I)

sufficient information to enable participants and beneficiaries to understand the effect of any reduction on their benefits, including an estimate (on an annual or monthly basis) of any affected adjustable benefit that a participant or beneficiary would otherwise have been eligible for as of the general effective date described in clause (i), and

(II)

information as to the rights and remedies of plan participants and beneficiaries as well as how to contact the Department of Labor for further information and assistance where appropriate.

(iii)

Form and manner

Any notice under clause (i)—

(I)

shall be provided in a form and manner prescribed in regulations of the Secretary of the Treasury, in consultation with the Secretary,

(II)

shall be written in a manner so as to be understood by the average plan participant, and

(III)

may be provided in written, electronic, or other appropriate form to the extent such form is reasonably accessible to persons to whom the notice is required to be provided.

The Secretary of the Treasury shall in the regulations prescribed under subclause (I) establish a model notice that a plan sponsor may use to meet the requirements of this subparagraph.

(9)

Benefit suspensions for multiemployer plans in critical and declining status

(A)

In general

(B)

Suspension of benefits

(i)

Suspension of benefits defined

(ii)

Length of suspensions

(iii)

No liability

(iv)

Applicability

(v)

Retiree representative

(I)

In general

(II)

Reasonable expenses from plan

(III)

Special rule relating to fiduciary status

(C)

Conditions for suspensions

The plan sponsor of a plan in critical and declining status for a plan year may suspend benefits only if the following conditions are met:

(i)

Taking into account the proposed suspensions of benefits (and, if applicable, a proposed partition of the plan under section 1413 of this title), the plan actuary certifies that the plan is projected to avoid insolvency within the meaning of section 1426 of this title, assuming the suspensions of benefits continue until the suspensions of benefits expire by their own terms or if no such expiration date is set, indefinitely.

(ii)

The plan sponsor determines, in a written record to be maintained throughout the period of the benefit suspension, that the plan is still projected to become insolvent unless benefits are suspended under this paragraph, although all reasonable measures to avoid insolvency have been taken (and continue to be taken during the period of the benefit suspension). In its determination, the plan sponsor may take into account factors including the following:

(I)

Current and past contribution levels.

(II)

Levels of benefit accruals (including any prior reductions in the rate of benefit accruals).

(III)

Prior reductions (if any) of adjustable benefits.

(IV)

Prior suspensions (if any) of benefits under this subsection.

(V)

The impact on plan solvency of the subsidies and ancillary benefits available to active participants.

(VI)

Compensation levels of active participants relative to employees in the participants’ industry generally.

(VII)

Competitive and other economic factors facing contributing employers.

(VIII)

The impact of benefit and contribution levels on retaining active participants and bargaining groups under the plan.

(IX)

The impact of past and anticipated contribution increases under the plan on employer attrition and retention levels.

(X)

Measures undertaken by the plan sponsor to retain or attract contributing employers.

(D)

Limitations on suspensions

Any suspensions of benefits made by a plan sponsor pursuant to this paragraph shall be subject to the following limitations:

(i)

The monthly benefit of any participant or beneficiary may not be reduced below 110 percent of the monthly benefit which is guaranteed by the Pension Benefit Guaranty Corporation under section 1322a of this title on the date of the suspension.

(ii)

(I)

In the case of a participant or beneficiary who has attained 75 years of age as of the effective date of the suspension, not more than the applicable percentage of the maximum suspendable benefits of such participant or beneficiary may be suspended under this paragraph.

(II)

For purposes of subclause (I), the maximum suspendable benefits of a participant or beneficiary is the portion of the benefits of such participant or beneficiary that would be suspended pursuant to this paragraph without regard to this clause;

(III)

For purposes of subclause (I), the applicable percentage is a percentage equal to the quotient obtained by dividing—

(aa)

the number of months during the period beginning with the month after the month in which occurs the effective date of the suspension and ending with the month during which the participant or beneficiary attains the age of 80, by

(bb)

60 months.

