§1396 Special rules for plans under section 404(c) of title 26

Summary

When an employer leaves a certain retirees-only pension plan, the employer must pay withdrawal liability calculated in one of two ways. If the employer withdraws before the special kind of plan termination in section 1341a(a)(2), the yearly payment is the larger of two amounts: the amount set by the rule in section 1399(c)(1)(C)(i), or the number of contribution base units the employer would have owed for the prior plan year multiplied by the contribution rate needed to meet the amortization schedule in section 1423(d)(3)(B)(ii) (calculated without any rate caps). If the employer withdraws after December 31, 1983 because of a termination agreed to by the union that names the employee trustee, the employer’s liability is worked out under the alternative method in subsection (c) only if three conditions are met: contribution base units fell below 67 percent of the 1974–1979 average due to withdrawals after January 1, 1980; at least 50 percent of the liability tied to the first 33 percent drop was judged uncollectible by the plan sponsor under PBGC rules; and the plan’s employer contribution rate for each year after the first plan year beginning after September 26, 1980 and before the termination date met or exceeded the rate in section 1423(d)(3). The rule applies to plans that are under section 404(c) of the tax code (or their continuations) where most participants retired before January 1, 1976. Under the alternate method in subsection (c), an employer’s liability equals the normal withdrawal amount multiplied by the greater of 90 percent or a fraction: numerator = the plan’s unfunded vested benefits tied to participants with 10 or more years of signatory service; denominator = the plan’s total unfunded vested benefits. A “year of signatory service” is a year when the participant worked for an employer who had to contribute that year or later became required to contribute.