(iii)

No benefits based on disability (as defined under the plan) may be suspended under this paragraph.

(iv)

Any suspensions of benefits, in the aggregate (and, if applicable, considered in combination with a partition of the plan under section 1413 of this title), shall be reasonably estimated to achieve, but not materially exceed, the level that is necessary to avoid insolvency.

(v)

In any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan under section 1413 of this title, the suspension of benefits may not take effect prior to the effective date of such partition.

(vi)

Any suspensions of benefits shall be equitably distributed across the participant and beneficiary population, taking into account factors, with respect to participants and beneficiaries and their benefits, that may include one or more of the following:

(I)

Age and life expectancy.

(II)

Length of time in pay status.

(III)

Amount of benefit.

(IV)

Type of benefit: survivor, normal retirement, early retirement.

(V)

Extent to which participant or beneficiary is receiving a subsidized benefit.

(VI)

Extent to which participant or beneficiary has received post-retirement benefit increases.

(VII)

History of benefit increases and reductions.

(VIII)

Years to retirement for active employees.

(IX)

Any discrepancies between active and retiree benefits.

(X)

Extent to which active participants are reasonably likely to withdraw support for the plan, accelerating employer withdrawals from the plan and increasing the risk of additional benefit reductions for participants in and out of pay status.

(XI)

Extent to which benefits are attributed to service with an employer that failed to pay its full withdrawal liability.

(vii)

In the case of a plan that includes the benefits described in clause (III), benefits suspended under this paragraph shall—

(I)

first, be applied to the maximum extent permissible to benefits attributable to a participant’s service for an employer which withdrew from the plan and failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under section 1381(b)(1) of this title or an agreement with the plan,

(II)

second, except as provided by subclause (III), be applied to all other benefits that may be suspended under this paragraph, and

(III)

third, be applied to benefits under a plan that are directly attributable to a participant’s service with any employer which has, prior to December 16, 2014—

(aa)

withdrawn from the plan in a complete withdrawal under section 1383 of this title and has paid the full amount of the employer’s withdrawal liability under section 1381(b)(1) of this title or an agreement with the plan, and

(bb)

pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries of the plan under a separate, single-employer plan sponsored by the employer, in an amount equal to any amount of benefits for such participants and beneficiaries reduced as a result of the financial status of the plan.

(E)

Benefit improvements

(i)

In general

The plan sponsor may, in its sole discretion, provide benefit improvements while any suspension of benefits under the plan remains in effect, except that the plan sponsor may not increase the liabilities of the plan by reason of any benefit improvement for any participant or beneficiary not in pay status by the first day of the plan year for which the benefit improvement takes effect, unless—

(I)

such action is accompanied by equitable benefit improvements in accordance with clause (ii) for all participants and beneficiaries whose benefit commencement dates were before the first day of the plan year for which the benefit improvement for such participant or beneficiary not in pay status took effect; and

(II)

the plan actuary certifies that after taking into account such benefits improvements the plan is projected to avoid insolvency indefinitely under section 1426 of this title.

(ii)

Equitable distribution of benefit improvements

(I)

Limitation

(II)

Equitable distribution of benefits

(iii)

Special rule for resumptions of benefits only for participants in pay status

(iv)

Special rule for certain benefit increases

This subparagraph shall not apply to a resumption of suspended benefits or plan amendment which increases liabilities with respect to participants and beneficiaries not in pay status by the first day of the plan year in which the benefit improvements took effect which—

(I)

the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, or

(II)

is required as a condition of qualification under part I of subchapter D of chapter 1 of subtitle A of title 26 or to comply with other applicable law, as determined by the Secretary of the Treasury.

(v)

Additional limitations

(vi)

Definition of benefit improvement

(F)

Notice requirements

(i)

In general

No suspension of benefits may be made pursuant to this paragraph unless notice of such proposed suspension has been given by the plan sponsor concurrently with an application for approval of such suspension submitted under subparagraph (G) to the Secretary of the Treasury to—

(I)

such plan participants and beneficiaries who may be contacted by reasonable efforts,

(II)

each employer who has an obligation to contribute (within the meaning of section 1392(a) of this title) under the plan, and

(III)

each employee organization which, for purposes of collective bargaining, represents plan participants employed by such an employer.

(ii)

Content of notice

The notice under clause (i) shall contain—

(I)

sufficient information to enable participants and beneficiaries to understand the effect of any suspensions of benefits, including an individualized estimate (on an annual or monthly basis) of such effect on each participant or beneficiary,

(II)

a description of the factors considered by the plan sponsor in designing the benefit suspensions,

(III)

a statement that the application for approval of any suspension of benefits shall be available on the website of the Department of the Treasury and that comments on such application will be accepted,

(IV)

information as to the rights and remedies of plan participants and beneficiaries,

(V)

if applicable, a statement describing the appointment of a retiree representative, the date of appointment of such representative, identifying information about the retiree representative (including whether the representative is a plan trustee), and how to contact such representative, and

(VI)

information on how to contact the Department of the Treasury for further information and assistance where appropriate.

(iii)

Form and manner

Any notice under clause (i)—

(I)

shall be provided in a form and manner prescribed in guidance by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, notwithstanding any other provision of law,

(II)

shall be written in a manner so as to be understood by the average plan participant, and

(III)

may be provided in written, electronic, or other appropriate form to the extent such form is reasonably accessible to persons to whom the notice is required to be provided.

(iv)

Other notice requirement

(v)

Model notice

(G)

Approval process by the Secretary of the Treasury in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor

(i)

In general

(ii)

Solicitation of comments

(iii)

Required action; deemed approval

(iv)

Agency review

(v)

Standard for accepting plan sponsor determinations

(H)

Participant ratification process

(i)

In general

(ii)

Administration of vote

(iii)

Ballots

The plan sponsor shall provide a ballot for the vote (subject to approval by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor) that includes the following:

(I)

A statement from the plan sponsor in support of the suspension.

(II)

A statement in opposition to the suspension compiled from comments received pursuant to subparagraph (G)(ii).

(III)

A statement that the suspension has been approved by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor.

(IV)

A statement that the plan sponsor has determined that the plan will become insolvent unless the suspension takes effect.

(V)

A statement that insolvency of the plan could result in benefits lower than benefits paid under the suspension.

(VI)

A statement that insolvency of the Pension Benefit Guaranty Corporation would result in benefits lower than benefits paid in the case of plan insolvency.

(iv)

Communication by plan sponsor

(v)

Systemically important plans

(I)

In general

Not later than 14 days after a vote under this subparagraph rejecting a suspension, the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, shall determine whether the plan is a systemically important plan. If the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, determines that the plan is a systemically important plan, not later than the end of the 90-day period beginning on the date the results of the vote are certified, the Secretary of the Treasury shall, notwithstanding such adverse vote—

(aa)

permit the implementation of the suspension proposed by the plan sponsor; or

(bb)

permit the implementation of a modification by the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, of such suspension (so long as the plan is projected to avoid insolvency within the meaning of section 1426 of this title under such modification).

(II)

Recommendations

(III)

Systemically important plan defined

(aa)

In general

(bb)

Indexing

(vi)

Final authorization to suspend

(I)

Judicial review

(i)

Denial of application

(ii)

Approval of suspension of benefits

(I)

Timing of action

(II)

Standards of review

(aa)

In general

(bb)

Temporary injunction

(iii)

Restricted cause of action

(iv)

Limitation on action to suspend benefits

(J)

Special rule for emergence from critical status

A plan certified to be in critical and declining status pursuant to projections made under subsection (b)(3) for which a suspension of benefits has been made by the plan sponsor pursuant to this paragraph shall not emerge from critical status under paragraph (4)(B), until such time as—

(i)

the plan is no longer certified to be in critical or endangered status under paragraphs (1) and (2) of subsection (b), and

(ii)

the plan is projected to avoid insolvency under section 1426 of this title.

(f)

Rules for operation of plan during adoption and rehabilitation period

(1)

Compliance with rehabilitation plan

(A)

In general

(B)

Special rules for benefit increases

(2)

Restriction on lump sums and similar benefits

(A)

In general

Effective on the date the notice of certification of the plan’s critical status for the initial critical year under subsection (b)(3)(D) is sent, and notwithstanding section 1054(g) of this title, the plan shall not pay—

(i)

any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section 1054(b)(1)(G) of this title), to a participant or beneficiary whose annuity starting date (as defined in section 1055(h)(2) of this title) occurs after the date such notice is sent,

(ii)

any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and

(iii)

any other payment specified by the Secretary of the Treasury by regulations.

(B)

Exception

(3)

Special rules for plan adoption period

During the period beginning on the date of the certification under subsection (b)(3)(A) for the initial critical year and ending on the date of the adoption of a rehabilitation plan—

(A)

the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides for—

(i)

a reduction in the level of contributions for any participants,

(ii)

a suspension of contributions with respect to any period of service, or

(iii)

any new direct or indirect exclusion of younger or newly hired employees from plan participation, and

(B)

(g)

Adjustments disregarded in withdrawal liability determination

(1)

Benefit reduction

(2)

Surcharges

(3)

Contribution increases required by funding improvement or rehabilitation plan

(A)

In general

(B)

Special rules

(4)

Emergence from endangered or critical status

(5)

Simplified calculations

(h)

Expedited resolution of plan sponsor decisions

(i)

Nonbargained participation

(1)

Both bargained and nonbargained employee-participants

(2)

Nonbargained employees only

(j)

Definitions; actuarial method

For purposes of this section—

(1)

Bargaining party

The term “bargaining party” means—

(A)

(i)

except as provided in clause (ii), an employer who has an obligation to contribute under the plan; or

(ii)

in the case of a plan described under section 404(c) of title 26, or a continuation of such a plan, the association of employers that is the employer settlor of the plan; and

(B)

an employee organization which, for purposes of collective bargaining, represents plan participants employed by an employer who has an obligation to contribute under the plan.

(2)

Funded percentage

The term “funded percentage” means the percentage equal to a fraction—

(A)

the numerator of which is the value of the plan’s assets, as determined under section 1084(c)(2) of this title, and

(B)

the denominator of which is the accrued liability of the plan, determined using actuarial assumptions described in section 1084(c)(3) of this title.

(3)

Accumulated funding deficiency

(4)

Active participant

(5)

Inactive participant

The term “inactive participant” means, in connection with a multiemployer plan, a participant, or the beneficiary or alternate payee of a participant, who—

(A)

is not in covered service under the plan, and

(B)

is in pay status under the plan or has a nonforfeitable right to benefits under the plan.

(6)

Pay status

A person is in pay status under a multiemployer plan if—

(A)

at any time during the current plan year, such person is a participant or beneficiary under the plan and is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan related to a retirement benefit), or

(B)

to the extent provided in regulations of the Secretary of the Treasury, such person is entitled to such a benefit under the plan.

(7)

Obligation to contribute

(8)

Actuarial method

(9)

Plan sponsor

(10)

Benefit commencement date

(Pub. L. 93–406, title I, § 305, as added Pub. L. 109–280, title II, § 202(a), Aug. 17, 2006, 120 Stat. 868; amended Pub. L. 110–458, title I, § 102(b)(1)(B)–(G), Dec. 23, 2008, 122 Stat. 5100, 5101; Pub. L. 113–235, div. O, title I, §§ 102(a), 103(a), 104(a), 105(a), 106(a), 107(a), 109(a), title II, § 201(a)(1)–(3), (5)–(7)(A), Dec. 16, 2014, 128 Stat. 2774, 2777, 2779, 2781, 2783, 2789, 2798, 2799–2809.)

cite as: 29 USC 1085